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Minimum Wages and On-the-Job Training

Daron Acemoglu and Jorn-Steffen Pischke

CEP Discussion Papers from Centre for Economic Performance, LSE

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. In contrast, in noncompetitive labor markets, minimum wages tend to increase training of affected workers because they induce firms to train their unskilled employees. We provide new estimates on the impact of the state and federal increases in the minimum wage in the US between 1987 and 1992 on the training of low-wage workers. We find no evidence that minimum wages reduce training, and little evidence that they tend to increase training. We therefore develop a hybrid model where minimum wages reduce the training investments of workers who were taking wage cuts to finance their training, while increasing the training of other workers. Finally, we provide some evidence consistent with this hybrid model.

Keywords: Imperfect Labor Markets; Low Wage Workers; General Human Capital; Firm Sponsored Training (search for similar items in EconPapers)
JEL-codes: J24 J31 J41 (search for similar items in EconPapers)
Date: 2002-04
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http://cep.lse.ac.uk/pubs/download/DP0527.pdf (application/pdf)

Related works:
Working Paper: Minimum wages and on-the-job training (2002) Downloads
Working Paper: Minimum Wages and On-the-Job Training (2001) Downloads
Working Paper: Minimum Wages and On-the-Job Training (1999) Downloads
Working Paper: Minimum Wages and On-the-Job Training (1999)
Working Paper: Minimum Wages and On-the-job Training (1999) Downloads
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