Search Results

Also: NTIS Report: PB2006101302

On-the-Job Training surveys the recent literature from both a theoretical and empirical perspective. The analysis of how individuals obtain and are paid for their skills is fundamental to labor economics. The basic idea of human capital theory is that workers and firms invest in workers' skills in order to increase their productivity, much as persons invest in financial or physical assets to earn income. Workers develop many skills through formal education not tied to an employer, but an important part of their skills are learned on the job. On-the-Job Training focuses on recent literature including empirical research using direct measures of training and theoretical papers inspired by findings from this empirical work. The authors presents a theoretical model showing that costs and returns to general human capital may be shared if training increases mobility costs, if there are constraints on lowering wages, or if there is uncertainty about the value of training at competing employers. This model analyzes the choice of the amount of training, emphasizing the influence of whether the employer can commit to training prior to employment. In addition, the model implies that firms will attempt to match low-turnover workers with training opportunities, which is supported by the empirical literature.

How individuals obtain their skills and how they are paid for the use of those skills are concepts that are fundamental to the field of labor economics. Productive skills are often referred to as "human capital." The basic idea of human-capital theory is that workers invest in their own skills in order to earn higher wages, much as persons invest in financial or physical assets to earn income. Although this idea goes back at least to Adam Smith, modern human-capital research was originated in the late 1950s by economists Theodore Schultz, Jacob Mincer, and Gary Becker. Their ideas, focusing on investments in and returns to education and training, have provided the theoretical and empirical basis for decades of ensuing research.

Much of the empirical research on the topic of human capital has analyzed the relationship between education and wages. This focus on education is due to the abundance of high-quality data sources with information on both education and wages. For example, analysts using cross-sectional data from the Current Population Survey (CPS) have found that individuals in the United States receive earnings that are approximately 10 percent higher for every additional year of schooling they have completed. Kenneth I. Wolpin's article on education in this special edition of the Monthly Labor Review shows that, over the 15-year period between ages 25 and 39, a male college graduate earns 80 percent more than a male high school graduate without any college, and a male high school graduate earns 57 percent more than a high school dropout.

However, empirical research on training—the other key component of human capital--has lagged research on the economics of education. The human-capital model yields straightforward predictions about the relations hip of on-the-job training to wages, wage growth, and job mobility; still, as will become clear, testing these predictions requires good longitudinal microdata.