stock marketable embodied rented 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

Human Capital: similarity with physical capital Stock vs. flow of service Depreciation Investment Obsolescence

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 % of all wealth in the U.S. U.S. human capital stock worth $75 trillion, $300,000 per capita

Forms of Human Capital Investment Education On-the-job Training Occupational training Job Search Migration Health Cost: time and dollars Return: greater utility, income

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

Hours Devoted by Firms to Training a New Worker during First Three Months on Job, 1992

Length of Time to become Fully Trained PercentileWeeks Average22 High School Graduate18 College Graduate37 % nonzero99% Barron Berger and Black On-The-Job Training

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)+* Age 2 -* Barron Berger and Black On-The-Job Training

Firm Provided Training $/Employee ( 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 Indirect costs add $74 billion in Prorated, that would imply Indirect costs of $250 billion in **Frazis, Gittleman and Joyce Industrial and Labor Relations Review (April 2000).

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

Training Stylized Facts 71% of establishments provide training >98% of establishments with >50 employees Frazis, Herz and Horrigan Monthly Labor Review (May 1995)

Training Stylized Facts Type of Training Specific Orientation32% Workplace Related36% Safety32% Both Apprenticeship19% General? Job Skills49% Basic Skills2% Frazis, Herz and Horrigan Monthly Labor Review (May 1995)

Look at Job Skills (49%) More Closely Skills specific to firm75% Skills specific to technology53% Retention (compensation?)53% Legally mandated25% To get needed skills13%* *13% of 49% is 6.4% Frazis, Herz and Horrigan Monthly Labor Review (May 1995)

General Training and Monopsony Asymmetric Information on Firm Provided General Training