The Hidden Cost of Training

42 Pages Posted: 10 Jul 2019

Date Written: July 1, 2019

Abstract

Firms invest in training to increase the skills and, through this, the productivity of their employees. We argue that because of the increased productivity potential, employees hold higher fair wage expectations after receiving training. We present evidence from an employer-employees matched dataset documenting the positive relationship of training participation and employees' wage expectations. Consistent with the field data, we find in a laboratory experiment that receiving training increases employees’ fair wage perceptions. If the actual wage thereby falls below what is considered fair, employees reduce their effort levels. Our results indicate that fairness concerns could alleviate the positive productivity effects of training and thus lead to lower human capital investments by firms.

Keywords: human capital, training, fairness, wages, gift exchange

JEL Classification: C91, J24, J31, M52, M53

Suggested Citation

Petters, Lea, The Hidden Cost of Training (July 1, 2019). Available at SSRN: https://ssrn.com/abstract=3417105 or http://dx.doi.org/10.2139/ssrn.3417105

Lea Petters (Contact Author)

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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