Economic feasibility of on-the-job training

Investing in on-the-job training (OJT) is risky because the value of specific human capital is lost if a permanent separation occurs between the employer and employee. An efficient contract between the two parties can reduce but not eliminate the risk. In theory, some form of “training insurance” could further reduce the risk or eliminate it entirely by pooling risk among employees or employers. The merits of this idea in practice could be determined by field tests, as could the value of ideas for improving the actual process of OJT.