From the perspective of turnover cost, I find that minimum wage has two opposite effects on firm-sponsored training. In this paper, turnover cost is employee's private information, and firms implement third degree price discrimination. As a result, employees in the same firm confront same wages offered by each firm, yet different turnover costs. Consequently, those who have low turnover costs will take job-hopping, while those with high turnover costs will remain. Because of turnover cost, inner wage should be lower than outer wage and thus minimum wage is first bounding on inner wage other than outer wage. Under this circumstance, training will raise workers' productivity and thus their outer wage offers, while inner wage remains on the level of minimum wage. This means training enlarges the gap between inner wage and productivity, and the gap between inner and outer wages. The former effect is called wage-compressing effect, and the latter turnover effect. Wage-compressing effect encourages firm-sponsor training, yet turnover effect discourages it. Overall, the effect of minimum wage on training obeys a 'U' form: minimum wage first increases firm training, and then decreases it.
Zhejiang Social Sciences