RETURNS TO JOB TRAINING:
THE EFFECTS OF RELATED AND UNRELATED TRAINING

Table 16 presents the coefficients describing the effects of different types of job training on annual earnings for 1987 only. (Results are very similar for the other two years.) Coefficients are presented both for overall effects and then for the effects of related and unrelated training. In interpreting these results, it is crucial to be aware of uncorrected selection effects. For example, among men, participation in a sheltered workshop or vocational rehabilitation has a large, significant, negative effect on earnings--but individuals in such programs are there because of a significant handicap, the effects of which earnings are evidently not adequately captured by the simple binary variable describing a disability. Similarly, the significant negative coefficient of JTPA training (again for men only) almost surely represents a negative selection effect, since individuals enrolled in JTPA are generally those who have been unemployed for long periods or have other barriers to their participation in the labor market (like limited English proficiency, criminal records, or records of substance abuse); the factors that cause them to be selected for JTPA training are poorly measured by other independent variables.

The most striking finding about these forms of short-term job training is how few of them augment earnings. The only consistent positive effect is that training on the job increases earnings for both men and women; the effects are relatively small for men (6.4%), though for women they are almost as high as the benefits of an Associate degree. (For other positive evidence of firm-based training, see Grubb, 1993a, and Lynch, 1992.) Consistent with the hypothesis that only related training has a positive effect, the

Table 16

Returns to Job Training: 1987

coefficients for unrelated on-the-job training are insignificant.[36] The only other positive effects are for women, for related training in a vocational school--presumably a proprietary school--and for related training in a junior college.[37] These effects (.176 and .199 respectively) are about equivalent to that of a vocational certificate (.164).[38] Again, the effects of training unrelated to the current job in such institutions is insignificantly different from zero.[39] The larger effects of short-term training for women compared to men is a related conclusion from these results, consistent with evaluations of other job training programs (e.g., Gueron & Pauly, 1991).

The other interesting result in Table 16 is that, with only a few exceptions, the effects of training related to the current job are consistently algebraically higher than the effects of unrelated training. The differences are not usually statistically significant; but the consistency of this result tends to confirm the hypothesis that the relatedness of training to one's job influences the economic benefits. Of course, the ability to find related employment and, therefore, to benefit from relatively specific training, is itself a characteristic of a training program: if low-quality programs prepare individuals for jobs that don't exist locally, or if employers won't hire from low-quality programs, their enrollees will have lower rates of related employment and therefore lower returns on the average.

It is difficult to make too much of these results because small sample sizes and problems with selection effects make the results difficult to interpret. On the whole, however, it is difficult to find much benefit to short-term job training programs.[40] The one consistent exception is on-the-job training provided by employers, training that proves to be especially beneficial to women. In addition, training in proprietary schools and community colleges benefits women, as long as they have employment related to their area of training. Otherwise, however, the many forms of short-term job training which have proliferated in the past thirty years and which continue to be proposed as solutions to problems ranging from dislocated workers to welfare mothers, provide no real benefits.

[36] About 9.0% of men and 8.9% of women report that they received on-the-job training, and the overwhelming majority of them--84.3% of men and 82.2% of women--report it to be related to their current job.

[37] It is not clear what such training is in a junior college, but it might be customized training offered by community colleges to employees of specific firms, or short-term noncertificate programs offered by some community colleges and technical institutes.

[38] However, the coefficient for a vocational certificate (.164, from Table 3) averages the effects of both related and unrelated training. The effects of a related vocational certificate (.295, from Table 10) are much higher.

[39] Of the 416 women reporting job training in a vocational school, 59.6% report it to be related to their current job; the corresponding figure for the 153 women with job training from junior colleges is 75.2%.

[40] Again, this result is consistent with the findings of much more rigorous studies using random-assignment experiments. See, for example, Bloom, Orr, Cave, Bell, Doolittle, & Lin (1993) on JTPA; Cave, Bos, Doolittle, and Toussaint (1993) on JOBSTART; and Gueron and Pauly (1991) on welfare-to-work programs.