Minimum Wages and On-the-job Training

Daron Acemoglu and Jorn-Steffen Pischke

No 7184, NBER Working Papers from National Bureau of Economic Research, Inc

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 labor 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 constrained 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 of 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.

JEL-codes: J24 J31 (search for similar items in EconPapers)
Date: 1999-06
New Economics Papers: this item is included in nep-lab and nep-ltv
Note: LS
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Citations: View citations in EconPapers (35)

Published as "Minimum Wages and On-the-job Training," 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 (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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