# **g. Worker Training**<sup>**35**</sup>

Worker training is a right in many countries. Ongoing upgrading of the work force through training, particularly in rapidly evolving industries, is a central element of the national innovation system.

**_Training tends to have a positive impact on productivity_ . . .** In general, the available rigorous empirical evaluations of training programs find that training increases firm-level productivity, (Tan and Lopez-Acevedo, 2003; Barrera and Higuera, 2004 among others for LAC). The impact on subsequent earnings is less clear, the productivity increases can translate into higher wage premiums but especially for skilled workers **.** Firm investments in training tend to pay off particularly when training takes place in-house and benefits already skilled workers. Further, it has been found that increased continuity of training leads to larger impact on productivity than does intermittent training.

_..._ **_and is complementary to firm R&D and technology adoption_** _._ Firm-level data show that firms that are capital intensive and/or invest in R&D and technological change are more likely to train workers (Barrera and Higuera, 2004; Gill, Dar, and Fluitman, 1998, and Tan and Batra, 1995b and 1997).

**_Larger firms are more likely to provide training_** in the Caribbean, Colombia, Mexico, and LAC in general.<sup>36</sup> Small firms may be more constrained by resources, lack knowledge about training benefits, invest less and have higher labor turnover rates than large firms (De Ferranti, 2003).  Some evidence from Mexico suggests that membership of a union raises the likelihood of receiving training (Lopez Acevedo 2002).

**_Training is not a substitute for good schools._** Firms overwhelmingly choose to train skilled (secondary education or above) workers. This is an exceptionally robust finding that is salient in cross-country household surveys, administrative databases, and firm panel data sets. Although the likelihood of training increases with all levels of education, the critical threshold seems to be completion of secondary education.. This most likely reflects the idea that investment in training requires a sufficient prior skill base in order to pay-off. This pattern is consistent with the pattern of returns to training.  Overall, firms rarely invest into basic skills of a worker, rather focusing on specific job related skills.

**_The efficacy of training differs by provider and modality_** . Studies of programs in Mexico find that on-the-job training in Mexico is more effective than classroom training. Further, private training centers seem to out-perform public training centers in the Caribbean, Colombia and Brazil (McArdler and Blom, forthcoming, Barrera and Higuera, 2004 and World Bank, 2004).

**_The majority of firms in the LAC region receive training from private providers._** In the LAC region, only 16% of enterprises use public institutes for external training (Batra, 2001b).  Private sector providers – firms themselves, industry associations, buyers and equipment suppliers, and private training institutes and colleges – are more important than government-run training institutions as sources of training. Naturally, there exists a large variation within the region. In Chile and Uruguay, employers rely mostly on private external training sources, whereas firms in other countries, such as Belize, Ecuador, Nicaragua, and Trinidad and Tobago, involve public training suppliers to a larger extent (Marquez, 2002; Cinterfor 2001, and De Ferranti et al., 2003). In almost

35 See background note by Andreas Blom and Gladys López-Acevedo 36 Gill, Dar, and Fluitman (1998) and Tan and Batra (1995b), McArdler and Blom (forthcoming) and Marquez (2002) 19