General and Specific Training : Evidence and Implications

As Gary Becker first noted in his seminal article on investment in human capital, the effect of training on wages and mobility can be expected to depend crucially on the degree to which the training is specific or general. While Becker's model is well accepted by labor economists, the topic of specific and general training is an area where empirical work is substantially lagging the theory. The degree of generality incorporated in employer-provided training has implications for topics such as welfare policy and how economists interpret the returns to tenure and experience. In this paper, we explicitly document the specificity and generality of employer-provided training and then analyze how wage growth and mobility are influenced by these direct measures of specific and general training. Our empirical work uses data from the 1993 National Longitudinal Survey of Youth (NLSY) and the Employer Opportunity Pilot Project survey (EOPP). Each of these surveys asked about the degree of generality incorporated in the training that the individual receives. In spite of the emphasis that labor economists have placed on specific training, we find that workers in the NLSY and employers in the EOPP indicate that most of the skills learned in training are useful elsewhere. Furthermore, utilizing a unique measure of relevant experience in the EOPP data, we show that employers not only frequently recognize the value of skills that workers have learned from training provided by previous employers, but they also substitute previous training for their own training. As one would expect, this substitution only takes place when the skills required on the current job are general. In addition, wage equations estimated from both the EOPP and the NLSY data indicate that skills learned in past jobs are rewarded by a worker's current employer. Our mobility equations are also consistent with the hypothesis that much on-the-job training is quite general. Interestingly, we are unable to find any systematic difference in the wage returns to specific and general training provided by the current employer. This can be partly explained by a combination of measurement error in the data, poorly worded questions that do not measure precisely the economic concepts of specificity and generality, and employers sharing the costs and returns to general as well as specific training. In fact, both our within and across job wage equations are consistent with several recent models that predict that employers will often extract some of the returns to the general training they provide