Training Programs, Skills, and Human Capital: A Life-Cycle Approach
AbstractEconomic studies of the effectiveness of government-sponsored worker training programs in fostering career progression is traditionally based on models with one-dimensional skills and human capital. Since training is an upfront human-capital investment, it is predicted to depress the rate at which workers reallocate across jobs. In this paper we analyze if this view is consistent with observed life-cycle labor market dynamics of workers with and without a training degree. To this end we focus on Germany's apprenticeship program, which offers occupation-specific training to high-school graduates together with government-sponsored general education and which is currently the largest training program of its kind in the world. We rely on a rich administrative worker-level panel data set that follows employees from labor market entry on until 25 years into their career. We document a number of striking facts: First, the large majority of apprentices are observed in just about a dozen of occupations even though training programs are offered in more than 500 occupations. In contrast, the employment distribution across occupations is much more even for high-school students who do not enter an apprenticeship program. Second, when using data on occupation-specific task usage, we find that apprentices are concentrated in occupations that predominantly require non-routine rather than routine tasks, while non-apprentices are more likely to work in routine occupations. Third, workers with an apprenticeship degree are quite mobile. However, in contrast to workers without a formal degree, their mobility patterns are "directional" in the sense that they clearly reflect either upgrades or downgrades in the occupational skill space.
We argue that standard models with one-dimensional skills and human capital cannot explain these distinct patterns. Instead we develop a model in which human capital is occupation-specific, but in which non-routine occupations require upfront occupation-specific human capital built-up.