General and Specific Training.

Evidence and Implications

ABSTRACT

Using data from the Employer Opportunity Pilot Project (EOPP) survey and the National Longitudinal Survey of Youth (NLSY), we explicitly document the specificity and generality of employer-provided training, and we analyze how wage growth and mobility are influenced by our direct measures of specific and general training. In spite of the emphasis that labor economists have placed on specific training, we find that employers in the EOPP and workers in the NLSY indicate that most of the skills learned in training are useful elsewhere. Our results are consistent with several recent models that predict that employers will often extract some of the returns to the general training they provide.

I. Introduction

In his seminal article on investment in human capital, Becker (1962) defined completely general training as a human capital investment that raises a worker's productivity at other employers to the same extent as at the employer that provides the training. Similarly, completely specific training is defined as a human capital investment that increases productivity only at the employer that provides the training. Recent empirical work in the human capital literature has attempted to proxy for specific versus general training by looking at the different effects of on-the-job versus off-the-job training (Lynch 1991, 1992), or by looking at the different effects of company versus school training (Loewenstein and Spletzer 1997, 1998a). In this paper, we document the degree to which employers and workers believe that the skills learned in employer-provided training are useful at other firms, we analyze the extent to which employers are able to substitute relevant experience elsewhere for their own training, and we e xamine how wage growth and mobility are influenced by direct measures of the generality of training.

The empirical work in this paper significantly expands on our earlier work on this topic (Loewenstein and Spletzer 1998a). In our earlier work, we used only one data set and were forced to use a proxy for the generality of training. In contrast, this paper uses data from both the Employer Opportunity Pilot Project survey (EOPP) and the 1993 National Longitudinal Survey of Youth (NLSY). Both of these data sets contain direct measures of the generality of training. A strength of the EOPP data is that they can be used to ascertain whether employers are able to substitute previous training elsewhere for their own training, and a strength of the NLSY data is that they are longitudinal and can therefore be used to analyze job mobility and wage growth both within and across jobs. We find, perhaps somewhat surprisingly in light of the emphasis that labor economists have placed on specific training, that the majority of employer-provided training is general.

In Section II we briefly review Becker's on-the-job training model and then discuss how certain modifications of the model can alter the prediction that workers incur the entire cost and realize the entire return to general training. We next summarize the empirical evidence on the effects of training; given the importance of the human capital model and the recent plethora of empirical work regarding on-the job training, the paucity of empirical evidence on the generality of training is quite striking. In Section III we describe the information from the EOPP data and the 1993 NLSY data regarding the generality of workers' training investments. The data suggest quite strongly that most training is general--more than half of the employers and the workers believe that all of the skills learned in training are useful at other employers, and roughly three-quarters indicate that most if not all of the skills learned are useful at other employers. However, these simple descriptive statistics do not by themselves mea n that most employer-provided training is general.