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Originally Posted by Scucca  You've gone a snip wonky! The difference between specific and general training is that the latter empowers the worker (i.e. the worker can jump ship and acquire the full value of the training via a higher wage at a different firm). We essentially have a 'free market' problem generated by imperfect contracting (i.e. the employer has little incentive to provide training unless he can force the worker to stay put).
Britain suffered the full consequences of labour market flexibility. The 'free market', by encouraging low wage and temporary labour, further hampered the demand for skills investment. |
Employers in some markets (think oil) are now having to find ways to make it worth their employees while to stay around. They are having to offer incentives such as stock options etc based on time served. This has more to do with the employees "specific" knowledge and skill rather than the "general" knowledge they learned at university. The "free market" for human capital allows the employee to be trained by one employer for a few years then jump ship with a massive signing bonus to another. Isn't that the point of a free market - prices get to a natural equilibrium? Therefore, if the employee has skills that are valuable then they should be paid for at a high rate than those of employees whose skills are in adequate supply.