The Retention Effect of Training Portability, Visibility, and Credibility

Abstract

This paper analyses the effect of training participation on employees' retention in the training company. It for the first time empirically combines the human capital and the monopsony theory by jointly controlling for the portability, visibility, and credibility of training. Based on an extensive German linked-employer-employee data set with detailed information on training history (WeLL-ADIAB), we show that training increases employees' retention. We compare the probability to stay at the same employer between training participants and accidental training non-participants (those who could not participate in planned training on the basis of exogeneous reasons). Higher portability of general human capital contents and visibility of training induced by training certificates however reduce the retention effect of training. Retention is further reduced when training is credibly provided and certified by external institutions, the full training effect on retention is still positive, however. We are careful to control for endogeneity of training participation in retention equations, unobserved time-invariant effects, and extensive individual and employer characteristics including wage increases and general job satisfaction.

Training in the Great Recession – Evidence from an Individual Perspective

“…First, we only can use a sub-sample of firms in our data set with information on the crisis status, compare Dietz and Zwick (2016). Second, important training information in the data set is not available from all surveys.…”

“…According to Hochfellner et al (2015), less skilled employees are more negatively affected by the Great Recession and face a stronger decline in salary and job losses. We therefore assume: (Bender et al, 2008a;Spengler, 2007;Dietz and Zwick, 2016). Thus, in addition to sociodemographic information (age, sex, occupational status), the complete individual employment history 5 for training participants and non-participants is available (Schmucker et al, 2014).…”

Training in the Great Recession – Evidence from an Individual Perspective

“…There are some limitations of this paper. First, we only can use a sub-sample of firms in our data set with information on the crisis status, compare Dietz and Zwick (2016). Second, important training information in the data set is not available from all surveys.…”

“…According to Hochfellner et al (2015), less skilled employees are more negatively affected by the Great Recession and face a stronger decline in salary and job losses. We therefore assume: (Bender et al, 2008a;Spengler, 2007;Dietz and Zwick, 2016). Thus, in addition to sociodemographic information (age, sex, occupational status), the complete individual employment history 5 for training participants and non-participants is available (Schmucker et al, 2014).…”

Who Should Pay the Bill for Employee Upskilling?

“…5 Modestino et al (2019) explain that in recruitment, companies now require a higher level of competencies for the same jobs compared to the recent past, as they prefer upskilling to worker replacement. We do not consider the possibility that workers who bene…t from a …rm-…nanced upskilling program might leave for a better paying job elsewhere (Benson et al 2004) or that upskilling could be an e¢ cient worker retention policy (Manchester, 2010;Dietz and Zwick, 2020). In a dynamic setting, the fact that workers bene…t from information rent when upkilling is self-…nanced might make self-…nancing a more interesting education strategy.…”