A Question Almost All My Labor Students Got Right
By Bryan Caplan
Even famous economists occasionally tell me that, “Firms have no incentive to train workers in general job skills.” The argument: Once firms teach workers general job skills, the newly-trained workers can immediately threaten to quit unless they get a raise.
Such a plausible argument! But almost all of my labor economics students can easily explain why it’s wrong. Their midterm asked:
F, and Explain: According to human
capital theory, firms have no incentive to train workers’ general skills.
A typical answer:
workers who improve their general skills can easily bargain for a raise, firms’
obvious response is to pay them a below-market wage – or even a zero wage –
during their training period.
Internships are an excellent example.
I’d like to think that my students owe this insight to my stellar teaching. But the real reason, I fear, is simply personal experience. College students today are hungry for training in general job skills – and they know that firms are ready to provide that training. All firms ask in exchange is unpaid labor – a deal that students nowadays are happy to take.