Minimum Wages and On-the-Job Training

Daron Acemoglu and Jorn-Steffen Pischke

No 384, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 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: general human capital; low wage workers; Imperfect labor markets; firm sponsored training (search for similar items in EconPapers)
JEL-codes: J24 J31 J41 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2001-10
New Economics Papers: this item is included in nep-cfn and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Published - published in: Research in Labor Economics 22, 2003, 159-202

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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 (1999)
Working Paper: Minimum Wages and On-the-Job Training (1999)
Working Paper: Minimum Wages and On-the-job Training (1999)
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