The Effects of Minimum Wages on Training

Author Name HARA Hiromi (Japan Women's University)
Creation Date/NO. June 2015 15-E-075
Research Project The Changing Japanese Labor Market: A perspective and desirable policy responses
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This study examines how minimum wages affect on-the-job training and worker-initiated training using micro data on Japanese female workers, and is the first to use the difference-in-difference-in-differences method to estimate this effect in a Japanese context. The estimation results show that a 1% increase in minimum wages causes a 2.5% decline in the formal training of female workers with no college education, but no statistically significant decrease in informal training. Assuming that the general components form a large portion of formal training and that firm-specific components are a large part of informal training, we regard the former as general training and the latter as firm-specific training. Therefore, the results indicate that minimum wage increases affect general training more than firm-specific training as predicted by economic theory. Concurrent with the decrease in formal training, the results also show that a 1% increase in minimum wages causes a 3.6% decrease in worker-initiated training activities among this group. This suggests that there is no evidence of workers increasing their self-learning activities to compensate for the decreasing skill development opportunities in the workplace. Thus, increases in minimum wages could lead to skill development inequality between unskilled and skilled workers.

Published: Hara, Hiromi, 2017. "Minimum wage effects on firm-provided and worker-initiated training," Labour Economics, Vol. 47, pp. 149-162