Developing skills and pay through career ladders: Lessons from Japanese and U.S. companies

California Management Review

Volumn , Issue 2, 1997, Pages 124-144

  Brown, Clair ^a   Reich, Michael ^a  

^a NONE

Author keywords

[No Author keywords available]

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EID: 0031478689     PISSN: 00081256     EISSN: None     Source Type: Journal    
DOI: 10.2307/41165890     Document Type: Article

References (40)

1. George Borjas, Labor Economics (New York, NY: McGraw-Hill, 1996), p. 251.
2. Our discussion is pertinent for companies in manufacturing and services, but it is less relevant for professional firms.
3. Gary S. Becker, Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education (New York, NY: Columbia University Press, 1964).
4. Charles Brown, "Empirical Evidence on Private Training," in Ronald Ehrenberg, ed., Research in Labor Economics (Greenwich, CT: JAI Press, 1990).
5. David Stern and J.M.M. Ritzen, Market Failure in Training?: New Economic Analysis and Evidence on Training of Adult Employees (New York, NY: Springer-Verlag, 1991).
6. John Bishop, "Employee Training in the United States: A Review of the Literature," background paper for OECD, Paris, 1994.
7. See Bishop, ibid., for a thorough and recent survey.
8. Bishop, op. cit.
9. The National Longitudinal Survey of Youth (NLSY) followed a cohort aged 16-25 over time. Lisa M. Lynch, "Payoffs to Alternative Training Strategies at Work," in Richard B. Freeman, ed., Working Under Different Rules (New York, NY: Russell Sage, 1993).
10. U.S. Bureau of Labor Statistics, "BLS Reports on Employer-Provided Formal Training," press release, September 23, 1994, Washington, D.C.
11. Lynch (1993), op. cit.
12. Jacob Mincer and Yuchio Higuchi, "Wage Structures and Labor Turnover in the United States and Japan," Journal of the Japanese and International Economies, 2 (1988): 97-33.
13. The Survey of Employer-Provided Training (SEPT) sample contains over 58,400 private establishments with five or more employees and achieved a response rate of 71 percent. This represents the largest and most representative survey of establishments in the training literature.
14. U.S. Bureau of Labor Statistics, op. cit.
15. Peter B. Doeringer and Michael J. Piore, Internal Labor Markets and Manpower Analysis (Lexington, MA: Heath, 1971).
16. Bishop, op. cit.
17. U.S. Bureau of Labor Statistics, op. cit.
18. Price Waterhouse, "U.S. Business Views on Workforce Training," prepared for ASTD, NRF, NAM, SLMA, April 1994.
19. Brown, op. cit.; Lee A.Lillard and Hong W. Tan, Private Sector Training and Who Gets It and What Are Its Effects? (Los Angeles, CA: The Rand Corporation, 1986); Lisa M. Lynch, "The Role of Off-the-Job vs. On-the-Job Training for the Mobility of Women Workers," AEA Papers and Proceedings, May1991, pp. 151-156; Ann P. Bartel, "Training, Wage Growth and Job Performance: Evidence from a Company Database," Journal of Labor Economics (1994).
20. Brown, op. cit.; Lee A.Lillard and Hong W. Tan, Private Sector Training and Who Gets It and What Are Its Effects? (Los Angeles, CA: The Rand Corporation, 1986); Lisa M. Lynch, "The Role of Off-the-Job vs. On-the-Job Training for the Mobility of Women Workers," AEA Papers and Proceedings, May1991, pp. 151-156; Ann P. Bartel, "Training, Wage Growth and Job Performance: Evidence from a Company Database," Journal of Labor Economics (1994).
21. Brown, op. cit.; Lee A.Lillard and Hong W. Tan, Private Sector Training and Who Gets It and What Are Its Effects? (Los Angeles, CA: The Rand Corporation, 1986); Lisa M. Lynch, "The Role of Off-the-Job vs. On-the-Job Training for the Mobility of Women Workers," AEA Papers and Proceedings, May1991, pp. 151-156; Ann P. Bartel, "Training, Wage Growth and Job Performance: Evidence from a Company Database," Journal of Labor Economics (1994).
22. Lisa M. Lynch, "Private-Sector Training and the Earnings of Young Workers," The American Economic Review, 82/1 (1992): 439-480.
23. Harry J. Holzer, "The Determinants of Employee Productivity and Earnings," Industrial Relations, 29/3 (1990): 403-422; Bishop, op. cit.; Anthony Carnevale and I. Gainer, "The Learning Factory," ASTD and U.S. Department of Labor, 1989; David Black, M. Berger, and James Barron, "Job Training Approaches and Costs in Small and Large Firms," Report no. PB93-192870, U.S. Dept. of Commerce, 1993.
24. Harry J. Holzer, "The Determinants of Employee Productivity and Earnings," Industrial Relations, 29/3 (1990): 403-422; Bishop, op. cit.; Anthony Carnevale and I. Gainer, "The Learning Factory," ASTD and U.S. Department of Labor, 1989; David Black, M. Berger, and James Barron, "Job Training Approaches and Costs in Small and Large Firms," Report no. PB93-192870, U.S. Dept. of Commerce, 1993.
25. Harry J. Holzer, "The Determinants of Employee Productivity and Earnings," Industrial Relations, 29/3 (1990): 403-422; Bishop, op. cit.; Anthony Carnevale and I. Gainer, "The Learning Factory," ASTD and U.S. Department of Labor, 1989; David Black, M. Berger, and James Barron, "Job Training Approaches and Costs in Small and Large Firms," Report no. PB93-192870, U.S. Dept. of Commerce, 1993.
26. Alan Eck, "Job-Related Education and Training: Their Impact on Earnings," Monthly Labor Review, 116/10 (1993): 21-38.
27. Ronald L. Jacobs, Michael J. Jones, and Sue Neil, "A Case Study in Forecasting and Financial Benefits of Unstructured and Structured On-the-Job Training," Human Resource Development Quarterly, 3/2 (1992): 113-139.
28. Office of Technology Assessment, "Worker Training: Competing in the New International Economy," OTA-ITE-457, U.S. Congress, 1990.
29. M. Sloman, "On-the-Job Training: A Costly Poor Relation," Personnel Management, 21/2 (1989): 38-41; William J. Rothwell and H. C. Kazanis, Improving On-the-Job Training: How to Establish and Operate a Comprehensive OJT Program (San Francisco, CA: Jossey-Bass, 1994). Based upon their management consulting work with numerous companies, Rothwell and Kazanis have developed off-the-shelf tools for companies to structure on-the-job training.
30. M. Sloman, "On-the-Job Training: A Costly Poor Relation," Personnel Management, 21/2 (1989): 38-41; William J. Rothwell and H. C. Kazanis, Improving On-the-Job Training: How to Establish and Operate a Comprehensive OJT Program (San Francisco, CA: Jossey-Bass, 1994). Based upon their management consulting work with numerous companies, Rothwell and Kazanis have developed off-the-shelf tools for companies to structure on-the-job training.
31. Ronald Dore, British Factory, Japanese Factory (Berkeley, CA: University of California Press, 1973); Kazuo Koike and Takenori Inoki, eds., Skill Formation in Japan and Southeast Asia: a Comparative Study (Tokyo: University of Tokyo Press, 1990).
32. Ronald Dore, British Factory, Japanese Factory (Berkeley, CA: University of California Press, 1973); Kazuo Koike and Takenori Inoki, eds., Skill Formation in Japan and Southeast Asia: a Comparative Study (Tokyo: University of Tokyo Press, 1990).
33. Clair Brown, Michael Reich, and Lloyd Ulman, Work, Learning and Earnings: Employment and Pay Systems in Japan and the U.S. (New York, NY: Oxford University Press, forthcoming 1997).
34. G. Douglas Jenkins, Jr., Gerald E. Ledford, Jr., Nina Gupta, and Harold Doty, Skill-Based Pay: Practices, Payoffs, Pitfalls and Prescriptions (Scottsdale, AZ: American Compensation Association, 1992). The typical plan has ten skill units and each takes 20 weeks learning time. The average employee masters only 68% of the skill units in less than two years. Employees stop acquiring skills because of their own decision or because their supervisor did not want to train more people on certain machines. Three-fourths of these plans link skill acquisition to pay increases. Entry pay was approximately $8 and the typical employee's earnings was 40% higher with the top earnings potential 70% higher.
35. The responses discussed here do not include all that were collected, but are representative. Mark Glickman and Judy Ruha conducted the telephone survey. Marta Elvira provided the information for the clerical worker in the nonunion finance company. See her dissertation for an excellent analysis of the company's compensation system. Marta Elvira, "The Design and Outcomes of Reward Structures: Integrating Agency and Power Explanations of Incentives," unpublished Ph.D. dissertation, Haas School of Business, University of California, Berkeley, CA, 1995.
36. The training wage differential in the unionized sector has been widening. Ryan notes that few collective bargaining agreements made explicit reference to trainee pay in 1967; for 70% of covered workers, trainees were to be paid the full rate for the job. When trainee pay was negotiated, the ratio of the maximum wage to the starting wage for various operator and craft union jobs ranged from 1.09 to 1.22 for a duration of 3 to 72 months in the 1970s. Ryan argues that unions negotiate high trainee pay in order to prevent trainees from being used to erode the position of experienced workers. Paul Ryan, "Trade Union Policies Towards the Youth Training Scheme-Patterns and Causes," British Journal of Industrial Relations, 33/1 (1995): 1-33.
37. David W. Marsden and Paul Ryan, "Initial Training, Labour Market Structures and Public Policy: Intermediate Skills in British and German Industry," in Paul Ryan, ed., International Comparisons of Vocational Education and Training for Intermediate Skills (London: Falmer, 1991).
38. Birgit Mahnkopf, "A Modernization Approach of German Trade Unions: Further Training Through Collective Bargaining," Discussion Paper FSI91-2, Berlin, WZB, 1991.
39. Eric Parker and Joel Rogers, "The Wisconsin Regional Training Project: Lessons for National Policy," Working Paper Series, Berkeley, CA, National Center for the Workplace, 1996.
40. Kenneth Mericle and Dong-Jae Kim, "Skill-Based Pay and Work Reorganization in High Performance Firms," Working Paper Series, Berkeley, CA, National Center for the Workplace, 1996.