Market Failure in Training?

The papers in this volume were fIrst presented at a symposium on "An Expanded Public Role in Job Training? The Issue of Market Failure in the Provision of Training. " The symposium took place in May, 1989. It was sponsored by the LaFollette Institute of Public Affairs at the University of Wisconsin, Madison. JozefRitzen, then in Madison on leave from Erasmus University in the Netherlands, organized the symposium. Subsequently he became Minister of Education and Science for the Netherlands. He asked David Stern to fInish the work of editing the papers for publication. All the papers have been revised in light of comments by discussants at the symposium, as well as subsequent comments by the editors and outside reviewers. INTRODucrroN AND OVERVIEW Jozef M. M. Ritzen Erasmus University Rotterdam Minister of Education and Science The Netherlands David Stem School of Education University of California, Berkeley Two factors are contributing to an increased interest in the training of adult employees. First, there is the present high rate of change in the technologies embodied in products and in production processes. This enhances the negative effect of the undersupply of training on economic growth. Higher levels of training would provide a more fertile environment for technological change. The second factor is the aging of the population.

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This book deals with on-the-job training (OJT) of employees.Given fast-changing technology and an aging labor force,many industrialized countries must consider whether asufficient amount of investment is being undertaken. Thepapers in this volume offer new evidence on the amount ofOJT that occurs, and a re-examination of standard economictheory.One key assumption in former research was that employeesthemselves would absorb the cost of "general" training,i.e., OJT that produces portable skills or knowledge.However, that assumption remained empirically untested. Newsurveys that have measured OJT directly now permit testingof this assumption. Results, as reported in several chaptersof this book, fail to confirm this assumption. It appearsthat employers are not able, in fact, to "sell" OJT toemployees. Markets therefore do not provide enough OJT.Even if employees do absorb some of thecost of their owntraining, they may not buy enough of it, because the riskassociated with such investment cannot be hedged or insured.New proposals are presented to address this problem.Learning in workplaces includes solving problems andimproving the productive process. Some chapters in this bookdescribe the features of organizations where such learningoccurs. Externalities associated with certain of thesefeatures, in particular employment security, may also giverise tomarket failure.

Contenu
and Overview.- Job Training: Costs, Returns, and Wage Profiles.- Firm Financed Education and Specific Human Capital: A Test of the Insurance Hypothesis.- On-The-Job Training of New Hires.- Employee Training Programs in U.S. Businesses.- Firms' Propensity to Train.- Training and Employment Relations in Japanese Firms.- Market Failure for General Training, and Remedies.- Nonmarket Failure in Government Training Programs.