Poaching and Firm-sponsored Training: First Clean Evidence

Human capital investments of firms impose the risk that outsider firms poach trained worker because, in contrast to real capital investments, firms do not have the right of disposal for human capital investments. Since firms invest in general human capital, economic theory discusses how market imperfections create partial monopsony power for training firms. Such monopsony power permits general human capital investments of firms and reduce the poaching probability.

However to date, there have not been any empirical studies investigating the existence and extent of poaching after general human capital investments. This paper solves the empirical challenges to identify poaching and shows that around three per cent of the German apprenticeship training firms are poaching victims. Poaching is more likely to be observed in large firms that pay high earnings, whereas smaller firms that pay lower earnings are able to retain their most productive apprenticeship graduates.

This finding contrasts common arguments stating that low-earnings firms are more likely to be poaching victims. Instead, a firm’s current economic status determines the likelihood of becoming a poaching victim. During a downsizing period, training firms may not be able to make counter-offers for apprenticeship graduates that they would like to employ. Workforce reduction signals to outsider firms that they can hire high-quality employees for relatively small earnings premiums. Finally, we find that poaching victims respond to poaching by slightly reducing the share of new apprentice intakes, but they do not adjust earnings for apprenticeship graduates in their first jobs as skilled employees.

We conclude that the overall importance of poaching on expected returns to apprenticeship training and firms' training decisions seems to be negligible.

Mohrenweiser, Jens, Thomas Zwick and Uschi Backes-Gellner (2013), Poaching and Firm-sponsored Training: First Clean Evidence, ZEW Discussion Paper No. 13-037, Mannheim, published in: British Journal of Industrial Relations.