FORMAL TRAINING, TEMPORARY CONTRACTS, PRODUCTIVITY AND WAGES IN SPAIN†
| Date | 01 May 1994 |
| Published date | 01 May 1994 |
| DOI | http://doi.org/10.1111/j.1468-0084.1994.mp56002003.x |
| Author | Alfonso Alba‐Ramirez |
OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 56,2(1994)
0305-9049
FORMAL TRAINING, 'I'EMPORARY
CONTRACTS, PRODUCTIVITY AND WAGES IN
SPAINt
Alfonso Alba-Ramirez
I. INTRODUCTION
Much analysis has focused upon the individual's decision to invest in human
capital and its consequent effects on earnings (Mincer, 1974; Lillard and Tan,
1986; Barron et al., 1987 and Lynch, 1989). Yet, we know little about the
determinants and effects of formal training when provided by employers and
analysed from the perspective of firms.' Most developed countries have
implemented household surveys to obtain information on schooling and
earnings, and less frequently on job training. Besides, questions related to
human capital investment are rarely included in establishment surveys.
Consequently, the dearth of data can partly explain the absence of empirical
research on the firm's decision to provide formal training and the effect that
training may have on economic performance.
An important difference between a person's decision to invest in education
and an organization's decision to invest in training is that the period of
expected return is more uncertain for the organization than for the individual.
Discouraged by such an uncertainty, some firms refrain from making any
training commitment and rely on the educational system at large or on other
firms in obtaining trained workers. Otherwise, the relationship between the
employer and the trainee in bearing the costs and reaping the benefits of
undertaking training becomes paramount.2
tThe author gratefully acknowledges a grant from the Spanish Ministry of Education and
Science, in cooperation with the Fulbright Commission, during the second year of his Post-
Doctoral Fellowship at Harvard University and the National Bureau of Economic Research. He
has benefited from conversations with Lisa Lynch. He thanks two anonymous referees and
participants of the NBER Labor Lunch for their useful comments and suggestions. Cynthia
Costas-Centivany has been indispensable in editing this article.
'As an exception, Bartel (1 989) analyses company-based training by using an econometric
framework where the firm is the unit of analysis, while Bishop et aI. (1985) analyse a firm-based
data set containing training information only on the most recently hired employees.
2Becker (1962) and Oi (1962) stress the role of firm-specific elements in the relationship
between the employer and the trainee. In this article, we refer to training as that provided
through organized courses or programmes within the firm.
© Basil Blackwell Ltd. 1994. Published by Blackwell Publishers, 108 Cowlcy Road. Oxford 0X4 uF,
UK & 238 Main Street, Cambridge, MA 02142, USA.
152 BULLETIN
Two questions are relevant: First, are there appreciable differences
between firms which provide training and firms which do not? Secondly, does
training have a significant effect on productivity and wages? The first
question can be investigated where the typical firm assesses the costs against
the returns of training its workers. We observe an absence of training when
the firm finds that providing it turns out to be virtually unprofitable. The
second question addresses the core of the current debate on how countries
can improve productivity and economic performance (Dertouzos et al.,
1989).It is often pointed out that workers in entry-level jobs who receive training
in the workplace, and senior employees who experience an environment of
continuous learning, are more flexible in performing tasks that present
frequent contingencies. Moreover, labour psychologists emphasize that
peoples' better understanding of their jobs makes them more responsible and
satisfied at work. In a world of fast-paced technological change, the necessity
of training is deemed to be enhanced: multiple skills, teamwork, responsi-
bility and cooperation on the workplace are increasingly gaining terrain in
more advanced enterprises. Favourable task planning, adequate incentives
and a satisfactory compensation system become some of the necessary
complements to a motivated and productive labour force. These values in
human resources development critically depend upon well-educated and
trained employees.
In order to obain a quantitative response to the two questions posed, we
use 1989 training data provided by medium- and large-sized firms in Spain.
We first ascertain the characteristics of the firms which provide training, as
opposed to those which do not. We then analyse the effect training has on
labour productivity, as measured by sales as well as by value added per
employee. Finally, we estimate wage equations to assess the relationship
between training and firms' average wage. Our results indicate that larger,
more capital-intensive and foreign-owned firms are the most likely to provide
training. Moreover, firms undergoing technological change, employing
workers in higher occupational categories, practising profit-sharing and more
intensively using some forms of public employment-training programmes are
also more likely to train their workers than are other firms. More importantly,
we find evidence showing that the proportion of senior employees receiving
training has a positive effect on labour productivity and wages.
In the following section, we develop the framework. In Section III, we
explain some features of the relevant labour institutions in Spain. We offer a
description of the data in Section IV. In Section V, we present estimations and
discuss the results. Finally, in Section VI, we draw some conclusions.
II. CONCEPTUAL AND EMPIRICAL FRAMEWORK
What underlies a firm's decision to provide its employees with training?
Among those which do, what determines the intensity of training provided?
© Basil Blackwell Ltd. 1994.
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