Working Paper: CEPR ID: DP999
Authors: Dennis J. Snower
Abstract: The paper explains how a country can fall into a 'low-skill, bad-job trap', in which workers acquire insufficient training and firms provide insufficient skilled vacancies. In particular, the paper argues that in countries where a large proportion of the workforce is unskilled, firms have little incentive to provide good jobs (requiring high skills and providing high wages), and if few good jobs are available, workers have little incentive to acquire skills. In this context, the paper examines the need for and effectiveness of training policy, and provides a possible explanation for why Western countries have responded so differently to the broad-based shift in labour demand from unskilled to skilled labour.
Keywords: skills; productivity; training; vacancies; employment; search
JEL Codes: D21; D62; D82; D83; E24; J22; J23; J31; J63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| High proportion of unskilled workers (F66) | Firms lack incentive to offer good jobs (J29) |
| Firms lack incentive to offer good jobs (J29) | Scarcity of skilled vacancies (J69) |
| Scarcity of skilled vacancies (J69) | Discouragement of workers from acquiring skills (J24) |
| High proportion of unskilled workers (F66) | Scarcity of skilled vacancies (J69) |
| Scarcity of skilled vacancies (J69) | Low incentive for skill acquisition (J24) |
| Low-skilled labor (F66) | Low-skilled job vacancies (J69) |
| Lowskill badjob trap (F66) | Smaller employment multipliers with small training subsidies (J24) |
| Lowskill badjob trap (F66) | Larger subsidies needed to stimulate changes in employment (J68) |
| Interaction between vacancy supply externality and training supply externality (J24) | Market failures (D52) |