DP2845 Is Wage Compression a Necessary Condition for Firm-Financed General Training?

Author(s): Alison L Booth, Gylfi Zoega
Publication Date: June 2001
Keyword(s): absolute- and relative wage compression, Firm-financed general training
JEL(s): J24, J31
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2845

It is well known that workers in Europe appear to receive more firm-provided general training than their counterparts in the United States. Moreover, there is considerable evidence that firms, in many cases, pay for the general training, contrary to the predictions of Becker (1964). In important recent contributions, Acemoglu and Pischke argue that it is through wage compression that unions and other labour-market institutions induce firms to invest in general training. We show that while wage compression can make firms more willing to pay for training, it does not constitute a necessary condition for firm-sponsored training.