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Can subsidising job-related training reduce inequality?

Konstantinos Angelopoulos, Andrea Benecchi and James Malley

Working Papers from Business School - Economics, University of Glasgow

Abstract: A well-established stylised fact is that employer provided job-related training raises productivity and wages. Using UK data, we further find that job-related training is positively related to subsidies aimed at reducing training costs for employers. We also find that there is a positive, albeit quantitatively small, relationship between wage inequality and training in- equality in the UK. Motivated by the above, we explore whether policies to subsidise firms monetary cost of training can improve earnings for the lower skilled and reduce inequality. We achieve this by developing a dynamic gen- eral equilibrium model, featuring skilled and unskilled labour, capital-skill complementarity in production and an endogenous training allocation. Our results suggest that training subsidies for the unskilled have a significant impact on the labour income of unskilled workers. These subsides also in- crease earnings for skilled workers and raise aggregate income with implied lifetime multipliers exceeding unity. Finally, the positive spill over effects to skilled workers imply that training subsidies are not very effective in re- ducing inequality, measured as the distance between skilled and unskilled wages and incomes.

Keywords: Job-related training; wage and earning inequality; training subsidies (search for similar items in EconPapers)
JEL-codes: E24 J24 J31 (search for similar items in EconPapers)
Date: 2017-08
New Economics Papers: this item is included in nep-dge, nep-hrm and nep-mac
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