Minimum Wages and On-the-Job Training

Daron Acemoglu and Jorn-Steffen Pischke

No 2177, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Becker's theory of human capital predicts that minimum wages should reduce training investments for affected workers, because they prevent these workers from taking wage cuts necessary to finance training. We show that when the assumption of perfectly competitive labour markets underlying this theory is relaxed, minimum wages can increase training of affected workers, by inducing firms to train their unskilled employees. More generally, a minimum wage increases training for con-strained workers, while reducing it for those taking wage cuts to finance their training. We provide new estimates on the impact of the state and federal increases in the minimum wage between 1987 and 1992 on the training of low wage workers. We find no evidence that minimum wages reduce training. These results are consistent with our model, but difficult to reconcile with the standard theory of human capital.

Keywords: Firm-Sponsored Training; General Human Capital; Imperfect Labour Markets; Low Wage Workers (search for similar items in EconPapers)
JEL-codes: J24 J31 J41 O0 (search for similar items in EconPapers)
Date: 1999-07
References: Add references at CitEc
Citations: View citations in EconPapers (19)

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Related works:
Chapter: MINIMUM WAGES AND ON-THE-JOB TRAINING (2003)
Working Paper: Minimum Wages and On-the-Job Training (2002)
Working Paper: Minimum wages and on-the-job training (2002)
Working Paper: Minimum Wages and On-the-Job Training (2001)
Working Paper: Minimum Wages and On-the-Job Training (1999)
Working Paper: Minimum Wages and On-the-job Training (1999)
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