Usinginformation on time costs of training and gains in wages attributable to
training I computed rates of return on training investments. The range of estimates based
on several data sets generally exceeds the magnitudes of rates of return usually observed
for schooling investments. It is not clear, however, that the difference represents
underinvestment in job training.
Two methods were used to estimate total annual costs of job training in the U.S.
economy, for 1958, 1976, and 1987. The "direct' calculation uses information on time spent
in training and on wages. For 1976 so calculated costs amounted to 11.2% of Total
Employee Compensation and a half of costs of school education. In the "indirect" method
training costs were estimated from wage functions fitted to PSID data. In 1976 the direct
estimate amounted to between 65% and 80% of the indirect estimate based on the wage
profile. This result represents strong support for the human capital interpretation of wage
profiles.
The estimates indicate a slower growth of training than of school expenditures in the
past decades. Substitution of schooling for job training is a likely cause.
*Published:
Market Failure inTraining Springer Verlag 1991
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