Does Availability of Educated Workers Increase Enterprise Training?

A number of studies have addressed the issue of whether educated employees are more likely to receive enterprise training. Since productivity gains of training activities among educated workers are expected to be higher, firms with a higher proportion of educated workforce are more likely to provide training. Much empirical evidence supports this. Tan and Batra (1996) show that firms with high mean years of education are more likely to provide training in Colombia, Mexico and Malaysia. Tan and Lopez-Acevedo (2003) and Zeufack (1999) show that firms with a higher proportion of educated workers are more likely to provide training.

However, this does not necessarily imply that firms, faced with an abundant supply of educated workers, would train more. Indeed the WBES indicates that as many as 44 per cent of firms in LAC and 21 per cent of firms in East Asia provide less or no training due to the availability of skilled workers in the labour market. Miyamoto and Todo (2003) further confirm this by showing, after controlling for endogeneity of average workers education variable, that firms in Indonesia substitute training by hiring more educated workers.

This has an important policy implication since these findings indicate that simply expanding educational attainment may reduce firm’s incentives to provide training.

OECD DEVELOPMENT CENTRE Working Paper No. 211 HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES by Koji Miyamoto To learn more about this author, visit OECD Development Centre's Website.

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