Does Employer-Financed General Training Pay?

Evidence from the US Navy

Published in: Economics of Education Review, v. 21, no. 1, 2002, p. 19-27

by Federico Garcia, Jeremy Arkes, Robert Trost

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Despite Becker's theory that employers pay for workers' firm-specific training only, employer-financed general training is quite common. A possible explanation is that general training reduces turnover, thereby safeguarding investments in firm-specific training. We test this explanation by examining whether the US Navy's Voluntary Education (VOLED) program leads to lower personnel turnover. The VOLED program offers off-duty educational opportunities to all personnel and is aimed at keeping sailors satisfied so that the Navy can recoup its investment of approximately $19,000 per sailor in largely Navy-specific training. From a standard probit model, we find that program participation is associated with an 11-percentage-point increase in the probability of continuing in the Navy for six years. From a bivariate probit model in which the unexplained portions of the participation and turnover decisions are allowed to be correlated, the effect is 13 percentage points. Our findings seem to support the theory that general training safeguards employer investments in specific training by reducing employee turnover.

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