On-The-Job Training of New Hires [chapter]

John H. Bishop
1991 Market Failure in Training?  
This paper presents an analysis of a unique data set containing measures of the time devoted to training during the first three months on a job and the productivity consequences of that training. The major findings derived from the analysis of the data on new hire training may be summarized as follows: * Training investments in new hires are substantial even for jobs that are generally considered unskilled. * Formal training provided by specialized training personnel accounts for only a small
more » ... for only a small portion of the training received by new hires. * Productivity rises substantially during the first year on the job. * To fill jobs requiring a great deal of on-the-job training, employers prefer applicants who have previous relevant work experience, who are well educated and who have vocational training in a relevant field. * Large establishments invest more in the training of their new hires than small and medium sized establishments because (1) they have lower turnover, (2) they have better access to capital markets, (3) the marginal product of an hour of training time is higher at large establishments and (4) training lowers turnover more substantially at large establishments. The elasticity of demand for training is below unity. * * When it is a binding constraint, the minimum wage lowers training investment by roughly 17 percent during the first 3 months on the job and productivity growth by 5 to 10 percent. * Informal training by coworkers and training by watching others do the job appear to have a higher benefit cost ratio than informal training by management. * The reported generality of training has no significant effects on the its marginal productivity or on the effects of training on turnover.
doi:10.1007/978-3-642-76986-3_4 fatcat:32b5czu2erc4rjzwvj5ne72vwy