Training, Wages, and the Human Capital Model

Author(s): Jonathan R. Veum

Source: Southern Economic Journal, Vol. 65, No. 3 (Jan., 1999), pp. 526-538
Published by: Southern Economic Association
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Southern Economic Journal 1999, 65(3), 526-538

Training, Wages, and the Human Capital

Model

Jonathan R. Veum*

Using recent data from the National Longitudinal Survey of Youth, this study examines the
predictions of the human capital model concerning the relationship between training, starting
wages, and wage growth. As implied by the model, training, particularly employer-financed
training, is positively related to wage growth. Company-financed training also appears to be
portable across jobs or to have a general component. In addition, there is some evidence that
workers pay for initial training through a reduced starting wage. The results provide partial
support for the human capital model.

1. Introduction

Enhancing the skills of American workers through increased job training is often deeme
necessary for the United States to compete in the global market. Yet, primarily because of
lack of data, there is little research into the role training plays in increasing the productivit
and wages of workers. While there are a number of theories as to why wages increase over
individual's work life, a commonly accepted interpretation of this relationship is that wage
increase over time due to investments in human capital, particularly investments in job traini
The human capital model (Becker 1962; Mincer 1962) suggests that an individual's deci-
sion to invest in training is based on an examination of the net present value of the costs a
benefits of such an investment. Individuals are assumed to invest in training during an ini
period and receive returns to the investment in subsequent periods. Workers pay for training
receiving a wage while being trained that is lower than what could be received elsewhere. Sin
training is thought to make workers more productive, workers collect the returns from the
investment in later periods through higher marginal products and higher wages.
Human capital models usually decompose training into specific training, which increase
productivity in only one firm, and general training, which increases productivity in more th
one firm. Purely general training is financed by workers, and the workers receive all of th
returns to this training. In contrast, employees and employers will share in the costs and retu
of specific training. Despite these differences between general and specific training, the mod
predicts that both forms of training lower the starting wage and increase wage growth.
Recent improvements in the available data on training have produced a growing body o
literature that analyzes the different aspects of the human capital model and documents th

* US Bureau of Labor Statistics, 2 Massachusetts Avenue, NE, Suite 4945, Washington, DC 20212, USA; E-m
veum_j @bls.gov.
The views expressed in this paper are those of the author and do not reflect the policies or views of the Burea
of Labor Statistics. The author thanks two anonymous referees for helpful comments and Alexander Eidelman for excellent
research assistance.

Received January 1997; accepted July 1998.

526

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 Human Capital Model 527

consequences of training. In particular, most studies find that training received from the current
employer is associated with increased wage growth (Duncan and Hoffman 1979; Mincer 1988;
Barron, Black, and Loewenstein 1989; Brown 1989; Altonji and Spletzer 1991; Barron, Black,
and Loewenstein 1993; Bartel 1995). However, there have been only limited tests of other
aspects of the human capital model. For instance, Barron, Black, and Loewenstein (1989) and
Parsons (1989) find no statistically significant relationship between training and the starting
wage. Also, although Barron, Berger, and Black (1993) find that training has a negative effect
on the starting wage, the estimated effect is small relative to the impact of training on produc-
tivity.
In addition, there is mixed evidence as to whether training is specific or general. Lynch
(1992), using data from the early years of the National Longitudinal Survey of Youth (NLSY),
concludes that company training is primarily firm-specific. In contrast, a recent study using the
NLSY data by Loewenstein and Spletzer (1998) indicates that firms often pay the direct costs
of training that takes place outside the workplace. They find that these employer-financed forms
of training have a lasting impact on wages for those who switched employers after training,
suggesting that these forms of training are general. They hypothesize that firms and workers
enter into wage contracts that allow firms and workers to share in the costs and returns to
general training.
Similarly, others have suggested that alternatives to the traditional human capital model
should be considered. For instance, Bishop (1996) offers a number of possible explanations as
to why employers might finance general training, such as uncertainties about workers' skills,
liquidity constraints, and the presence of federal regulations. Similarly, Acemoglu and Pischke
(1996) attempt to explain why German firms pay for apprenticeship training, a form of training
that offers a number of skills that are not firm-specific. The authors hypothesize that firms pay
for general training because the current employer has more information about a worker's ability
than potential employers. The existence of this asymmetric information provides the firm with
some monopsony power and allows the firm to extract rents from the worker. Since the firm
obtains part of the worker's marginal product, it has an incentive to provide training and increase
the worker's marginal product. The worker may be reluctant to pay for the training, however,
since the worker receives only part of the return from the training.
Despite these recent analyses of the human capital model, no study to date has directly
tested the predictions of the traditional human capital model relating to starting wages, wage
growth, and the specificity of training. For instance, Loewenstein and Spletzer (1998) examine
the relationship between training and wage levels in a particular year but do not examine the
relationship between training and starting wages or wage growth. They also use data from a
relatively short time period (1988-1991), so that their results reflect only the short-term effects
of training on wages.
In this paper, recent data from the NLSY over a relatively long time (1986-1996) are used
to directly test the implications of the standard human capital model. Measures of time spent
in training programs are the key variables of interest. To preview the results, there is evidence
that some forms of initial training are inversely related to the starting wage. Employer-financed
training appears to be portable across employers or to have a general component. Training that
is financed by employers is also particularly effective in enhancing wage growth. Taken together,
the results provide partial support for the traditional human capital model.
The paper proceeds as follows. In the next section, a description of the data used here is
provided. Section 3 presents results from estimating the effect of training on starting wages,

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528 Jonathan R. Veum

while section 4 provides estimates from wage growth equations. Section 5 offers
cluding remarks.

2. The Data

In this analysis, data from the NLSY are used to examine the effect of prior a
training on starting wages and wage growth. A number of previous studies using
such as those by Lynch (1992) and Parsons (1989), have used information from the
surveys, where time spent in private sector training is available only for programs t
one month. In subsequent years, the training questions in the survey were change
respondents were asked about all types of training (up to four programs) since the las
regardless of duration.' Consequently, this past research using the pre-1986 data fro
captures the effects of participation in relatively formal training programs. Lynch (1
a company training incidence of 4.2%, while the more recent NLSY data indica
incidence is about 20% (U.S. Bureau of Labor Statistics 1993), suggesting that
data miss the majority of training events.
The NLSY is a sample of approximately 10,000 young men and women who wer
the ages of 14 and 22 in 1979 and who have been interviewed annually from 1979
After 1994, the survey moved to a biennial interview cycle. It is possible to create
of hours spent in training programs taken after the 1986 interview by taking the
answers to separate questions about the number of weeks of training and hours pe
training. The training programs exclude any training received through formal scho
Also, while the measures of training are more comprehensive than those availa
the 1979-1986 surveys, it is important to mention that they do not capture the extent o
training. Methods of informal training such as observing coworkers, learning by
speaking with supervisors, which are notoriously difficult to measure and quantif
included in these training variables. Hence, while the NLSY contains the most com
currently available on training, the training measures used here may not fully captur
of all forms of training on wages.
A key feature of the NLSY is that it garners information in an event history
which dates are collected for the beginning and ending of important life events. In
the starting dates and ending dates of all jobs are recorded, as well as the timing o
programs. Based on the timing of these events, it is possible to create measures of
received on the current job along with measures of training received prior to the cu
While the earlier years of the NLSY data primarily provide information on wh
training took place, the more recent data include information both on training loca
who pays the direct costs of this training. Incorporating data on the payer of the dir
training is particularly important when estimating the effects of training on the sta
Presumably, even though some employers pay for the explicit costs of training, e
indirectly pay for "company-paid" training through a lower starting wage.
The issue of who pays for the training is also important since many company

'Although no training questions were included in the 1987 survey, the training questions in the 1988 surv
training programs dating back to the 1986 interview. Respondents were asked about training in each surv
2 The NLSY includes oversamples of blacks and Hispanics.

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 Human Capital Model 529

Table 1. Details of Sample Creation

Sample Creation Deletions Remaining Sample

NLSY total sample 9964

Respondents in 1996 8636
Enrolled in school at 1996 interview date 331 8305
Missing AFQT 380 7925
Missing urban locality variable 139 7786
Missing firm size 160 7626
Missing industry 115 7511
Missing occupation 35 7476
Missing/invalid(nonpositive) wage 160 7316
Nonworker 816 6500
Started job prior to 1986 interview date 1041 5459

programs take place "off the job." For instance, classes that offer tr
opments in the field, such as changes in accounting laws, advancements
or new medical techniques, may not take place at the worksite but in
financed by the employer. Yet there may also exist some forms of t
the job but are financed by the employee. In particular, seminars or
general skills, such as those in management, leadership, public speakin
may occur at the worksite but be paid for by the worker.
Consequently in this analysis, training is separated into categories
payer.3 Since the focus here is primarily on the effect of company
wages, location is divided into categories of "onsite" and "offsite," an
"company paid" and "other paid," where "other paid" includes trainin
dividual, family, government, or other external sources.4 The resulting f
company paid; onsite, other paid; offsite, company paid; and offsite, ot
the effect of training on starting wages and wage growth, these categ
training received at the current job and training received prior to the
The primary sample used here is restricted to those who were wo
enrolled in school in 1996, those who started the 1996 job after the 1
with nonmissing information on other variables used in the analysis (d
are provided in Table 1). The employment restriction does not imply
working at the 1996 interview date, but he or she had to be working
interview year. The resulting sample is a group of 5459 men and wom
39 in 1996, and it is important to note that the results are specific to
Since the sample is limited to those who began the 1996 job after t
complete data on training received while working with the current e
all sample members. While information on training received prior to t
the effect of previous training may also be partially captured by the

3 The only type of training in which categorization is somewhat ambiguous is apprenti

involve both on-the-job training along with coursework, which may take place offsite.
are included in the "onsite" category, although the results for the most part are un
considered offsite (96 sample members participated in apprenticeships).
4 Another reason that the components of the "other-paid" category are grouped togethe
of these components are relatively small, particularly when subdivided into previous an
component of other-paid training is self or family (59.9%), followed by government (1

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530 Jonathan R. Veum

ables. If training, particularly specific training, is associated with greater job at

stricting the sample to those with less than 10 years of tenure may result in a
less apt to receive training than if the sample included those with more than 10 y
(approximately 16% of workers in 1996). If so, the full effect of training on wag
completely captured in this analysis because of this sample restriction (see Table
Table 3 provides information on the receipt of training and time spent in train
members. Over one-half of the sample participated in some form of training ove
period. Approximately 31% of the sample received onsite, company-paid training,
20% received company-paid training that took place outside the workplace. Abou
ipated in offsite training that was not employer financed, while close to 4% rec
at the worksite that was not directly financed by the firm. The percentage of indivi
company training is slightly higher than that suggested by previous research, wh
that between 4 and 25% of workers receive company training (Bishop 1996)
samples, time frame, and measures of training vary substantially across studies.6
most prior studies examined training received from the current employer, wherea
training received from multiple employers over an extended time frame is analy
Individuals spent on average about 132 hours, or about 13 hours per year, in t
the time period. Training recipients (excluding those with zero hours of trainin
256 total hours in training. Recipients of offsite, other-paid training spent on av
hours in these programs, which is more than any other source. This category inc
received from vocational/technical schools, business schools, and correspondence
these programs are probably more formal than some of the on-the-job training
should also be noted that the standard deviations for each of the forms of training
large, implying a wide dispersion in the hours of training received.

3. Training and Starting Wages

The NLSY collects information on the current wage rate of all jobs held. In
the year in which a job begins, respondents are asked about their starting wage
(specifically, the question reads, "How much did you earn when you first started
(EMPLOYER)?"). Respondents can report earnings over any time frame (hour
etc.). For those who do not report an hourly wage, one is constructed using usual
over the time frame. Hence, the NLSY is one of the few data sets that allows for a
of the relationship between initial training and starting wages.7
The effect of training on starting wages is estimated by specifying the foll
equation:

In w, = toTo + , + opTp X + (1)

5 Results from a probit estimation describing those with 10 or more years of ten
part, those with long tenures are more likely to be male, white, married, have
and to live in areas with low unemployment rates. When a selectivity correction
in the wage regressions, there is little effect on the estimated coefficients.
6 Since individuals can participate in more than one form of training, the participat
the sum of the percentages for the different types of training.
7 The CPI-U is used to convert all wages to 1996 dollars. The average starting

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 Human Capital Model 531

where In ws is the log starting wage rate of the job held in 1996, To is training received within
the first six months of employment at the current job, Tp is training received prior to the current
job, X is a vector of worker and firm characteristics, and e is a standard error term.8 The X
vector includes variables such as a quartic in prior work experience, sex, race/ethnicity, edu-
cation, firm size, urban residence, local unemployment rate, union status, and marital status. In
addition, an individual's score on the Armed Forces Qualifying Test (AFQT) is included and is
taken to be a measure of ability.9
As mentioned, except for a few prior studies, the effect of prior training on wages has
been ignored, since creating a measure of past training (Tp) requires the use of longitudinal or
quality retrospective data. The human capital model predicts that initial training received at the
current job is negatively related to the starting wage (ca < 0). Prior training has a positive
effect on the wage if training is general (axp > 0) but has no impact if training is firm-specific
(c, = 0).
Estimating the impact of training on wages is complicated by the fact that individuals may
be nonrandomly selected into training based on unmeasured factors. The individual and firm
characteristics that are available in the NLSY, including a measure of ability, are used here to
control for individual heterogeneity between training recipients and nonrecipients. To provide
additional controls for job type, the wage equations are estimated with and without industry
and occupation controls in the vector of explanatory variables. These broad industry and oc-
cupation categorical variables should provide a crude measure of the nature of a worker's job.
In addition, these variables may be a proxy for the extent of informal training that is received
on the job. Still, unobserved characteristics of workers and firms that are positively correlated
with both initial training and starting wages may affect the estimates of training on wages.'0
Table 4 presents estimates from log starting wage equations. For ease of presentation, only
the estimates of the training, education, and ability coefficients are presented. The estimates in
model 1 for the full sample indicate that training received in the first six months of employment
is negatively related to the starting wage, although the estimate is not statistically significant.
Training received while employed at previous jobs is positively related to the starting wage,
indicating that training is portable across jobs or is general. The results also indicate that edu-
cation and ability (as measured by AFQT percentile) are positively related to starting wages, as
might be expected. Although the estimated education coefficient is somewhat smaller than that
often found in the returns to education literature, it is similar to that found in studies using the
cohort-based NLSY (Cawley, Heckman, and Vytlacil 1998). Evaluated at the sample means,
the implied elasticities suggest that a 10% increase in previous training increases starting wages
by less than 0.05%, while similar increases in education and ability do so by approximately 7.5

8 The results for initial training and starting wages are fairly similar if the definition of "initial training" is made more
restrictive, to include only training received in the first three months of employment, or made more expansive, to
include training in the first year of employment.
9 The AFQT was administered to all respondents in 1980. The score used in the estimations is the percentile ranking of
the score based on the respondent's age when the test was taken.
10 Attempts were made to control for unobserved heterogeneity through the inclusion of individual fixed effects in the
wage equations. The use of a fixed-effects specification, however, requires restricting the sample to those individuals
who changed jobs at least twice between 1986 and 1996. The results from a fixed-effect starting wage regression for
this restricted sample indicate that the estimate for initial training becomes larger (less negative) when using fixed
effects, suggesting that the unobservables are actually negatively correlated with training receipt. Hence, any gain from
using a fixed-effects specification appears to be mitigated by the sample restrictions necessary to perform the estimation.

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532 Jonathan R. Veum

Table 2. Sample Means/Probit for Tenure > 10 Years

Variable Sample Means Tenure > 10 Years Probita

Female 0.486 -0.325**

(5.25)
Black 0.306 -0.346**
(4.57)
Hispanic 0.185 -0.128
(1.53)
Education 13.08 -0.003
(0.20)
Armed Forces Qualifying Test percentile 38.74 0.007**
(5.25)
Prior experience (in weeks/1000) 0.489 - 10.62**
(5.40)
Experience2 0.284 40.66**
(3.35)
Experience3 0.181 -113.04**
(4.27)
Experience4 0.123 83.61**
(4.95)
Firm > 1000 employees 0.366 0.127**
(2.17)
Urban locality 0.801 0.038
(0.54)
Local unemployment rate 6.79 -0.025**
(2.48)
Married 0.560 0.233**
(4.06)
Professional and technical 0.172 0.258*
(1.71)
Manager 0.131 0.452**
(3.09)
Sales 0.046 0.183
(0.95)
Clerical 0.163 0.184
(1.27)
Operative 0.141 -0.053
(0.36)
Craft worker 0.115 0.470*
(3.24)
Service and private household 0.162 0.025
(0.17)
Agriculture and mining 0.030 0.100
(0.60)
Construction 0.081 -0.158
(1.12)
Transportation 0.073 -0.049
(0.42)

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 Human Capital Model 533

Table 2. Continued

Variable Sample Means Tenure > 10 Years Probita

Wholesale and retail trade 0.171 -0.410**

(3.98)
Finance 0.055 0.090
(0.66)
Business 0.085 -0.185
(1.44)
Personal services and entertainment 0.066 -0.500**
(3.28)
Professional services 0.212 -0.156
(1.56)
Public administration 0.058 0.016
(0.14)
Constant 0.824**
(3.42)
Log-likelihood -1424.8
Number of observations 5459 6500

* Statistically significant at the 10% level.

** Statistically significant at the 5% level.
a Absolute value of t-statistics are in parentheses. The
omitted industrial category is manufacturing.

and 1.5%, respectively. Hence, the impact o

and ability is small.
Model 2 presents estimates when the dif
variables as opposed to the aggregate trainin
four forms of initial training are negativel
the offsite, other paid category has a nega
at the 10% significance level. For this type
worker productivity during the training p
explicit cost of this training. This result su
initial training through a reduced starting

Table 3. The Incidence and Duration of Trai

Mean Hours of
Percent Who Mean Hours of Training Among
Received Training Training Training Recipients

Any form of training 51.46 131.67 255.90

(371.80) (486.72)
Type of training
Onsite, company paid 31.15 48.87 152.00
(216.56) (360.91)
Onsite, other paid 3.96 5.19 131.10
(86.79) (417.91)
Offsite, company paid 19.51 20.48 105.02
(137.48) (296.77)
Offsite, other paid 17.31 57.13 330.04
(249.79) (520.18)
a The number of observations is 5459. Standard deviations are in paren

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Table 4. Log Starting Wage Regressionsa
All

Variable Model 1 Model 2 Model 3

Training in First Six Months at Cur

Any form -0.075
(1.15)
Onsite, company paid -0.068 -0.058
(0.79) (0.65)
Onsite, other paid -0.132 -0.271
(0.19) (0.40)
Offsite, company paid 0.263 0.261
(1.37) (1.41)
Offsite, other paid -0.177* -0.175*
(1.70) (1.75)
Training at Previous Jobs
Any form 0.054**
(2.78)
Onsite, company paid 0.078** 0.080**
(2.23) (2.35)
Onsite, other paid 0.002 -0.016
(0.02) (0.21)
Offsite, company paid 0.182** 0.168**
(3.31) (3.17)
Offsite, other paid 0.104 0.017
(0.37) (0.62)
Education 0.058** 0.058** 0.041**
(16.32) (16.23) (10.79)
AFQT percentile 0.004** 0.004** 0.003**
(10.53) (10.39) (8.93)
Industry/occupation dummy variables included? No No Yes
R2 0.28 0.28 0.34
Number of observations 5459 5459 5459

* Statistically significant at the 10% level.

** Statistically significant at the 5% level.
a Numbers in parentheses are t-statistics. Additional covariates include controls for female, black, Hispanic, a quartic in e
means of all variables).

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 Human Capital Model 535

The results in model 2 also indicate that previous company-financed training, both onsite
and offsite, is positively related to the starting wage. Hence, these forms of prior training are
valued by subsequent employers and appear to have a general component. These results suggest
that firms are particularly effective in providing skill enhancements that are useful to other
employers. It is somewhat surprising, however, that both forms of previous other-paid training
are unrelated to wages. These results may suggest that these forms of training that are not
financed by the employer are not particularly effective in enhancing productivity. It may also
be true that these forms of training are taken for consumption purposes.
Model 3 presents estimates when industry and occupation variables are included as addi-
tional covariates in the starting wage regression. The estimates for the training variables are
only slightly changed with the inclusion of the industry/occupation dummies. When the starting
wage regressions are estimated separately by gender, there is some indication of a negative
correlation between certain forms of initial training and starting wages for males. In particular,
onsite, company-paid training and offsite, other-paid training are marginally significant at the
0.13 and 0.15 levels, respectively. Also, both forms of company-paid training are portable across
employers for males, whereas only offsite, company-paid training is portable for females.
These results indicate that training has a general component, and there is some evidence
that workers pay for training through a lower starting wage, although the presence of a negative
relationship between training and starting wages depends on the training measure used. It is
important to reemphasize, however, that because of the limitations of the training measures and
restrictions in the nature of the sample imposed by the data, the inverse relationship between
training and starting wages may be understated by these estimates. Also, unobserved charac-
teristics of workers and firms may prevent the negative relationship between initial training and
starting wages from being more evident. Despite these limitations, the regression estimates
provide some indications that there is an inverse relationship between initial training and starting
wages, as predicted by the human capital model.

4. Training and Wage Growth

The impact of training on wage growth is estimated using the following specification:

In (wc/W,) = ycTc + 'ypT + OY + v (2)

where wc is the current wage at the 1996 job, Tc is training received at the cur
training received at prior jobs, Y is similar to the previously defined X vector bu
a quartic in tenure at the current job, and v is the error term. The human capital
that current training is positively related to wage growth (-yc > 0), while prev
should have no impact on wage growth (yp = 0). Similar to the starting wa
specifications that include and exclude industry and occupation controls as additio
are estimated.

The results from estimating Equation 2 are presented in Table 5. The results for the full
sample in model 1 indicate that training received at the current job is positively related to wage
growth, which is similar to the findings from most prior studies (Duncan and Hoffman 1979;
Mincer 1988; Barron, Black, and Loewenstein 1989; Brown 1989; Altonji and Spletzer 1991;
Barron, Black, and Loewenstein 1993; Bartel 1995). Also, as predicted by the human capital
model, prior training is unrelated to wage growth. In addition, the results suggest that education

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Table 5. Wage Growth Regressionsa
All

Variable Model 1 Model 2 Model 3 M

Training at Current Job

Any form 0.154**
(5.12)
Onsite, company paid 0.233** 0.222**
(5.41) (5.10)
Onsite, other paid 0.016 -0.040
(0.06) (0.15)
Offsite, company paid 0.161** 0.153**
(2.37) (2.25)
Offsite, other paid 0.081 0.027
(0.33) (0.48)
Training at Previous Jobs
Any form -0.015
(1.09)
Onsite, company paid -0.017 0.023
(0.70) (0.94)
Onsite, other paid 0.021 0.021
(0.37) (0.37)
Offsite, company paid -0.041 -0.041
(1.08) (1.07)
Offsite, other paid -0.010 -0.006
(0.55) (0.32)
Education 0.008** 0.008** 0.006**
(3.15) (3.09) (2.08)
AFQT percentile 0.001** 0.001** 0.001
(2.36) (2.35) (1.45)
Industry/occupation dummy variables included? No No Yes
R2 0.05 0.05 0.05
Number of observations 5459 5459 5459

* Statistically significant at the 10% level.

** Statistically significant at the 5% level.
a Numbers in parentheses are t-statistics. Additional covariates include those mentioned in the note in Table 4 as well as

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 Human Capital Model 537

and ability are positively related to wage growth. The implied elasticities indicate that a 10%
increase in training at the current job increases wage growth by 0.03%, while a 10% increase
in education and ability does so by 0.8% and 0.4%, respectively. Hence, the estimates suggest
that the impact of training on wage growth relative to education and ability is fairly small.
When the disaggregated training measures are included in model 2, the results imply that
company-financed training at the current job, both onsite and offsite, is positively related to
wage growth. When the industry and occupation dummy variables are included as additional
regressors in model 3, there is little change in the results. Also, when the wage growth equations
are estimated separately by gender, both forms of current company-paid training are positively
related to wage growth for males, while only onsite, company-paid training is significantly
related to wage growth among females.
The results for company-paid training are of interest, given that the starting wage estimates
indicate that this form of training has a general component. Hence, onsite and offsite company-
sponsored training, which are the most common forms of training, appear to enhance produc-
tivity, both at the current firm and at other firms. It is surprising, however, that the other forms
of training received at the current job have no estimated impact on wage growth. Similar to the
results in the prior section, the wage growth results suggest that training that is not financed by
the employer, or that is in the other-paid category, is either ineffective at enhancing productivity
or is taken largely for consumption purposes.

5. Conclusions

This study uses recent data from the NLSY to examine the predictions of the human ca
model concerning the relationship between training and wages. The results indicate that tr
received with the current employer is positively related to wage growth, as predicted b
human capital model. Training, particularly training that is financed by employers, has a g
component or is portable across employers. While finding strong empirical support for
predicted negative relationship between initial training and starting wages is somewhat el
the data provide some indications of an inverse relationship. Given that the typical wor
spends about a day and a half in training per year, the time costs of training are relative
Consequently, it is likely that firms can recoup the costs of training not only through a
starting wage but also through small changes in nonpecuniary aspects of the job, such as re
perquisites or fringe benefits. Taken together, these results provide partial support for th
ditional version of the human capital model.
The finding that firms often pay the explicit costs of training that is portable across
ployers is consistent with variants of the human capital model that introduce factors su
implicit contracts, uncertainties about workers' skills, or transaction costs into the human
framework. Yet, since the results also suggest that workers implicitly pay for some for
training through a reduced starting wage, the conventional human capital model may re
relatively minor modifications in order for its predictions to be consistent with the ob
relationship between training and wages. In addition, it is again important to mention t
estimating the relationship between training and wages is largely a function of the qual
data on training, as training is in many ways a difficult concept to measure and quantif
instance, the training measures used in this analysis do not capture time spent in infor
training. If those workers who do not participate in formal training instead receive inf

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538 Jonathan R. Veum

training in lieu of formal training, the estimated impact of training on wages w

toward zero. Improved data on training should allow for additional tests of the trad
capital model versus possible alternatives.

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