Job Training: Costs, Returns, and Wage Profiles

29 Pages Posted: 9 Jun 2004

See all articles by Jacob Mincer

Jacob Mincer

Columbia University, Graduate School of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 1989

Abstract

Using information on time costs of training and gains in wages attributable to training I computed rates of return on training investments. The range of estimates based on several data sets generally exceeds the magnitudes of rates of return usually observed for schooling investments. It is not clear, however, that the difference represents underinvestment in job training. Two methods were used to estimate total annual costs of job training in the U.S. economy, for 1958, 1976, and 1987. The "direct' calculation uses information on time spent in training and on wages. For 1976 so calculated costs amounted to 11.2% of Total Employee Compensation and a half of costs of school education. In the "indirect" method training costs were estimated from wage functions fitted to PSID data. In 1976 the direct estimate amounted to between 65% and 80% of the indirect estimate based on the wage profile. This result represents strong support for the human capital interpretation of wage profiles. The estimates indicate a slower growth of training than of school expenditures in the past decades. Substitution of schooling for job training is a likely cause.

Suggested Citation

Mincer, Jacob, Job Training: Costs, Returns, and Wage Profiles (December 1989). NBER Working Paper No. w3208. Available at SSRN: https://ssrn.com/abstract=265286

Jacob Mincer (Contact Author)

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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