Types of training and its impact on employment outcome in a general skill occupation

Abstract

We study the impact of formal and informal training on within groups employment outcome especially on wage inequality using cross sectional data collected among auto mechanics in Malaysia. Using simplified Mincerian wage function, we analyzed the wage difference between respondents who had received formal training prior to work and those who acquired their skills mainly through informal on the job training. We minimized the effect of education on wage by maintaining homogeneity in years of schooling received by our respondents. The empirical results show that formal training positive impact is only confined to initial wage, the effect is however short termed. One important policy implication from this finding is for developing countries like Malaysia to reduce emphasis on institutionalizing formal training on general skills but rather remain focus on firm specific skills.