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

[Admiral Yi]

What would you recommend to fix the problem?

The two obvious alternatives are public financing and indentured servitude.  Of these two, I prefer the second.  A model already exists in the military.  They give you a free college education, you give them X years of your life.  JD, Y years, MD, Z years. 

[merithyn]

What would you recommend to fix the problem?

The two obvious alternatives are public financing and indentured servitude.  Of these two, I prefer the second.  A model already exists in the military.  They give you a free college education, you give them X years of your life.  JD, Y years, MD, Z years.

Most companies already have that. If they pay for your education, you're required to either give them X number of years back, or pay the full amount. My company, for instance, will help you pay for additional training up to a certain amount, but you then owe them the time that you're in school (usually from 2-6 years) plus an additional 2-3 years, depending on how much they're into you for. If you leave prior to any of that happening, you have to pay back everything, whether you leave on your own terms or theirs.

[crazy canuck]

Yeah, it's an incentive to keep the employee happy. Not really a disincentive to train. I mean, the skills are required to do the work, so not training would make the entire operation pointless.

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

Not sure why paying for the increased productivity is losing the return on investment.  Your scenario assumes the increased productivity equals the cost of training.  If that is true then the company needs to look at how it trains its people.

Assuming a company can train people in an efficient manner than then the company will become more productive and profitable.  Sure a portion of that increased profitability goes toward the increased cost of keeping the now more productive employee.  But in the end the company is still more profitable then it had been.

That said, government funded training provides an answer to reducing unemployment for certain groups since it provides an incentive for employers to give job offers to that particular pool of people who might otherwise be less employable. 

[Baron von Schtinkenbutt]

"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.

[Jacob]

Not sure why paying for the increased productivity is losing the return on investment.  Your scenario assumes the increased productivity equals the cost of training.  If that is true then the company needs to look at how it trains its people.

Yeah.

Seems to me the ideal is that both the worker and the company gains some benefit from the employee's increased productivity.

[Admiral Yi]

Not sure why paying for the increased productivity is losing the return on investment.  Your scenario assumes the increased productivity equals the cost of training.  If that is true then the company needs to look at how it trains its people.

Assuming a company can train people in an efficient manner than then the company will become more productive and profitable.  Sure a portion of that increased profitability goes toward the increased cost of keeping the now more productive employee.  But in the end the company is still more profitable then it had been.

We can assume a world of hyperefficient job training, in which $1 of training cost results in $10,000/year worth of increased productivity.  The trained worker is now worth $10K year more on the labor market.  He will be bid away from the training company for $10K more a year in wages.  Or alternatively the training company can pay him $10K more a year to retain him.  The company is only out $1, but it's $1 that they get nothing in return for.  The issue is not the ratio of costs to benefits, it's the ownership and mobility of the benefits.

Is this the part of the show when you call me a dick for disagreeing with you, or does that come later?

[crazy canuck]

Not sure why paying for the increased productivity is losing the return on investment.  Your scenario assumes the increased productivity equals the cost of training.  If that is true then the company needs to look at how it trains its people.

Assuming a company can train people in an efficient manner than then the company will become more productive and profitable.  Sure a portion of that increased profitability goes toward the increased cost of keeping the now more productive employee.  But in the end the company is still more profitable then it had been.

We can assume a world of hyperefficient job training, in which $1 of training cost results in $10,000/year worth of increased productivity.  The trained worker is now worth $10K year more on the labor market.  He will be bid away from the training company for $10K more a year in wages.  Or alternatively the training company can pay him $10K more a year to retain him.  The company is only out $1, but it's $1 that they get nothing in return for.  The issue is not the ratio of costs to benefits, it's the ownership and mobility of the benefits.

Is this the part of the show when you call me a dick for disagreeing with you, or does that come later?

No but this is the part of the show where I say you are acting like a dick by adding your last sentence.

Also, you are wrong.  No company could be profitable if it paid its employees wages equal to the value of their productivity.  Your assumption that increased training necessarily increases their wages to the value of the increased productivity is nonsense. 

[MadImmortalMan]

It seems to me that if the training were that expensive, then the tax burden required for the state to do it would be roughly equal to the opportunity cost of companies doing it themselves.

[Neil]

Also, you are wrong.  No company could be profitable if it paid its employees wages equal to the value of their productivity.  Your assumption that increased training necessarily increases their wages to the value of the increased productivity is nonsense.

Not only that, but he's also assuming that the job market is incredibly efficient when it isn't, and that any time someone gains a new skill that he will immediately leave his job for a new one.

[Admiral Yi]

It seems to me that if the training were that expensive, then the tax burden required for the state to do it would be roughly equal to the opportunity cost of companies doing it themselves.

Of course.  Moving the cost to the public sector doesn't reduce the cost.  But that's one of main things the public sector is supposed to be doing: internalizing externalities.  "Society" would be better off if all those jobs were filled with trained people--"society" would be producing more and earning more.  But the private sector won't do it because of the externality that I've described.

[PDH]

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

[DGuller]

Also, you are wrong.  No company could be profitable if it paid its employees wages equal to the value of their productivity.  Your assumption that increased training necessarily increases their wages to the value of the increased productivity is nonsense.

That isn't really crucial to the argument.  The fact of the matter is that positive externalities exist when a company trains their workers.  Whether there is still enough left for the company to get something back or not is not that important:  the level of investment in human capital is still going to be suboptimal.

[Jacob]

We can assume a world of hyperefficient job training, in which $1 of training cost results in $10,000/year worth of increased productivity.  The trained worker is now worth $10K year more on the labor market.  He will be bid away from the training company for $10K more a year in wages.  Or alternatively the training company can pay him $10K more a year to retain him.  The company is only out $1, but it's $1 that they get nothing in return for.  The issue is not the ratio of costs to benefits, it's the ownership and mobility of the benefits.

If those assumptions hold, then your argument make sense, but I'm not sure they're appropriate. I've never heard of a place where people get paid the value of their productivity in wages.

[crazy canuck]

Also, you are wrong.  No company could be profitable if it paid its employees wages equal to the value of their productivity.  Your assumption that increased training necessarily increases their wages to the value of the increased productivity is nonsense.

That isn't really crucial to the argument.  The fact of the matter is that positive externalities exist when a company trains their workers.  Whether there is still enough left for the company to get something back or not is not that important:  the level of investment in human capital is still going to be suboptimal.

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.

[Admiral Yi]

If those assumptions hold, then your argument make sense, but I'm not sure they're appropriate. I've never heard of a place where people get paid the value of their productivity in wages.

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."