4 ms·

There are strong economic disincentives to training employees in transferable skills: the second you do, their market value increases, which means that if you d

by _lex 11y ago

There are strong economic disincentives to training employees in transferable skills: the second you do, their market value increases, which means that if you don't pay them more, they will be recruited by other companies willing to do so. So you wind up paying for both their education and an increased salary because you educated them. It's cheaper to just hire someone who's already educated. For example, consider the employer who decides to pay 10,000 to train their employees when doing so will cause their employees' market salary to increase by 5000/year. Assuming the employee will stay with him for 2 years if he does the salary bump, he's effectively paying the employee $5000 (salary bump) + 10,000/2 (training) = $10,000/year extra, when he could just go to the market and hire someone who already has the skill for $5,000/year extra. Going to the market may also be faster if the skill is both complex & modularized (so it doesn't require deep insight into the current code base). You'll also benefit from the experience of the person who's done it before and gained battle scars. So instead of promoting a jr engineer and training them, it's often just cheaper and more efficient to hire a senior guy who's done it before.

cortesoft 11y ago
This seems so obvious, I can't believe others aren't seeing this. It is a clear collective action problem - the free loader (the company who doesn't train and just hires the trained worker away from the other company) will always have the advantage.
- mixmastamyk 11y ago
  Except when you can't hire, because all those experienced folks are taken. Then the work doesn't get done and the company falls behind in inaction.
- smaudet 11y ago
  I'm pretty sure they ARE seeing this. Problem is, that's a name-calling game. The employer is just as much a free-loader here. Why should they get skilled people for free? That talent directly benefits them, so why should other people be subsidizing their talent pool?
lukeschlather 11y ago
I don't contest your math, but I think this suggests the experienced employee is under-priced.
- _lex 11y ago
  It only seems that way because as a company you're amortizing the investment in education over 2 years, when as an individual the employee can amortize that investment over the effective life of the technology or how long he thinks the knowledge will benefit him, which should be way, way longer (since he can switch companies and sell himself as a battle-tested expert). So the $5000 premium does include a payoff for investing in education, but the payoff is spread out among many more years. This is a fundamental economic problem in training employees in transferrable skills. It's the reason why companies rarely pay for employees' graduate degrees (even though it can be extremely tax efficient for them to do so), and in the case that they do, they include term requirements (e.g. you have to work for us for 4 years afterwards, otherwise repay a prorated portion).
trishume 11y ago
This. The economics and incentives make more sense for individuals to train themselves. Whether that be through university or through side projects. In fact I'm going to university and was taught this in "Comparative political economy of advanced industrial nations". Germany and Japan counter this effect through a culture of non-poaching whereas Anglo-saxon nations deal with it through lots of university education.
neogodless 11y ago
So on the one hand we have this general sense that "there aren't enough talented people to hire" but on the other hand we have this idea that "it's easier to hire someone talented than to train them ourselves." Can it be both? Any time a business is saying they are having trouble hiring someone talented... maybe they just have to look inward and improve their own training processes.
- _lex 11y ago
  When companies complain of shortages, they generally mean "shortage at the price I would like to pay". The talent is there, they just need to be willing to pay the _true_ market clearing price, and to advertise as such. Having trouble hiring an iOS lead? Advertise the job with a $200k salary, and you'll see many more applicants. Granted, there's going to be related costs of sifting through many unqualified applicants; but that's part of the cost of doing business. Finally, I explained above why businesses don't want to train employees. It really is that simple. Th e math is basic and as inescapable as gravity. (note that planes do fly, aka, you can defy it by devising a clever contraption).
  - neogodless 11y ago
    I guess what I really wanted to communicate is this: If 100% of the companies decide it is not worth it to train employees because it's easier to hire already trained employees... there would be no trained employees to hire. So it's like a market force - as long as some companies are paying to train employees, other companies can take advantage and hire externally. But not all companies can do that.

by _lex 11y ago

cortesoft 11y ago

This seems so obvious, I can't believe others aren't seeing this. It is a clear collective action problem - the free loader (the company who doesn't train and just hires the trained worker away from the other company) will always have the advantage.

mixmastamyk 11y ago
Except when you can't hire, because all those experienced folks are taken. Then the work doesn't get done and the company falls behind in inaction.
smaudet 11y ago
I'm pretty sure they ARE seeing this. Problem is, that's a name-calling game. The employer is just as much a free-loader here. Why should they get skilled people for free? That talent directly benefits them, so why should other people be subsidizing their talent pool?

lukeschlather 11y ago

I don't contest your math, but I think this suggests the experienced employee is under-priced.

_lex 11y ago
It only seems that way because as a company you're amortizing the investment in education over 2 years, when as an individual the employee can amortize that investment over the effective life of the technology or how long he thinks the knowledge will benefit him, which should be way, way longer (since he can switch companies and sell himself as a battle-tested expert). So the $5000 premium does include a payoff for investing in education, but the payoff is spread out among many more years. This is a fundamental economic problem in training employees in transferrable skills. It's the reason why companies rarely pay for employees' graduate degrees (even though it can be extremely tax efficient for them to do so), and in the case that they do, they include term requirements (e.g. you have to work for us for 4 years afterwards, otherwise repay a prorated portion).

trishume 11y ago

This. The economics and incentives make more sense for individuals to train themselves. Whether that be through university or through side projects. In fact I'm going to university and was taught this in "Comparative political economy of advanced industrial nations". Germany and Japan counter this effect through a culture of non-poaching whereas Anglo-saxon nations deal with it through lots of university education.

neogodless 11y ago

So on the one hand we have this general sense that "there aren't enough talented people to hire" but on the other hand we have this idea that "it's easier to hire someone talented than to train them ourselves." Can it be both? Any time a business is saying they are having trouble hiring someone talented... maybe they just have to look inward and improve their own training processes.

_lex 11y ago
When companies complain of shortages, they generally mean "shortage at the price I would like to pay". The talent is there, they just need to be willing to pay the _true_ market clearing price, and to advertise as such. Having trouble hiring an iOS lead? Advertise the job with a $200k salary, and you'll see many more applicants. Granted, there's going to be related costs of sifting through many unqualified applicants; but that's part of the cost of doing business. Finally, I explained above why businesses don't want to train employees. It really is that simple. Th e math is basic and as inescapable as gravity. (note that planes do fly, aka, you can defy it by devising a clever contraption).
- neogodless 11y ago
  I guess what I really wanted to communicate is this: If 100% of the companies decide it is not worth it to train employees because it's easier to hire already trained employees... there would be no trained employees to hire. So it's like a market force - as long as some companies are paying to train employees, other companies can take advantage and hire externally. But not all companies can do that.