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Who should pay the bill for employee upskilling?

Author

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  • Radu Vranceanu

    (ESSEC Business School, THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université)

  • Angela Sutan

    (UBFC - Université Bourgogne Franche-Comté [COMUE])

Abstract

Upskilling is an investment in human capital that allows a worker to successfully undertake a new task or new project within his/her existing job. It involves costly effort on behalf of the employee to acquire new skills and new knowledge. A firm-financed training scheme allows to screen the applicants to the programme, but comes with the cost of hidden actions, as some employees train on their own yet keep on working on low-value projects. A laissez - faire policy relying on worker self-training and incentive compatible contracts allows to attract more workers to high-value projects, yet it must grant to flexible workers a positive informational rent. The profit comparison reveals a paradoxical situation where it might be in the interest of a company to rely on worker self-training rather than to provide a training programme.

Suggested Citation

  • Radu Vranceanu & Angela Sutan, 2021. "Who should pay the bill for employee upskilling?," Working Papers hal-02977891, HAL.
    • Handle: RePEc:hal:wpaper:hal-02977891
    Note: View the original document on HAL open archive server: https://essec.hal.science/hal-02977891v3
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    References listed on IDEAS

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    Keywords

    Contract theory; Upskilling; Screening; Training policy;
    All these keywords.

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