TRAINING, JOB SECURITY AND INCENTIVE WAGES

This paper considers the optimal level of firm‐specific training by taking into account the positive effect of training on the expected duration of workers' current employment. In the framework of an efficiency wage model, a short expected job tenure represents a disamenity that reduces the penalty from shirking. As this disamenity increases, workers have an incentive to continue providing a positive level of effort only if they are compensated by a higher wage. We endogenize the employment separation rate by introducing firm‐specific training. Firm‐specific training creates a rent that is lost if the worker is separated from the firm. As a result, the firm will be more reluctant to fire its trained workforce in a recession. This implies that firm‐specific training can decrease current wages because it represents a commitment to lower future labour turnover.     

JOB FLOWS AND UNEMPLOYMENT IN AN EQUILIBRIUM UNEMPLOYMENT MODEL WITH FIRM‐SPECIFIC SKILL TRAINING*

We introduce productivity enhancing firm‐specific skill training into the labour search model in which the firm‐specific skill training intensity and the job destruction rate are endogenously determined. It is shown that the higher the intensity of such training, the lower the rates of unemployment, job creation and job destruction. The paper's model provides a theoretical framework to understand the often mentioned peculiarity of the Japanese labour market; prevalently low rates of unemployment, job creation and job destruction in Japan are due to its training system which promotes workers to acquire firm‐specific skills.     

Training and worker effort: a signalling perspective

Abstract This paper analyzes the interaction between firms’ investment in general skills training and workers’ incentives. It shows that when a firm has an informational advantage over its workers, its provision of free general skills training can serve as a signal that there will be a long‐term relationship between the firm and its workers. This signal induces the workers to exert more effort in learning firm‐specific skills, which enhances the firm's profits. In contrast with most of the existing literature, the model implies that firms may provide free general skills training even if there is no labour market friction.     

Wage Returns to Experience and Tenure for Young Men in Italy

This paper provides estimates of wage returns to experience‐, firm‐, sector‐ and occupation‐specific tenure for a sample of young Italian male workers. By comparing returns obtained using different estimators, I evaluate the importance of endogeneity and selection problems generated by specific unobserved components and individual fixed effects. After controlling for the role of collective bargaining agreements and occupation categories, results indicate that general labour market experience is the fundamental source of wage growth for blue and white collars, while returns to firm tenure are insignificant. There is some evidence of positive returns to sector and occupational tenure for white collars. Estimates from different sectors suggest that union coverage can be relevant in offsetting the role of search and matching in wage determination.     

Training Systems and Labor Mobility: A Comparison between Germany and Sweden*

The mobility effect of general and specific training is a key issue in the debate on the design of educational systems. Using data from two retrospective life‐history surveys, we compare general school‐based vocational training and specific apprenticeship training with regard to inter‐firm, inter‐occupational and inter‐industrial mobility. The results show that workers with school‐based degrees display greater occupational mobility, while no difference in firm and industrial mobility can be discerned. This suggests that apprenticeships do not eliminate job search at labor market entry, that they reduce occupational mobility, and that responsiveness to structural change is similar under both training systems.     

APPRENTICES AND YOUNG WORKERS: A STUDY OF THE NORWEGIAN YOUTH LABOUR MARKET

Apprenticeship programmes are in many countries important stepping stones into the labour market. However, recruitment of apprentices seems to follow the business cycle. This pattern may be caused by firms' contemporaneous demand for labour, but may also be consistent with an investment hypothesis. A model, in which the tightness in the labour market is taken into account, is tested on a sample of Norwegian quarterly firm‐specific data. The empirical findings give moderate support to an investment hypothesis. The apprentices substitute to some degree for skilled labour but are recruited primarily based on the labour market situation. The wage level plays a minor role for recruitment of apprentices.     

Why Some Firms Train Apprentices and Many Others Do Not

Abstract. The latest study investigating the cost–benefit ratio of apprenticeship training for Swiss companies has shown that most apprentices offset the cost of their training during their apprenticeship on the basis of the productive contribution of the work they perform. Given this outcome, it is worth investigating why so many firms choose not to train apprentices. Maximum-likelihood selection models were used to estimate the net cost of training for firms without an apprenticeship programme. The models show, firstly, that non-training firms would incur significantly higher net cost during the apprenticeship period if they would switch to a training policy and, secondly, that this less favourable cost–benefit ratio is determined less by cost than by absence of benefit. For the apprenticeship system as such the results indicate that, as long as training regulations and the market situation permit a cost-effective training of apprentices, companies do not need specific labour market regulations or institutions to offer training posts. In this respect, the Swiss findings might be of interest for the ongoing German discussion about the expected repercussions of a more general labour market deregulation on the apprenticeship training system.     

The Incidence and Intensity of Employer Funded Training: Australian Evidence on the Impact of Flexible Work

The interaction between the growth of flexible forms of employment and employer funded training is important for understanding labour market performance. In particular, the idea of a trade‐off has been advanced to describe potential market failures in the employment of flexible workers. This study finds that evidence of a trade‐off is apparent in both the incidence and intensity of employer funded training. Flexible workers receive training that is 50–80% less intense than the workforce average. Casual workers – especially males – suffer more acutely from the trade‐off. This suggests that flexible production externalities may seriously reduce human capital formation in the workforce.     

Foreign ownership wage premia in emerging economies

In this article we examine the relationship between wages, labour productivity and ownership using a linked employer–employee dataset covering a large fraction of the Czech labour market in 2006. We distinguish between different origins of ownership and study wage and productivity differences. The raw wage differential between foreign and domestically‐owned firms is about 23 percent. The empirical analysis is carried out on both firm‐ and individual‐level data. A key finding is that industry, region and notably human capital explain only a small part of the foreign–domestic ownership wage differential. Both white and blue collar workers as well as skilled and unskilled employees obtain a foreign ownership wage premium. Foreign ownership premia are more prevalent in older and less technologically advanced firms. Joint estimation of productivity and wage equations show that, controlling for human capital, the difference in productivity is about twice as large as the wage differential. Overall, results indicate that the international firms share their rents with their employees.     

The East German wage structure after transition1

Abstract We extend the literature on transition economies’ wage structures by investigating the returns to tenure and experience. This study applies recent panel data and estimation approaches that control for hitherto neglected biases. We compare the life‐cycle structure of East and West German wages for fulltime employed men in the private sector. The patterns in the returns to seniority are similar for the two regional labour markets. The returns to experience lag behind in the East German labour market, even almost 20 years after unification, with significant differences particularly for high‐skill workers. The results are robust when only individuals who started their labour market career in the market economy are considered. We expect that the different returns are related to the heterogeneity of work experience gathered in East as compared with West Germany.     

PARTICIPATION IN WORKPLACE EMPLOYER‐SPONSORED TRAINING IN CANADA: ROLE OF FIRM CHARACTERISTICS AND WORKER ATTRIBUTES

In this work, we study the role of firm characteristics and worker attributes in determining participation in workplace employer‐sponsored training in Canada using the Workplace and Employee Survey (WES) of Statistics Canada. We attempt to answer the following questions using the rich information of firms that are available in WES data: Does firms' provision of workplace training encourage workers' participation in Canada? How do changes in market competition, organizational changes, and technological innovation affect workers' participation in workplace training in Canada? We find that firms' training provision significantly affects workers' participation in Canada. We also find that increased international competition, organizational changes, and technological innovation are significantly correlated with workers' training participation at workplaces. We note that workers in some sectors and in smaller firms have lower workplace training incidence and older, part‐time, production and marketing/sales workers and workers with preschool children participate less in workplace training. (JEL J080, J240, J290)     

Multinationals,cross‐border acquisitions and wage dispersion

Abstract We examine the impact of cross‐border acquisitions on intra‐firm wage dispersion using a detailed Swedish linked employer‐employee data set including data on all firms and about 50% of the Swedish labour force with information on job‐tasks and education. Foreign acquisitions of domestic multinationals and local firms increase wage dispersion but so do also other types of cross‐border acquisitions. Hence, it is the acquisition itself rather than foreign ownership that increases wage dispersion. The positive wage effect is concentrated to CEOs and other managers, whereas other groups are either negatively affected or not affected at all.     

Trade theorems with search unemployment

Abstract We revisit the Heckscher‐Ohlin‐Samuelson model in the presence of labour market frictions à la Mortensen‐Pissarides. Relaxing the assumption of the one‐worker‐one‐firm matching rule, we show that the Stolper‐Samuelson theorem and the Rybczynski theorem may not hold in specific circumstances. We also demonstrate that the Factor Price Equalization theorem is valid only for capital and unemployed labour across countries, but not for employed labour. In equilibrium, trade patterns are determined by countries’ factor endowments and relative factor intensities in sectors (independent of factor intensities in production). Finally, our results suggest an additional explanation for the ‘missing trade’ phenomenon.     

Do Immigrants Affect Firm‐Specific Wages?*

We propose and test a novel effect of immigration on wages. Existing studies have focused on the wage effects that result from changes in the aggregate labour supply in a competitive labour market. We argue that if labour markets are not fully competitive, immigrants might also affect wage formation at the most disaggregate level – the workplace. Using linked employer?employee data, we find that an increased use of low‐skilled immigrant workers has a significantly negative effect on the wages of native workers at the workplace – also when controlling for potential endogeneity of the immigrant share using both fixed effects and instrumental variables.     

Long‐Term Unemployment and the Great Recession: Evidence from UK Stocks and Flows

Long‐term unemployment more than doubled during the United Kingdom's Great Recession. Only a small fraction of this persistent increase can be accounted for by the changing composition of unemployment across personal and work history characteristics. Through extending a well‐known stocks‐flows decomposition of labour market fluctuations, the cyclical behaviour of participation flows can account for over two‐thirds of the high level of long‐term unemployment following the financial crisis, especially the procyclical flow from unemployment to inactivity. The pattern of these flows and their changing composition suggest a general shift in the labour force attachment of the unemployed during the downturn.     

PRECAUTIONARY DEMAND FOR LABOUR AND FIRM SIZE

This paper studies firms' job creation decisions in a labour market with search frictions. A simple labour market search model is developed in which a firm can search for a second employee while producing with a first worker, and this creates the equilibrium size distribution of firms. A firm expands employment even if the instantaneous payoff to a large firm is less than that of staying small – a firm has a precautionary motive to expand its size. In addition, this motive is enhanced by a greater market tightness. Because of this effect, firms’ decisions become interdependent – a firm creates a vacancy if it expects other firms to do the same, creating strategic complementarity among firms and thereby self‐fulfilling multiple equilibria. An increase in productivity can cause a qualitative change in labour market tightness and the rate of unemployment.     

Non‐wage benefits,costs of turnover and labour attachment

Like firms in established market economies, many Russian firms provide non‐wage benefits to their workers, such as housing, medical care or day care. This article explains the provision of benefits as a strategic choice for firms in the presence of labour and service market imperfections. Analysing unique survey data for 404 industrial establishments from 40 Russian regions, the authors provide strong evidence that non‐wage benefits are used by firms to attach workers and thereby reduce the costs of labour turnover in the face of tight labour markets. It is also shown that this attachment strategy works due to imperfections in the regional markets for social services.     

Firm ownership and internal labour practices in a transition economy

One feature common to many post‐socialist transition economies is a relatively compressed wage structure in the state‐owned sector. We conjecture that this compressed wage structure creates weak incentives for work effort and worker skill acquisition and thus presents adverse consequences for the entire transition economy if a substantial portion of the labour force works in the state sector. We explore firm wage incentives and worker training, as well as other labour practices and outcomes, in a transition setting with matched firm and worker data collected in one of the largest provinces of Vietnam – Ho Chi Minh City. The Vietnamese state sector exhibits a compressed wage distribution in relation to privately owned firms with foreign ownership. State wage practices stress tenure over worker productivity and their wage policies result in flatter wage–experience profiles and lower returns to education. The state work force is in greater need of formal training, a need that is in part met through direct government financing. In spite of the opportunities for government financed training and at least partly due to inefficient worker incentives, state firms, by certain measures, exhibit lower levels of labour productivity. The private sector comparison group to state firms for all of these findings is foreign owned firms. The internal labour practices of foreign firms are more consistent with a view of profit‐maximizing firms operating with no political constraints. This is not the case for Vietnamese de novo private firms that exhibit much more idiosyncratic behaviour and whose labour practices are often indistinguishable from state firms. The exact reasons for this remain a topic of on‐going research yet we conjecture that various private sector constraints, including limited access to formal capital, play an important role.     

The Threat Effect of Active Labour Market Programmes*

In this paper, we estimate the threat effect of active labour market programmes (ALMPs) for a sample of unemployed men in Denmark. Threat effects of such programmes capture the impacts of a system of ALMPs prior to actual participation. Rational economic agents make search decisions based on the expected discounted value of unemployment, and the perceived risk of future participation in programmes may affect job‐search behaviour early in the unemployment spell. We find a strong and significant threat effect, which is shown to reduce average unemployment duration by two and a half weeks.     

A microfoundation for increasing returns in human capital accumulation and the under-participation trap

This paper considers educational investment, wages and hours of market work in an imperfectly competitive labour market with heterogeneous workers and home production. It investigates the degree to which there might be both underemployment in the labour market and underinvestment in education. A central insight is that the ex post participation decision of workers endogeneously generates increasing marginal returns to education. Although equilibrium implies underinvestment in education, optimal policy is not to subsidise education. Instead it is to subsidise labour market participation which we argue might be efficiently targeted as state-provided childcare support.