In This Review
Training and the Private Sector: International Comparisons

Training and the Private Sector: International Comparisons

Edited by Lisa M. Lynch

University of Chicago Press/National Bureau of Economic Research, 1994, 319 pp.

We have had much lamentation about the poor quality of American schools, and especially about the low quality of those new entrants into the labor force who have no education beyond high school. This volume usefully examines the experience of several other countries in training those out of school to be productive and well-rewarded workers. It is written by economists for economists who have some training in econometrics, but the chapter summaries and especially the lucid introduction by editor Lynch are accessible to a much wider audience.

What comes through is that there is no magic formula. Vocational training is potentially useful, but its payoff in higher productivity and higher wages depends heavily on the form and content of the training, and on the institutional setting in which it is given. In particular, training seems to have the highest payoff if it is directed by firms (who have the clearest grasp of what business needs), provided it includes general education as well as training in firm-specific skills.

But why should firms provide general education to workers who may leave? Japan's answer is strong mutual loyalty between worker and firm, resulting in long-term employment. Germany's is that young workers in training receive exceptionally low wages; in effect, they pay tuition to the firm providing the training. In both countries, post-school training builds on formal school education well-suited for feeding young people into the labor force, with heavy emphasis on literacy and numerical skills.