Training and organisational innovations in a local industrial system: empirical evidence from Emilia‐Romagna1

The article studies the driving forces of firm training using a survey‐based dataset of manufacturing firms in the Emilia‐Romagna region, Northern Italy. The data are derived from the responses to a structured questionnaire administered in 2002 to the management of a representative sample of firms with more than 50 employees in the highly industrialised province of Reggio Emilia. Firms’ training choices are analysed using a theoretical/conceptual framework based on the notion of complementarity among productive factors. Training is provided as long as it favours the establishment of complementary relationships among the skills it develops and other inputs. The main factors associated with training include structural characteristics, HRM practices, workforce features, labour management and performance of the firm. Training activities emerge as being positively associated with organisational practices that affect the whole firm: workforce skill level, firm size, firm productivity and labour flexibility. The role of HRM practices in driving training is brought into question. These are key issues for the current debate on the development of local systems in the European and Italian context. The high and joint relevance of structural variables and labour demand‐related factors shows that regional industrial policies must support labour policies within an integrated policy effort aimed at increasing potential firm productivity.     

The renewed ‘American Challenge’: a review of employment practice in US multinationals

Despite the extensive literature concerned with IR practice in American multinational companies (MNCs), there are serious gaps in our understanding of how this group of firms manages their international workforces. In this paper, we set out a framework of ‘four key influences’ on the way MNCs approach the management of labour and go on to use this framework to assess existing literature concerned with US MNCs. While this review reveals a number of general tendencies—for example, American MNCs tend to be highly centralised in the decision making on IR matters—it also reveals a number of gaps and weaknesses. In particular, we argue that previous research has failed to develop a convincing understanding of how the ‘embeddedness’ of US MNCs in their country of origin informs the behaviour of these firms as employers outside the USA. The paper ends by outlining a programme of research into US MNCs.     

Cementing skills: training and labour use in UK construction

This article explores questions of labour reproduction and skill development under different contract arrangements within the UK construction and civil engineering industry. The central concerns of the article relate to the impact skills shortages within the sector have had on recruitment practices, training provision and the use of contract alternatives in terms of both direct and non‐standard labour. The argument primarily draws on data from a national postal survey conducted in 2002, covering firms of all sizes within this key economic sector. The article reveals some interesting findings regarding recruitment and training practices which, despite encouraging headline figures on the existence of training, reveal an over‐dependency on contingent labour and low levels of apprenticeships – particularly among small firms, which are predominant in the industry. This suggests that the recognised problems of labour shortages within the sector are ongoing, and that the aim of attracting new workers into the industry remains unrealised.     

The Labour Market Effects of Increases in Social Insurance Premium: Evidence from Japan

Exploiting heterogeneous variations in labour cost increases due to Japan's 2003 social insurance premium reform as a natural experiment, we estimate the impacts of the increased social insurance premiums on employment, working hours and payroll costs. Using the difference‐in‐differences method with establishment fixed effects, we find that firms reduce the number of employees and increase average annual earnings from longer working hours in response to an exogenous increase in labour costs without productivity gains. Firms manage to pay for this increase in the average wage paid to the remaining workers by reducing the number of employees to keep total payroll costs unchanged. In contrast, since social insurance premiums are shared equally between employees and employers, firms pay the remaining half premiums that they are imposed with. Sub‐sample analyses show that firms adhering to a labour hoarding policy did fire many workers taking advantage of the 2003 reform. This may indicate that the reform provided a good excuse to cut employment in firms that had been forced to comply with a labour hoarding policy even in an over‐employment situation, which is more likely in sectors and countries where dismissals are rigorously regulated.     

The implications of the national minimum wage for training in small firms

This article investigates the extent to which small firms' training practices have altered since the introduction of the national minimum wage (NMW). Low pay is particularly widespread among small firms and they are thus likely to have been disproportionately affected by the NMW. Drawing on survey data collected from 258 establishments, the study provides information about training practices and identifies the steps that employers have taken to offset the impact of the NMW. The study also assesses the extent to which firms have made use of lower ‘development’ rates for young workers and new adult recruits, and whether this has been associated with an increase in training activity. The findings suggest that the NMW has provided a positive boost to training in some cases, although this has primarily come about as a result of efforts by firms to offset increases in labour costs, as opposed to take‐up of the development rate.     

Regulating employment relations through workplace learning: a study of small employers

Using data from two employer samples, the article develops our understanding of small business employee skill formation and development processes in three main ways. First, it focuses on learning (what employees do) rather than on providing training (what employers do), as it is employee learning which influences individual and organisational performance. Second, it challenges the dominant focus on external training by presenting data on employer enablement of workplace employee learning and their motives for this. The diversity of workplace learning practices and their importance in smaller businesses are highlighted. Third, it situates workplace learning processes firmly within the context of the employment relationship, one in which employers and employees pursue distinctive interests in enabling/participating in learning.     

Gender earnings gap: the role of firm specific effects

The gender earnings differential is an intensely studied issue in labour economics. However, existing studies do not examine how the wage policies of firms affect gender earnings differentials. This paper uses employer–employee linked data to address this issue. The Juhn et al. [Juhn, C., Murphy K., Pierce, B., 1991. Accounting for the slowdown in black–white wage convergence, in M.H. Kosters, ed. Workers and Their Wages, AEI Press, 107–143] decomposition methodology is extended to incorporate the decomposition of firm fixed effects. It is found that, on average, firms' wage policies are associated with a significant narrowing of the gender earnings gaps. Further analysis indicates that firms which are more likely to have narrower gender earnings gaps are those subject to strong market competition, find it easy to identify labour productivity at the individual level, and with no enterprise level wage bargaining.     

Labour market oligopsonistic competition: The effect of worker immobility on wages

We suggest that firms in a local labour market may be able to exploit worker mobility costs and offer immobile workers wages that are lower than their marginal product. If so, the ability of employers to exploit worker immobility in setting wages would decline in the competitiveness of the local labour market. We test this intuition using a measure of individual mobility costs and measures of local labour market competition. Our findings suggest that worker immobility causes substantial wage variation across workers in small, weakly competitive markets, and in occupations where wages are individually bargained.     

The relationship between ‘high-performance work practices’ and employee attitudes: an investigation of additive and interaction effects

In order to improve our understanding of mediating variables inside the ‘black box’ of the firm's labour management, this paper examines the relationship between high-performance work system (HPWS) practices and employee attitudes. Using a randomly selected, national population sample, clear evidence was found for a positive relationship between HPWS practices and the attitudinal variables of job satisfaction, trust in management, and organizational commitment, implying that HPWS can provide win-win outcomes for employees and employers. However, the study also tests – from an employee perspective – the ‘complementarities thesis’ and finds negative interaction effects among HPWS practices. This strengthens the argument that there are likely to be limits to the positive outcomes of HPWSs for employees. Evidence of sequencing in the employee attitudinal responses to HPWSs was also found, with job satisfaction as the key mediating variable.     

Employer preferences,collective agreements and the Australian resources sector: a paradox of limited commodification?

There is a commonly held view that firms in high‐wage/skill‐intensive sectors will tend to provide wages and working conditions that are above market‐clearing levels. This article empirically examines this claim by analysing the content of all collective agreements concluded in the resource sector in Australia after the enactment in 2006 of the Workplace Relations Amendment (Workchoices) Act. This legislation gave employers unprecedented ability to place downwards pressure on employee entitlements. In the resource sector, however, the quantitative results indicate that firms maintained, in the main, substantive standards but used extensively key regulatory provisions to gain an unprecedented level of control over both functional and numerical flexibility.     

An ill-informed choice: empirical evidence of the link between employers’ part-time or temporary employment strategies and workplace performance in Canada

Many employers seek flexibility through part-time or temporary employment to achieve improved competitiveness and success. Using strategic choice theory, this study is a longitudinal examination of employers’ strategic decisions of reducing labour costs and using part-time or temporary workers on workplace performance. Workplace performance is measured through profitability, productivity and change in net operating revenue. Statistics Canada’s Workplace and Employee Survey longitudinal workplace data are used for the analysis. Results show that reducing labour costs strategy has no effect on profitability, productivity or change in net operating revenue, and using part-time or temporary workers strategy shows decreased profitability and productivity, and that there is no effect on the change in net operating revenue in Canadian workplaces studied. Based on these findings, we recommend that employers, in Canada and elsewhere, not only carefully weigh reducing labour costs and employing part-time or temporary workers strategies for workplace performance, but also reconsider such strategies and instead seek alternative means of improving workplace performance.     

Who benefits from job placement services? A two-sided analysis

In light of additional information market agents would achieve better outcomes, for example, a lower ask price for the buyer and a higher offer price for the seller. I examine this notion in a labor market, where employers and employees do not possess perfect information about wages, and address the question of who benefits from the information provided by job placement services? The empirical strategy considers the two-sided nature of the labor market. Estimates of employee and employer incomplete information are contrasted between users and non-users of placement services provided by Job Corps, America’s largest and most important job training program for youths. Findings suggest that employees that use placement services don’t have more information about better offer wages, relative to non-users. Interestingly, firms that employed users of placement services are better informed about reservation wages relative to firms that employed non-users.     

Employee ‘voice’ and working environment in post‐communist New Member States: an empirical analysis of Estonia,Latvia and Lithuania

This article examines employee ‘voice’ in workplace health and safety in three Baltic New Member States by means of a cross‐national survey. The data point to unresolved problems of voice in the context of rather poor working environments. These present opportunities for collective renewal by trade unions, but paradoxically are more likely to be addressed by employers in the context of significant labour shortages created by a post‐European Union accession labour ‘exit’.     

Ageing and employability. Evidence from Belgian firm-level data

The Belgian population is ageing due to demographic changes, so does the workforce of firms active in the country. Such a trend is likely to remain for the foreseeable future. And it will be reinforced by the willingness of public authorities to expand employment among individuals aged 50 or more. But are older workers employable? The answer depends to a large extent on the gap between older workers’ productivity and their cost to employers. To address this question we use a production function that is modified to reflect the heterogeneity of labour with workers of different age potentially diverging in terms of marginal products. Using unique firm-level panel data we produce robust evidence on the causal effect of ageing on productivity (value added) and labour costs. We take advantage of the panel structure of data and resort to first-differences to deal with a potential time-invariant heterogeneity bias. Moreover, inspired by recent developments in the production function estimation literature, we also address the risk of simultaneity bias (endogeneity of firm’s age-mix choices in the short run) using (1) the structural approach suggested by Ackerberg et al. Structural identification of production functions. Department of Economics, UCLA, (2006), (2) alongside more traditional system-GMM methods (Blundell and Bond in J Econom 87:115–143, 1998) where lagged values of labour inputs are used as instruments. Our results indicate a negative impact of larger shares of older workers on productivity that is not compensated by lower labour costs, resulting in a lower productivity-labour costs gap. An increment of 10 %-points of their share causes a 1.3–2.8 % contraction of this gap. We conduct several robustness checks that largely confirm this result. This is not good news for older individuals’ employability and calls for interventions in the Belgian private economy aimed at combating the decline of productivity with age and/or better adapting labour costs to age-productivity profiles.     

On‐the‐job training: a skill match approach to the determinants of lifelong learning

A recurrent finding in on‐the‐job training research is the ‘training gap’ in formal training: the positive correlation between initial education and continuing training. This finding is here examined from the perspective of two important distinctions: (i) between employee skill supply and job skill demand and (ii) between formal and informal training. Less‐educated workers may hold jobs with low skill requirements demanding little further formal training because the use of high skills is irrelevant, jobs that moreover provide little informal training. Exploring these issues on representative Swedish survey data using the educational mismatch (overqualified, the rightly qualified and the underqualified) model, we find that job requirements are strongly correlated with the incidence of both formal and informal training. Rather than, as has previously been argued, employee training decisions being the cause of the gap, this suggests that employer decisions regarding how to structure jobs and whom to hire are the primary factors behind the training gap.     

Unions and the adoption of high-performance work systems in Korea: moderating roles of firms' competitive strategies

An unresolved question about the relationship between union representation and the adoption of high-performance work systems (HPWSs) is which factors affect the roles of unions toward the HPWS adoption. Using data from a 2009 multi-industry survey of 301 Korean firms, the author empirically examines the impacts of unions on the adoption of HPWSs. From the strategic choice perspective, he focuses on the roles of firms’ competitive strategies regarding the unions’ behaviors toward the use of HPWSs. The results indicate that Korean unions are negatively associated with the adoption of HPWSs when employers choose to implement more comprehensive HPWSs. Evidence suggests, however, that employers’ differentiation strategies moderate the union's negative impacts even when the employers comprehensively use the HPWSs. It implies that the differentiation strategy is a key factor to resolve the conflicts between unions and employers concerning the adoption of HPWSs.     

Skill shortages and labor market outcomes in Central Europe

The new Central European members of the EU have been characterized by low employment rates, especially among unskilled workers, despite the GDP recoveries and large private sector shares in output and employment. Evidence points at skill shortages in Central Europe as a key impediment to faster labor reallocation and convergence to the EU-15 employment structures. In this paper, we develop a simple model of labor reallocation with transaction costs and show how skill shortages can inhibit firm creation and increase income inequality. We use the model to examine the impact of training subsidies and their financing on skill acquisition and start-ups of new private firms, and show that the positive effect of subsidies would be mostly offset by high wage taxes. Shifting financing from wage to consumption taxes would improve incentives for workers’ training and firm start-ups, while relying more on income taxes could reduce the income gap between workers and entrepreneurs.     

The impact of corporate governance on employment relations in South Korea: the shareholder versus stakeholder perspectives

This study empirically examined the impact of corporate governance on employment relations outcomes utilizing a comprehensive data set drawn from 214 Korean firms. The study contrasted the stakeholder and shareholder perspectives of corporate governance in investigating the impact of corporate governance on employment relations outcomes. The results showed that the stakeholder corporate governance orientation (as compared to the shareholder orientation) had positive relationships with education/training expense, average employee tenure and industrial relations (IR) climate, as well as a negative association with number of strikes. Overall, the results implied that the stakeholder orientation of firms led to more beneficial effects for employees and more consensual relations with labour unions than the shareholder orientation did.     

A firm level perspective on migration: the role of extra-EU workers in Italian manufacturing

A production-theory approach to migration is adopted in this paper to address the role of migrant workers from extra-EU countries in Italian manufacturing firms. The adoption of flexible functional forms to model firm-level technology lets us directly derive different measures of elasticity from the coefficients of the estimated production and cost functions. The use of foreign labour is shown to affect the industry composition in favour of low skill intensive sectors and the estimated cross demand elasticities confirm the complementarity between migrant and native workers found in previous studies. However, the two labour inputs prove to be substitutes in terms of the Morishima elasticity of substitution: in general, firms tend to increase the foreign labour intensity of production in response to a decline in migrants’ wage, while the migrant to domestic labour ratio responds to changes in the domestic workers’ wage only for firms in low skill intensive sectors.     

The effectiveness of socially sustainable sourcing mechanisms: Assessing the prospects of a new form of joint regulation

The traditional mechanisms for improving and protecting labour standards in advanced economies are failing. In Britain, the effectiveness of collective bargaining has diminished substantially over the past quarter century. Legally enforceable minimum labour standards have been an inadequate substitute. A new form of ‘joint regulation’ is emerging that may be better attuned to the contemporary structure of product market competition. It involves employers and unions coordinating action on labour standards across the supply chains of firms that contribute to the production of a particular good or service. This article explores the circumstances in which these ‘socially sustainable sourcing’ mechanisms develop and examines their impact on labour standards, by means of two case studies.