2.3 Skill Acquisition
For policy purposes, an understanding is required of how the skills and knowledge required in the workplace are formed. In general, worker skills are derived from innate ability, family background factors, and knowledge accumulated from formal education and learning in the workplace.[4] Learning in the workplace includes formal training activities, learning-by-doing, or informal knowledge transfer from other workers, or by workers changing jobs. This process of knowledge accumulation is important. It influences decisions on educational investment before and after employment, and how the returns from these investments accumulate over the working lifetime. With the likelihood of skill obsolescence given technical change, some approach to continuous learning is required.
In the knowledge accumulation process, the knowledge acquired in one period complements the skills available in next. Skills are more productive in environments where there is an existing high stock of knowledge. This can affect decisions about recruitment policies, the building up of firm-specific knowledge, information retrieval processes, or mentoring by more experienced and skilled workers, and will be influenced by the size of the firm.
In decentralised labour markets, the dominant model for thinking about firm-based human capital investments has been that of Becker (see Acemoglu and Pischke (1999)). Workers evaluate investments in education, based on earnings foregone and improvements in future earning streams, and may accept lower or no wages while skills are built up. Employers, faced with risks of labour turnover or poaching by other employers, will invest mainly in firm-specific knowledge (which by definition is not valued elsewhere), and require training wages to be paid to fund the acquisition of general skills (which are valued by other employers). The Becker model substantially relies on workers and employers to finance training, and assumes there is no case for government intervention. However, firms are observed to fund much generic training, and to pay wage increases after training that are less than the gains in productivity. This suggests that labour market imperfections exist, and that firms are adopting other strategies to encourage employee effort, manage information asymmetry and incentives, and respond to employee exit/mobility costs and job turnover.
Notes
- [4]Less attention is given here to knowledge accumulation up to the end of formal education, as it is not central to the discussion. The Journey project (Jacobsen et al (2002)) looks at child development processes. Nechyba (1999) looks the influence of family background factors. Given the cumulative effects of education, Heckman (1999, 2003) argues in general for earlier rather than later interventions to support skill acquisition.
