The finding that certain types of training pay off well for workers with and without a postsecondary education serves as a good point of departure for summarizing the present empirical findings. While it is clear that training is associated both with higher wages and increased annual hours of work, I found no evidence consistent with a substantial increase in employers' demand for trained workers during the past thirty years. The economic returns to training are high for a cohort of young men entering the labor market in the 1980s, and they were equally high for the cohort that entered in the late 1960s.
Even though the evidence from the NLS does not support the claim that training is becoming a more important determinant of economic outcomes, it is apparent that training plays a very important role in shaping economic well-being. On average, for both cohorts, participation in any form of training during the first decade and a half of one's career resulted in wage gains on the order of seven to ten percent. This increase is comparable with the earnings premium associated with an additional year or two of formal schooling.
Possibly more important among the present findings than the magnitude of average training returns is insight into the patterns and types of training which are particularly valuable. Notably, among workers who received training which lasted at least one month, it appears that for both cohorts only training received directly at the workplace has substantial economic returns. For both the original and NLSY cohort, long-term training received at a community college or school appears to have a relatively low return. This relative effectiveness of employer-provided training may be due to the possibility that such training is more effectively focusing on job-relevant skills. Moreover, learning in the workplace may provide trainees with a tangible context for the application of new skills and thereby improve learning.
The relatively lower wage benefit associated with training not provided by the employer may also be due to the possibility that participation in longer-term training at a place other than the workplace is more common among workers employed by smaller firms. Such firms may also pay relatively poorly, and, as a consequence, lower wages associated with such training would be observed in the short-run. However, this finding holds even when controls for firm size are included, which suggests the low value for non-employer-provided training is not simply an artifact of firm size.
Regardless of where long-term training occurs, participation in such a training program does not appear to provide any wage premium over and above shorter-term training. That is, while longer-term training is associated with higher wages, it is not associated, on average, with wages higher than those received by comparable workers who had engaged in only short-term training. There are several possible interpretations of this result. It may be that workers who participate in longer-term training are in need of remediation. [12] Alternatively, it may be the case that there are diminishing returns to training, or perhaps any beneficial effects of structured long-term training may be offset by a growing penalty associated with extended periods of absence from one's usual work duties.
However, regardless of the interpretation, the policy implication of this finding is promising. Because short-term training is as valuable as long-term training, it appears that any public or private efforts to upgrade workers' skills and wages need not involve investment in long-term training. This suggests that training investments need not involve major commitments of time, and perhaps money, in order to pay off.
If there is any evidence to suggest that workers who engage in substantial amounts of training do better than those who do not, it is in the form of a very large premium associated with frequent training, rather than long-term training. I estimate that the economic return to participation in frequent training for both the original and youth cohort is quite high, and remains high upon inclusion of controls for ability and promotion frequency. Together with the result that long-term training has no marginal benefits over short-term training, the pattern of training which emerges as the most valuable during the early stages of a person's career is one of frequent, short-term training episodes. This pattern is consistent with the need for minor but continual updating of skills.
It also appears that a postsecondary education is not a prerequisite for access to valuable training opportunities. For both the original and youth cohorts, workers with a high school education or less who participated in training earned returns which were at least as high as, and often higher than, their more educated peers. This suggests that training should be regarded as a useful policy instrument for those interested in improving the economic prospects of less-educated workers.
The difficulty associated with this strategy however, will involve improving access to training for less educated workers. While there was a mild fall in the overall incidence of training between cohorts, the only group which saw a large decline in training participation was high school graduates. As a result, among the later cohort, participation in training among high school graduates and dropouts lagged behind the participation of those with at least some postsecondary education. Because training is indeed a useful mechanism for improving workers' wages, the apparent cleavage between those with and without some postsecondary education in access to training may be an inauspicious sign of future wage trends. Workers without postsecondary schooling have seen their wages fall in both relative and absolute (real) terms during the past three decades. If these workers are increasingly shut out of or avoiding job training after they enter the labor market, we can likely expect an exacerbation of this trend.
Finally, while the present findings are suggestive of an important role of training in shaping recent trends in the wage structure, these findings and their implications must be recognized as limited. Because of the limitations imposed by inter-cohort comparisons of the NLS data, I have been unable to assess the effects of training on the relative wages of women and non-white workers. Developing a full sense of how access to training and its subsequent economic rewards has influenced earnings requires that the experiences of these workers be incorporated into the analysis.
[12] Interestingly, though, this result holds when AFQT test scores are included as controls for ability.