Can Subsidising Job-Related Training Reduce Inequality?

41 Pages Posted: 8 Sep 2017

See all articles by Konstantinos Angelopoulos

Konstantinos Angelopoulos

Athens University of Economics and Business - Department of International and European Economic Studies

Andrea Benecchi

Bank of Italy

Jim Malley

University of Glasgow - Department of Economics

Date Written: August 16, 2017

Abstract

A well-established stylised fact is that employer provided job-related training raises productivity and wages. Using UK data, we further find that job-related training is positively related to subsidies aimed at reducing training costs for employers. We also find that there is a positive, albeit quantitatively small, relationship between wage inequality and training inequality in the UK. Motivated by the above, we explore whether policies to subsidise firms’ monetary cost of training can improve earnings for the lower skilled and reduce inequality. We achieve this by developing a dynamic general equilibrium model, featuring skilled and unskilled labour, capital-skill complementarity in production and an endogenous training allocation. Our results suggest that training subsidies for the unskilled have a significant impact on the labour income of unskilled workers. These subsides also increase earnings for skilled workers and raise aggregate income with implied lifetime multipliers exceeding unity. Finally, the positive spill over effects to skilled workers imply that training subsidies are not very effective in reducing inequality, measured as the distance between skilled and unskilled wages and incomes.

Keywords: Job-Related Training, Wage and Earning Inequality, Training Subsidies

JEL Classification: E240, J240, J310

Suggested Citation

Angelopoulos, Konstantinos and Benecchi, Andrea and Malley, Jim, Can Subsidising Job-Related Training Reduce Inequality? (August 16, 2017). CESifo Working Paper Series No. 6605, Available at SSRN: https://ssrn.com/abstract=3033534 or http://dx.doi.org/10.2139/ssrn.3033534

Konstantinos Angelopoulos

Athens University of Economics and Business - Department of International and European Economic Studies ( email )

GR-10434 Athens
Greece

Andrea Benecchi

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Jim Malley (Contact Author)

University of Glasgow - Department of Economics ( email )

Adam Smith Building
Glasgow, Scotland G12 8RT
United Kingdom
+44 141 330 4617 (Phone)
+44 141 330 4940 (Fax)

HOME PAGE: http://www.gla.ac.uk/economics/malley/

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