Underinvestment in Employer Training: Is a Mandate to Spend on Training the Answer?
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American employers and their workers under invest in employer training. Under investment occurs because training generates externalities, because the tax system is biased against training investments, and because most workers are unable to finance general training because they lack access to loans to finance consumption during periods of heavy investment in training. School based occupational training ameliorates the under investment problem somewhat but it is not a complete answer to the problem. The French approach of requiring firms to spend at least 1.4 percent of their wage bill on continuing training of employees (if they are to avoid paying a tax) holds a good deal of promise but suffers from some critical flaws. These flaws are not basic to the tax offset design, however, so the paper concludes with a description of how a mandate to spend for the United States should be designed.
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This paper was presented at the Industrial Relations Research Association Meetings in Anaheim California on January 6, 1993.
French; worker; firm; education; wage; employee; skill; training; school; pay; investment; employer
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