Minimum wage effects on firm-provided and worker-initiated training

Abstract

This study examined the effects of minimum wages on formal and informal firm-provided training and worker-initiated training in Japan. Economic theory predicts that a minimum wage increase will adversely affect firm-provided training, and while we found that this effect was indeed observed on formal training, with a 1% increase in the minimum wage causing a 2.8% decline in the formal training of workers affected by minimum wage increases, no statistically significant decrease occurred with informal training. Further, although workers can potentially increase their self-learning activities to compensate for any decrease in skill development opportunities in the workplace, we found that an increase in the minimum wage did not increase worker-initiated training. Therefore, the overall effect of an increase in the minimum wage was a decrease in skill development among those workers affected by minimum wages.