Returns to On-the-Job Training: Do Skill Usage, Tasks and Workstation Matter? Evidence from British Workers
Using data drawn from the 1997 and 2001 British Skills Surveys, which are large-scale cross-sectional representative surveys of working individuals, this paper aims both to make a contribution to understanding the returns to on-the-job training and to disaggregate the contributions of formal and informal learning to workers with different levels of skills (literacy, numeracy, and computing skills), engaging in different types of tasks under different work arrangements. We use an explicit control for the informal learning process that is generally neglected by empirical studies, mostly as a result of lack of relevant direct measures. Thanks to rare information on the centrality of skill usage, on the complexity of that use, on the nature of the duty and on how this duty is performed, we stratify the estimates by different groups of workers to allow the coefficient estimates on all the training regressors to vary by workers’ status. The wage equations rely on Heckit corrections for formal training participation. The results show that not taking into account informal training explicitly in the wage equations may lead empirical assessments to bias the return to formal training upward. Nonetheless, wage premiums for a spell of formal training remain significant and positive in all of the models developed in the paper. Our results also reveal the complex relationships between the returns to formal and informal training, and the types of skills people were using, the type of work they were doing and how such work was organised. Amongst other results, we emphasise differentiated returns to formal and informal training depending on the complexity of tasks and show that, for certain types of workers carrying out specific duties, formal training may remain an efficient way to upgrade the skills and productivity of the labour force at low and intermediate levels of qualifications. Our estimates also exhibit that wage premiums for formal and informal training are higher and more significant for workers who perform their task in teams and are closely supervised.
Keywords: formal and informal learning, basic and computing skills, returns to training, selectivity, United Kingdom