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Minimum Wages and Training Revisited

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Author Info
David Neumark
William Wascher

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Abstract

Theory predicts that minimum wages will reduce employer-provided on-the-job training designed to improve workers' skills on the current job, but may increase the amount of training that workers obtain to qualify for a job. We estimate the effects of minimum wages on the amount of both types of training received by young workers by exploiting cross-state variation in minimum wage increases. The evidence provides considerable support for the hypothesis that higher minimum wages reduce training (especially formal training) aimed at improving skills on the current job. At the same time, there is little or no evidence that minimum wages increase training undertaken to qualify for or obtain jobs. Consequently, it appears that, overall, minimum wages substantially reduce training received by young workers.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6651.

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Date of creation: Jul 1998
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Handle: RePEc:nbr:nberwo:6651

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Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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  1. Adam J. Grossberg & Paul Sicilian, 1999. "Minimum Wages, On-the-Job Training, and Wage Growth," Southern Economic Journal, Southern Economic Association, vol. 65(3), pages 539-556, January.
  2. Rosella Gardecki & David Neumark, 1998. "Order from chaos? The effects of early labor market experiences on adult labor market outcomes," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 51(2), pages 299-322, January.
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  3. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December. [Downloadable!] (restricted)
  4. Lynch, Lisa M, 1992. "Private-Sector Training and the Earnings of Young Workers," American Economic Review, American Economic Association, vol. 82(1), pages 299-312, March.
  5. David Neumark & William Wascher, 1997. "Do Minimum Wages Fight Poverty?," NBER Working Papers 6127, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Hashimoto, Masanori, 1982. "Minimum Wage Effects on Training on the Job," American Economic Review, American Economic Association, vol. 72(5), pages 1070-87, December. [Downloadable!] (restricted)
  7. Constantine, J. & Neumark, D., 1996. "Training and the Growth in Wage Inequality," Department of Economics Working Papers 172, Department of Economics, Williams College.
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  8. Salop, Joanne & Salop, Steven, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 619-27, November. [Downloadable!] (restricted)
  9. Alan L. Gustman & Thomas L. Steinme)er, 1982. "Labor Markets and Evaluations of Vocational Training Programs in the Public High Schools - Toward a Framework for Analysis," NBER Working Papers 0478, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Agell, Jonas & Lommerud, Kjell Erik, 1997. "Minimum wages and the incentives for skill formation," Journal of Public Economics, Elsevier, vol. 64(1), pages 25-40, April. [Downloadable!] (restricted)
  11. Norman Bowers & Paul Swaim, 1994. "Recent Trends In Job Training," Contemporary Economic Policy, Western Economic Association International, vol. 12(1), pages 79-88, 01. [Downloadable!] (restricted)
  12. Joanne Salop & Steve Salop, 1976. "Self-selection and turnover in the labor market," Special Studies Papers 80, Board of Governors of the Federal Reserve System (U.S.).
  13. Lang, Kevin, 1987. "Pareto Improving Minimum Wage Laws," Economic Inquiry, Oxford University Press, vol. 25(1), pages 145-58, January.
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