Abstract
This paper analyses the effect of training participation on employees’ retention in the training establishment. On the basis of the human capital and monopsony theories the effect of portability, visibility, and credibility of training on employee retention is jointly calculated. We use an extensive German linked employer–employee panel data set with detailed survey information on the training history and administrative labour market information of 4318 employees working in 149 establishments (WeLL-ADIAB). In multivariate panel regressions including internal instruments we compare the probability of staying with the same employer between training participants and employees who were by chance unable to participate in a planned training event. The high portability of training contents and training visibility provided by training certificates reduce the retention effect of training independently. Retention is reduced further when training content is reported credibly, that is, it is provided and certified by external institutions. However, the total effect of portable, visible, and credible training on retention is still positive. This paper therefore implies that employers can reap a double dividend of higher productivity and increased retention even from general, visible, and credible training.
Highlights
The empirical literature on the effects of employee training mainly concentrates on wage and productivity increases (Dearden et al, 2000)
Even if we reduce the sample to training and accidental training non-participants and control for time-invariant unobserved heterogeneity, unobserved time-variant factors such as future employment expectations at the training firm or the chance of the employee to get a promotion may have an impact on training participation and current retention
On the basis of large linked employer-employee panel data with detailed information on the employee training history from Germany, we find that training has a significantly positive retention effect but according to human capital theory, portable training reduces the retention effect
Summary
The empirical literature on the effects of employee training mainly concentrates on wage and productivity increases (Dearden et al, 2000). 3 Data and estimation strategy In order to analyse the retention effect of different training measures and to test our hypotheses, we use the German linked employer-employee dataset WeLL-ADIAB6.
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