TY  - JOUR
AU  - Acemoglu,Daron
AU  - Pischke,Jorn-Steffen
TI  - Minimum Wages and On-the-job Training
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7184
PY  - 1999
Y2  - June 1999
UR  - http://www.nber.org/papers/w7184
L1  - http://www.nber.org/papers/w7184.pdf
N1  - Author contact info:
Daron Acemoglu
Department of Economics
MIT, E52-380B
50 Memorial Drive
Cambridge, MA  02142-1347
Tel: 617/253-1927
Fax: 617/253-1330
E-Mail: daron@mit.edu

Jorn-Steffen Pischke
CEP
London School of Economics
Houghton Street
London WC2A 2AE
UNITED KINGDOM
Tel: 44-20-7955-6509
Fax: 44-20-7955-7595
E-Mail: s.pischke@lse.ac.uk
AB  - Becker's theory of human capital predicts that minimum wages should  reduce training investments for affected workers, because they prevent these workers from taking wage cuts necessary to finance training.  We show that when the assumption of perfectly competitive labor markets underlying this theory is relaxed, minimum wages can increase training of affected workers, by inducing firms to train their unskilled employees. More generally, a minimum wage increases training for constrained workers, while reducing it for those taking wage cuts to finance their training.  We provide new estimates on the impact of the state and federal increases in the minimum wage between 1987 and 1992 of the training of low wage workers.  We find no evidence that minimum wages reduce training. These results are consistent with our model, but difficult to reconcile with the standard theory of human capital.
ER  -