Train drain? Access to foreign workers and firms’ provision of training

Abstract

Does better access to foreign workers reduce firms’ willingness to provide general skills training? We analyze how the opening of the Swiss labor market to workers from the European Union affected the number of apprenticeships that firms provide. We exploit that the availability of foreign workers increased more in firms close to the border because they gained unrestricted access to cross-border workers from Switzerland’s neighboring countries. Our Difference-in-Differences estimates suggest that firm-provided training to unskilled workers and access to foreign workers are not necessarily substitutes: opening the borders did not have a statistically significant effect on apprenticeship provision. Using unique data on firms’ costs and motives to train apprentices, we show that the greater availability of foreign workers reduced firms’ incentive to train because hiring skilled workers externally became cheaper, among others because new hires became more productive from the start. Positive impacts on firm growth worked in the opposite direction.