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.