Trying to hire high-skilled workers at rock-bottom rates is not a skills gap.

[DGuller]

There is always going to be some risk in training employees.  But the judgment has to be whether it is better to train or do nothing and simply hope that the company can hire more productive employees which seems to me to be an even bigger craps shoot.

Those are not the only two options.  Training is not an all or nothing proposition.  It may be that despite positive externalities, some type of training brings such huge returns that even after externality leakage, it's still worthwhile.  Other kinds of training may still be socially worthwhile, but don't have a high enough return to pay back the employer after externalities take their cut.  We would be better off as society if the latter type of training occurred as well, but it won't be done because it's not worth it to those who foot the bill.

[Jacob]

Once you factor in overhead, non-wage labor costs, and "reasonable economic return" on capital that should be what folks get paid in a competitive market.

In a monopolistic or oligopolistic market, companies will be able to charge a higher markup.  They are able to extract what economists call "rents."

Why do you factor in "reasonable economic return" in the pre-training wage, but not in the post-training wage?

[Admiral Yi]

Why do you factor in "reasonable economic return" in the pre-training wage, but not in the post-training wage?

I don't understand the question.

[MadImmortalMan]

There is also the market-making aspect. If the employers were training the employees, then the number of employees being trained would always match the demand for those skills. If the state does it, then there might be an imbalance.

[Admiral Yi]

OK, I think I get it Jake.

Non labor costs apply to both situations.  Just not made explicit in the first.

When I talk about productivity I'm talking about marginal productivity, not average productivity regardless of other input costs.

[crazy canuck]

There is also the market-making aspect. If the employers were training the employees, then the number of employees being trained would always match the demand for those skills. If the state does it, then there might be an imbalance.

That is why state sponsored training programs are more general in nature and then partner with companies to do more in depth apprentice type training.

[Warspite]

You know what this thread needs right now? Some highly trained MBAs.

[CountDeMoney]

Wait, MiM, isn't this just a thread to see what Seedy will post?

Meh.

[Iormlund]

Yi, what makes you think talented workers will stay at your firm if you don't train them? Soon you'll be stuck with those without potential or motivation. Well played.

[Admiral Yi]

Yi, what makes you think talented workers will stay at your firm if you don't train them?

Pay.

[The Minsky Moment]

"Keeping the employee happy" typically means paying the higher productivity wage and losing the return on investment.

With regards to highly-skilled workers, it does not.  In software development, for instance, people frequently choose lower-paying jobs that have better fringe benefits, work environments, locations, and company name recognition.  Presuming all your employees care about is money in their pocket breeds mercenary attitudes in both employers and employees.

But those are just other forms of compensation with a monetary value.  Fringe benefits are compensation that costs the company hard cash, "location" reflects higher rents paid for the office, "name recognition" reflects goodwill and trademark investments, "work environment" can be many things but again typically involves costs - availibility of snacks, special break rooms, transport options, etc.  From the company's POV these are costs that have to be paid for.

[Ideologue]

Why?

The training increases the worker's productivity.  That means he can command a higher wage.  A company investing in training needs to retain part or all of that increased productivity to repay the training cost.  If they have to pay the new, higher productivity wage or if a competitor bids away the worker at the new, higher productivity wage the original investing company doesn't retain anything.

No return on investment, no incentive.  The logic is no different than with investment in machinery.  If a press punch or an injection mold could sell itself to the highest bidder as soon as it had been bought we would see no investment in machinery either.

Your rich person tragedy of the commons fails to convince.  The free-riding employer would face serious difficulties if all they did was attempt to headhunt fully-trained individuals brought up by more responsible companies.  First, of course, is that inertial factors add friction to the labor market, that is an employee that has spent a couple of years being trained in one location for one company is more likely to have put down roots where he's been living, and thus will demand a premium to pull up stakes to go work for strangers.

Second, the free-riding employer is sacrificing time and taking a risk of not being able to fully staff its projects.  While they're waiting on other employers to produce experienced workers that they can peel off, they're suffering from wasted capacity and... OH WAIT THAT'S THE POINT OF THE ARTICLE.

Finally, someone has to pay for training and education.  We've decided to do it in a preposterously inefficient manner that introduces devastating supply-demand imbalances.  Good work, hybrid economy!

[Admiral Yi]

I'm having a tough time figuring out the main theme of your post Ide. 

[citizen k]

I'm having a tough time figuring out the main theme of your post Ide. 

Apparently the new buzzword now is "free-riding".

Shouting and stomping, right-to-work protesters swarm state Capitol

They crowded the state Capitol on Thursday -- shouting, chanting, clapping their hands and, at times, stomping their feet -- all in an attempt to get their voices heard.

Among the chants: "Union busting is disgusting." "This is what democracy looks like."

As lawmakers in the House and Senate debated the merits of right-to-work legislation, protesters were out in full force, both outside their chambers and on the grounds. Some carried signs that declared, "Kill the Bill."

"We feel like we're defending our way of life," said Paul Watson of Twin Lake, who works for Alcoa.

Watson, a member of UAW Local 1243, called Republicans pushing the legislation "cowards" and said he believes it is in retaliation for Proposal 2, the initiative that failed at the polls in November that would have amended the Michigan Constitution to guarantee public and private-sector employees the right to organize and collectively bargain.

"They're just slapping us in the face one more time," he said.

Tempers flared inside the Capitol, and Michigan State Police reported several protesters were arrested and mace was sprayed into a crowd that was attempting to rush the Senate floor.

•RELATED: Police arrest several protesters, spray mace into crowd inside Michigan Capitol (video)

There also was mounting anger in the crowd outside because state officials kept the doors to the Capitol locked for hours, preventing protesters from entering. In response, union activists ordered protesters to gather outside each entrance, saying, "Nobody in, nobody out."

The doors opened shortly before 5 p.m. after a court order, and after Democrats staged a brief walkout in protest.

Several lawmakers addressed the crowd, saying they had no intention of going back in until the government building was opened to the public.

Protesters came from across the state, including Gloria Keyes of Muskegon, who also works for Alcoa. She said she was concerned that workers' wages and benefits will be reduced if the legislation passes.

"I don't know what we can do," she said. "But I do know that in some way, we have to stop this." She and Watson called the atmosphere "antagonistic."

"If they cared about the will of the people, they would open the doors and let us in," Keyes said.

Laura Webb of DeWitt, who retired recently as a state worker, held a sign she hoped would remind people that unions helped secure such things such as the eight-hour workday, lunches and breaks. The legislation, she said, "is just the first nail in the coffin to kill the unions."

Jim Nelson, also of DeWitt, went to Lansing to show his union support.

"It's important that people in the state realize that the middle class is built on unions and public-service workers," Nelson said. "The middle class is the force that creates jobs.

"The right-to-work initiative is simply a way for free-riding workers to take advantage of the hard work of union bargaining."

http://www.freep.com/article/20121207/NEWS06/312070072/1001/rss01

[Admiral Yi]

Those are both legitimate uses of the term.  It's just that Ide ran a little hot and cold in his post.