Heterogeneous Wage Effects of Apprenticeship Training*

The relatively small average wage effects of employer and occupation changes after apprenticeship training mask large differences between occupation groups and apprentices with different schooling backgrounds. People who change employer and occupation within industrial occupations enjoy large wage advantages, whereas apprentices in commerce and trading occupations, as well as in construction and crafts occupations, face wage losses from an occupation change. The differences between the firms that provide the apprenticeship training are found to be small or insignificant. In this paper, we reconcile the differences between previous findings by comparing and replicating the empirical estimation strategies used. This demonstrates that selectivity in occupations and changes, unobserved heterogeneity between occupations, and sample selection do matter.     

General training and oligopsony

I consider a duopsony model of a general skilled labour market. The source of the market power of the firms is the mobility cost of the workers. In the model general training is inefficient and the firms bear a share of the general training cost. If capital market imperfections prevent workers from investing in human capital, the imperfect competition in the skilled labour market compared with the perfect competition promotes general training. In order to remove the inefficiency of personnel training it is necessary to link together a minimum wage for skilled workers and loans to apprentices.     

Employment polarization and the role of the apprenticeship system

This paper studies the effect of apprenticeship training on technology adoption and labor market polarization. A stylized model with two key features is developed: (1) apprentices are more productive due to industry-specific training, but (2) from the firm׳s perspective, when training apprentices, technological innovation is costly since training becomes obsolete. Thus, apprentices correlate with slower adoption of skill-replacing technologies, but also less employment polarization. We test this hypothesis on German regions given local variation in apprenticeship systems until 1976. The results show little computer adoption and no employment polarization related to apprentices, but similar displacement of non-apprentices by computers as in the US.     

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.     

Learning the master's trade: Apprenticeship and human capital in Ghana

This paper explores the institution of apprenticeship in Ghana. A model is presented where apprenticeship training is idiosyncratic, increasing an individual's productivity in the current firm, but not in any other firm. Still, individuals are willing to fund apprenticeships as they can reap the returns to the specific training of apprenticeship if they manage to acquire the capital required to start their own firms, and replicate the technology and business practice of the apprenticeship firm. Predictions of the model for the productivity and remuneration of different workers are developed and tested using both a linked employer–employee survey of manufacturing firms and a national household survey.     

Does apprenticeship improve job opportunities? A regression discontinuity approach

In Italy the main difference between apprentices and other types of temporary workers is that apprentices must receive firm-provided training. The firm incentive in hiring apprentices consists in paying lower wages and labour taxes. Using an Italian administrative dataset containing information on the jobs started between January 2009 and June 2012, we estimate the effect of apprenticeship on the hazard function to a permanent job. Identification is based on a regression discontinuity design. We find that, for 29-year-old workers, apprenticeships are “long entrance halls” towards permanent contracts, especially within the firm where the apprenticeship is performed.

     

The labor market and corporate structure

We analyze the impact of labor demand and labor market regulations on the corporate structure of firms. Higher wages are associated with lower monitoring, irrespective of whether these high wages are caused by labor market regulations, unions or higher labor demand. We also find that the organization of firms has important macroeconomic implications. In particular, monitoring is a type of “rent-seeking” activity and the decentralized equilibrium spends excessive resources on monitoring. Labor market regulations that reduce monitoring by pushing wages up may increase net output or reduce it only by a small amount even though they reduce employment.     

General training by firms, apprentice contracts, and public policy

Workers will not pay for general on-the-job training if contracts are not enforceable. Firms may if there are mobility frictions. Private information about worker productivities, however, prevents workers who quit receiving their marginal products elsewhere. Their new employers then receive external benefits from their training. In this paper, training firms increase profits by offering apprenticeships which commit firms to high wages for those trainees retained on completion. At these high wages, only good workers are retained. This signals their productivity and reduces the external benefits if they subsequently quit. Regulation of apprenticeship length (a historically important feature) enhances efficiency. Appropriate subsidies enhance it further.     

LABOUR‐MARKET ATTACHMENT AND TRAINING PARTICIPATION*

This paper examines how expected attachment to the labour market and expected tenure at a specific firm affect training participation. The results, based on cross‐sectional data from Japan, indicate that expected attachment to the labour market affects participation in both employer‐ and worker‐initiated training, while expected tenure at a specific firm mainly explains participation in employer‐initiated training. These two attachment indices explain more than two‐thirds of the sex gap in training participation. Employers in less‐competitive labour markets are more likely to offer employer‐initiated training to their workers.     

Impact of Immigration on Inhabitants' Educational Investments

We examine whether immigration into the labour market of the building and construction (BaC) industry affects enrolment in vocational programmes that teach the skills required in this industry. Results suggest that a higher supply of immigrant labour is associated with lower enrolment into programmes teaching BaC skills. The strength of this relationship increases according to the grades that the students achieved in lower secondary school. This finding indicates that the negative effect of immigration on educational recruitment is mainly caused by students who turn away from these programmes, rather than a reduction in apprenticeship positions offered by employers.     

Filling vacancies: an empirical analysis of the cost and benefit of search in the labour market

This paper investigates empirically the factors that affect the cost–benefit ratio of employers’ search. The empirical analysis is based on a small Dutch data set containing individual information on filled vacancies. It is found that firms that use advertisements during recruitment are sensitive to labour market conditions; their search cost per applicant rises (drops) in tight (slack) labour markets because of the diminished ability of advertisements to generate applicants in tight labour markets. Furthermore, it is found that the high search cost incurred by posting identical vacancies is more than compensated for by the benefits from having a larger flow of applicants.     

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.     

Employment Protection Versus Flexicurity: On Technology Adoption in Unionised Firms*

We analyse how different labour‐market institutions – employment protection versus ‘flexicurity’– affect technology adoption in unionised firms. We consider trade unions’ incentives to oppose or endorse labour‐saving technology and firms’ incentives to invest in such technology. Increased flexicurity – interpreted as less employment protection and a higher reservation wage for workers – unambiguously increases firms’ incentives for technology adoption. If unions have some direct influence on technology, a higher reservation wage also makes unions more willing to accept technological change. Less employment protection has the opposite effect, as this increases the downside (job losses) of labour‐saving technology.     

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.     

The Social Return to Apprenticeship Training

This paper draws together findings from a recent program of research to estimate the social rate of return to apprenticeship training and how the costs of training are distributed. It is estimated that 53 per cent of the costs of training an apprentice are borne by the employer, 28 per cent by the public sector and 19 per cent by the apprentice. This is in sharp contrast to the prediction of economic theory that trainees pay for general training. The social rate of return to male apprenticeships is estimated to be 12.8 per cent. This is in line with previous estimates of the social rate of return to university degrees and supports the case for policy measures to increase the level of apprenticeship training. Reforms taking place under the New Apprenticeships Systems are intended to shift the distribution of costs in line with that predicted by theory by placing a greater cost burden on apprentices for general training and increasing the specificity of training. If employers' willingness to offer apprenticeships has been a constraint, then these changes should stimulate apprenticeship training.     

Ignorance Is Bliss as Trade Policy

Consider domestic consumers that purchase from foreign firms. A presumption would be that consumers prefer being informed when quality is uncertain and exogenous. However, in a multifirm framework based on previous models, consumers can be worse off if they are informed of the quality. Further, in the Salop-circle model, consumers may prefer not learning even though expected high-quality output is greater with learning. Moreover, the possibility that consumers prefer uncertainty increases with the probability that products are of low quality. Essentially, the benefit of screening quality (better matching) can be less than its cost (higher prices from market segmentation).     

Monopolistic wages or efficient contracts?

Using a representative sample of medium and large firms, this paper explores the process of employment and wage bill determination in the Bulgarian manufacturing sector. The results suggest that, during 1997–2001, the labour market behaviour of these firms was consistent with weakly efficient contracting and employment elasticity with respect to both sales and wages similar to that of the fastest‐reforming Central and Eastern Europe economies. Although a case study using data on sell‐off deals by the Privatization Agency suggests that the largest firms selected for cash privatization may have exhibited higher preference for wage enhancement than employment protection, the results do not bring into question the efficient performance of the post‐crisis labour market in Bulgaria. Importantly, the study rejects the hypothesis that either persistent government stakes or mass privatization may have led to efficiency deterioration.     

Exports, unemployment, and the welfare state

Abstract .  The paper analyzes the labour market effects of globalization when foreign market entry is costly and risky. With flexible labour markets, a fall in foreign market entry cost tends to generate more income inequality, but not necessarily so, as more firms pay foreign entry cost. By contrast, when labour markets are inflexible in the short run, globalization tends to increase unemployment. In this situation, government unemployment benefits reduce the wages that exporting firms need to pay workers as risk compensation. Thus more firms within an industry and more industries enter the foreign market, which in turn tends to increase unemployment.