Human Capital: the stock of marketable skill and knowledge embodied in a worker that may be rented on the labor market

1
Human Capital the stock of marketable skill and
knowledge embodied in a worker that may be rented
on the labor market

• Stock not used up at once but offers a stream
  of services
• Marketable Some skills are not important on the
  labor market
• Embodied, rented Cannot access stock without
  paying the holder, rental market and not owner
  market

2
Human Capital similarity with physical capital

• Stock vs. flow of service
• Depreciation
• Investment
• Obsolescence

3
Human Capital

• 60 of economic growth cannot be explained by
  changes in input quantities
• Attributed to human capital
• 30-50 of unexplained growth
• 36-70 of wage growth since 1900
• 76 of all wealth in the U.S.
• U.S. human capital stock worth 75 trillion,
  300,000 per capita

4
Forms of Human Capital Investment

• Education
• On-the-job Training
• Occupational training
• Job Search
• Migration
• Health
• Cost time and dollars
• Return greater utility, income

5
Forms of Human Capital Investment

• General Training Valuable across many firms
• Firm Specific Training Valuable to only one firm
• Can also be specific to a single occupation,
  industry

6
Hours Devoted by Firms to Training a New Worker
during First Three Months on Job, 1992
7
Length of Time to become Fully Trained

• Percentile Weeks
• 10 1
• 25 2.3
• 50 6
• 75 24
• 90 52
• Average 22
• High School Graduate 18
• College Graduate 37
• nonzero 99

Barron Berger and Black. 1997 On-The-Job Training
8
Effect of characteristics on probability of
receiving training

• Firm characteristics
• Firm size
• Union -
• Turnover -
• Employee Characteristics
• Male
• Dropout -
• College
• Part-time -
• Age (peak at 33)
• Age2 -

Barron Berger and Black. 1997 On-The-Job Training
9
Firm Provided Training

• /Employee (1994-5 data)
• DIRECT COSTS
• In-House Training 139
• Outside Training 98
• Tuition Reimbursement 51
• Total 288
• INDIRECT COSTS
• Wage Paid to Trainees
• Formal 224
• Informal 423
• Total 647
• Direct costs amount to 16 billion. Training
  magazine estimates these costs at 386 per worker
  or 54 billion in 2002. Indirect costs add 74
  billion in 1994-5.Prorated, that would imply
  Indirect costs of 250 billion in 2002.
• Frazis, Gittleman and Joyce Industrial and
  Labor Relations Review (April 2000).

10
Productivity and Wage Growth, First Two Years on
Job, by Occupation and Initial Hours of Employer
Training
11
Training Stylized Facts

• 71 of establishments provide training
• gt98 of establishments with gt50 employees

Frazis, Herz and Horrigan Monthly Labor Review
(May 1995)
12
Training Stylized Facts

• Type of Training
• Specific
• Orientation 32
• Workplace Related 36
• Safety 32
• Both
• Apprenticeship 19
• General?
• Job Skills 49
• Basic Skills 2

Frazis, Herz and Horrigan Monthly Labor Review
(May 1995)
13
Look at Job Skills (49) More Closely

• Skills specific to firm 75
• Skills specific to technology 53
• Retention (compensation?) 53
• Legally mandated 25
• To get needed skills 13
• 13 of 49 is 6.4

Frazis, Herz and Horrigan Monthly Labor Review
(May 1995)
14
General Training and Monopsony

• Asymmetric Information on Firm Provided General
  Training