The Puzzle of Non-Participation in Training - an Empirical Study of Permanent vs. Occasional Non-Participation

Participation in continuing vocational training is often found to be associated with considerable individual benefits such as a wage increase or a reduction in unemployment. But why then do some participate and others don't? In our paper we argue that it is important to take selection effects into account in order to solve this puzzle. It is well known that training participants and non-participants differ in observable as well as in unobservable characteristics. The novel part in our paper is that we are able to show that even non-participants cannot be treated as a homogeneous group: there are individuals never taking part in training (permanent non-participants) and individuals currently (in a given year) not taking part (occasional non-participants). Previous empirical studies neglected these distinctions - mostly due to data restrictions. Our study fills this gap. It is based on a unique data set covering a large number of individuals not taking part in training, i.e., permanent and occasional non-participants. Comparing those two groups we find that permanent non-participants would have higher costs in case of participation than occasional non-participants. Moreover, the benefits associated with their current jobs would be lower, i.e., their pay increase and the reduction of their risk to get laid off would be smaller. Given these results their decision never to take part in training may be rational in a steady economic situation but it is not in times of rapid technological change because of better long-term employment outlooks due to better alternatives to change jobs. Our results indicate that in the long-run even permanent never-participants would benefit from participation in terms of improved prospects on the labor market. This indicates that permanent non-participants either misperceive future developments or suffer from an exceptionally high discount rate which in turn leads to a negative cost-benefit ratio of training in their perception