Training and Wages: What German Data Show

What the research found

Germany has a large household panel survey, the GSOEP, that follows the same people year after year. Researchers have used it repeatedly to look at training taken during working life and what happens to wages afterwards.

Pischke (2001) studied continuous training using data from 1986 to 1989. Three findings stand out.

• Most workplace training was in general skills that are useful at other employers too, and employers usually paid for it.
• Training taken outside working hours was associated with larger wage growth than training during working hours.
• There was no large wage gain in the short run after training, especially for men.

Mühler, Beckmann and Schauenberg (2007) used the same GSOEP data and compared people who took training with similar people who did not (propensity score matching combined with difference-in-differences). Training in general skills was associated with wages about 5–6% higher. Training in skills specific to one firm showed almost no statistically clear difference.

How to read it

Both studies use observational data, not experiments. The researchers try to remove the possibility that people whose wages were already rising are the ones who get trained, by looking at each person’s wage growth or matching them to similar people. Differences the data don’t capture, such as motivation or a manager’s opinion, can still remain. So this does not mean “take training and your pay goes up 5–6%.” The accurate reading is: in German data, people who took general-skills training tended to have higher wages.

Germany has a well-developed vocational training system, and its labour market works differently from Japan’s. In Japan, one analysis found that the link between self-directed study and later wages disappeared once ability and job characteristics were taken into account (see our article on self-study in Japan).

Still, the two German studies share some useful hints.

• Is the skill portable? The difference showed up for skills that are valued at other workplaces.
• Learning on your own time. Training outside working hours was linked to more growth, though this may also reflect the extra motivation of people willing to give up their own time.
• It does not show up right away. There was no large short-term change, so don’t judge learning by the first few weeks.

A small step for today

When you tick “Studied for 30 minutes” in the app, take a moment to ask whether today’s learning would be useful outside your current company. Spreadsheets, writing, a language, working with data, or studying for an industry qualification are closer to portable skills. Learning your company’s internal tools matters too, but noting the two separately helps you see what you are actually building.

If you are not sure where to start, look at the job ads for the role you would like in two or three years and note which skills keep appearing. That list is a practical guide to what counts as portable in your field.

Thirty minutes is small, but five days a week adds up to about ten hours a month. The research describes long-run tendencies, so the record of having kept going is the most useful thing you can collect.

Sources

• [C1] Pischke (2001) Continuous training in Germany. Journal of Population Economics.
• [C2] Mühler, Beckmann & Schauenberg (2007) The returns to continuous training in Germany: new evidence from propensity score matching estimators. Review of Managerial Science.