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Training, Job Security And Incentive Wages

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  • Margarita Katsimi

Abstract

This paper considers the optimal level of firm‐specific training by taking into account the positive effect of training on the expected duration of workers' current employment. In the framework of an efficiency wage model, a short expected job tenure represents a disamenity that reduces the penalty from shirking. As this disamenity increases, workers have an incentive to continue providing a positive level of effort only if they are compensated by a higher wage. We endogenize the employment separation rate by introducing firm‐specific training. Firm‐specific training creates a rent that is lost if the worker is separated from the firm. As a result, the firm will be more reluctant to fire its trained workforce in a recession. This implies that firm‐specific training can decrease current wages because it represents a commitment to lower future labour turnover.

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  • Margarita Katsimi, 2008. "Training, Job Security And Incentive Wages," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(1), pages 67-78, February.
    • Handle: RePEc:bla:scotjp:v:55:y:2008:i:1:p:67-78
    DOI: 10.1111/j.1467-9485.2008.00442.x
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    2. Dan Bernhardt & Steeve Mongrain, 2010. "The Layoff Rat Race," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(1), pages 185-210, March.
    3. Pierre Salmon, 2003. "The Assignment of Powers in an Open-ended European Union," CESifo Working Paper Series 993, CESifo.
    4. Lössbroek, Jelle & Radl, Jonas, 2019. "Teaching older workers new tricks: workplace practices and gender training differences in nine European countries," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 39(10), pages 2170-2193.
    5. Florian Baumann, 2010. "Severance Payments as a Commitment Device," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(4), pages 715-734, December.
    6. Jerzy Kaźmierczyk & Gulnara Fatykhovna Romashkina & Joanna Wyrwa, 2020. "The value of training and loyalty. A comparative analysis," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(1), pages 762-779, September.

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