Investment in Human Capital: Employers

While college and formal education provides general knowledge which may be applied in future work situations, workers gain many of their skills from on-the-job training. Some training may be rather formal programs. However, much training is informal, such as being shown the "do's and don'ts," learning from your (or others') mistakes, or observing and emulating others at work.

There are two broad categories of employer training. General training provides skills that can be applied across jobs, tasks, workplaces, occupations and industries. On the other hand, firm specific training cannot be widely applied. It is only applicable in certain jobs or workplaces. Learning to use the computer programs or equipment and tools at a particular work setting may or may not be a skill transferable elsewhere. The greater the extent that training is indeed transferable, the greater the extent of the burden of learning the skill in terms of time and money invested, will fall upon the employee. The employer has less incentive to invest in training, which has the often huge indirect cost of taking employees and their trainers out of current production for a good deal of time, when the skill learned can be portable with the employee at his or her next job (which may even be with a market rival!). However, if the training provides skills that have value mostly or only with the firm, then the employer has a great incentive to bear the cost of such human capital investments. Additionally, unless they can tie an individual to their firm, most employers don't want to spend their money to train or educate workers.

Clearly there is a complex distribution of the costs of training reflecting the nature and transferability of the skills that they provide workers. Because the return to training investments, as with education, takes time to develop into higher future productivity levels, workers may incur the up-front costs of training in the form of reduced earnings early in one's job tenure, reaping the benefits later with their current employer (if training is more specific) or another employer (if training is more general in nature).