The French Mandate to Spend on Training: A Model for the United States?

Abstract

American employers and workers underinvest in employer training. Underinvestment occurs because training generates externalities, because turnover is excessive, because the tax system discourages training investment, and because workers lack access to loans that would allow them finance heavy investments in training (Bishop 1991). During the election campaign, President Clinton proposed stimulating training by requiring employers to spend some minimum percentage of their wage bill on training or else be subject to a special tax. France has had such a mandate since 1972, so the design of an American training mandate is likely to benefit from a careful examination of the French program. The French have demonstrated that a training mandate is administratively and politically feasible, but their mandate is not optimally designed for U.S. implementation. The paper concludes with some recommendations about how a U.S. mandate to spend on training should be structured.