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In this paper, the author argues that the obsolescence of human capital, or the deterioration of the skills workers have acquired in the past, is central to the key challenge for western economies to achieve a knowledge-based society through lifelong learning. The first section outlines a typology of the various possible causes of human capital obsolescence, in which five different kinds of human capital obsolescence are identified: the wear of skills due to ageing, or illness that may be related to working conditions; the atrophy of skills due to insufficient use; job-specific obsolescence due to technological and organisational change; sector-specific obsolescence due to shifts in employment; and firm-specific skills obsolescence due to displacement. This is followed by a discussion of the different ways in which the obsolescence of human capital can be measured: (1) objective method: testing; (2) subjective method: asking workers or their employers; (3) workers' wages; and (4) the probability of losing their jobs. The next section reviews the evidence on skills obsolescence that exists in the literature. An example of some empirical indicators of the potential risks of human capital obsolescence for workers in the various sectors of industry in the Netherlands is presented. The discussion then moves to what kinds of learning or training activities could be remedies for the different kinds of human capital obsolescence and some empirical evidence on training participation in the various sectors of industry in the Netherlands is presented. Training participation in the various sectors of industry in relation to the specific potential risks of human capital obsolescence in each sector is discussed, with particular reference to older workers. The author concludes with some policy issues.

Selected papers from the conference are indexed from TD/TNC 87.81 to TD/TNC 87.84. Show less

This [conference] paper provides a tentative review of the literature that estimates wage returns to training. It discusses both the measurement and estimation issues. The fundamental problem concerning the recovery of the causal effect of training on earnings lies in the correction for selectivity into training. The discussion of the empirical literature emphasises the size of the estimated returns; something which has been largely neglected in the literature. It is argued that traditional studies that depend on differencing (fixed effect) methods where non-participants are used as a comparison group results in high return estimates. On the basis of these high returns, some have argued that there is substantial under-investment and therefore scope for public intervention. Such under-investment could arise because of, for example, hold-up or liquidity constraints. The paper then shows that studies which exploit arguably exogenous variation in training participation find much smaller wage effects of training. The evidence collected in this paper calls into question the case for under-investment based on return studies. There is other evidence which suggests that under-investment may be less severe than previously believed. First, recent literature in experimental economics shows that individuals are often motivated by reciprocity and fairness considerations which are typically ignored in standard human capital models, while reciprocity can alleviate under-investment. Second, recent literature emphasising market imperfections also shows that imperfections may give employers more incentives than previously thought to invest in the general training of their employees. The paper concludes by calling for further study of training mechanisms and subsequent outcomes. Some potential avenues for research in this area are given.

Published abstract.

Selected papers from the conference are indexed from TD/TNC 87.81 to TD/TNC 87.84. Show less

This conference paper evaluates the role of improved education and training provision in increasing the labour market activity rates and employment among older workers. The authors argue that the increase in human capital, or enhanced knowledge and skills, resulting from this provision needs to be economically productive if it is to improve the labour market position of recipients. The paper focuses on this and begins by providing a brief outline of the nature of labour market disadvantage suffered by older workers, who are defined as those over 54 years of age. The authors then discuss the causes of the disadvantage and consider whether better education and training might alleviate the problem. Some policy initiatives are evaluated and it is concluded that education and training have only a limited role to play unless there are accompanying policy measures.

Selected papers from the conference are indexed from TD/TNC 87.81 to TD/TNC 87.84. Show less

This conference paper focuses on training provided by firms. Many empirical studies demonstrate considerable variation across countries and across socio-economic groups in training participation rates, with Nordic countries showing higher participation than Southern European countries, and low-educated and older workers generally participating less than other groups in training activities. To investigate the reasons for this situation, the authors examine both the theoretical underpinnings and the empirical evidence in support of the under-provision of training. Under-provision is used to denote when 'training is below its efficient level, which equalises marginal social benefits to marginal social costs'. The authors argue that, if firms invest in general training, important evidence on under-provision can be gathered by examining the relationship between investment in training and labour turnover. They find evidence of a 'statistically significant and positive relationship between employer-provided training and subsequent turnover' for Denmark, Belgium, France and the UK. In the remaining countries the relationship is either not statistically significant or negative and statistically significant, as in the case of Finland. The evidence that, in no country except Finland, training significantly decreases the quit rate is suggestive of under-provision. The authors suggest that policies which aim at increasing the level of training above the market level should be designed to affect either supply or demand, or both.

Selected papers from the conference are indexed from TD/TNC 87.81 to TD/TNC 87.84. Show less