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The issue here is that in-house training internalizes as a cost a societal benefit, so it is not individually "optimal" according to naïve homo oeconomicus reasoning.

Basically, if you train an employee and they leave the firm before their higher productivity has paid off your training investment, you lose out. If they leave to go to a competitor, they win without investing in the training. So it may be individually optimal not to train, and to poach trained workers from competitors. But if nobody trains, soon the industry as a whole has no more workers to hire.

The only way out of that is collective/societal, either through an industry-wide training scheme, or government intervention. Or if a given firm is large enough to have market power and to have its own large in-house training scheme which can afford to lose some percentage of its trainees early. But small or medium enterprises are not in a position to train many more than one person at a time, so to them the risk of losing a trainee is unacceptably high.

In any case, even within the same industry, there is a common ground applicable to all firms which can be taught to anyone wishing to join the industry, but then there's in-house procedures, technologies, hardware and software, etc, which will take months to learn in any case. So industry-wide training, or school training is not a substitute for in-house training.

I mean, when they say they don't have qualified computer science people coming out of the universities, are they saying people come out of university functionally illiterate (not being able to learn a new computer system/language in a relatively short period of time, on the job)?

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 10:54:58 AM EST
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