Promoting Wage Growth: The Impact of Universal Skills Training Policy

• In Event: Approaches to Ensuring Wage Growth and Economic Mobility

Abstract

Skills training is a key policy tool for enhancing employability and potential wage growth. It might have become more critical for mitigating risks associated with job displacement, due to the advent of artificial intelligence, supply chain disruptions and global recessions. However, the literature has found that training effects vary. Thus, it is important to understand for whom training matters and when.

This paper asks three research questions:

1. To what extent does completing skills training boost wages?


2. Which profile(s) of workers benefit most from skills training?


3. When does training matter most for wages?

Our policy context is Singapore, a country touted as a “world leader in cultivating lifelong learning.” The Singapore government has formulated a coordinated approach to skills training. Collaborating with employers, training providers, and trade unions, policy levers include universal training credits, subsidies, and employer funding to boost demand for training. On the supply side, industry-specific training roadmaps were designed to ensure that training offered is aligned with industry demands. Ultimately, the policy goal is not only to improve workers’ employability, but also to channel them into jobs that offer greater potential for wage growth.

Singapore’s national training movement makes it an informative case study for other state-led training policies. We study training effects in this national context with representative data from a three-wave panel survey of an ongoing study entitled “In-Work Poverty and the Challenges of Getting By among the Young.” The study focuses on younger Singaporeans between 21 to 42 years old in the labor force, a crucial age range when training can reap longer lifetime benefits. The three waves were conducted between 2020 and 2024. The analytical sample size is 856 respondents who responded to all waves.

To estimate wage effects of completing skills training, we ran fixed effects and difference-in-differences (DID) regressions. Both methods eliminate time-invariant factors from the estimation, which allows for a more convincing attribution of wage changes to skills training. Across the three waves, we found from the fixed effects models that completing skills training increases wages by 4%, especially for lower-educated workers and workers who have spent a longer time in the workforce. However, this effect is mediated by employer’s funding of the training. Additionally, we ran DID regressions to identify when skills training has the most significant effect, and we found that training completed during the Covid-19 pandemic had the strongest impact on wages. This was when more than half of our respondents, including a greater proportion of lower-educated workers, attended training. We found insignificant effects of post-pandemic training.

Our findings suggest that Singapore’s universal state-wide training policy has reaped some wage benefits, but only insofar as the training is aligned with employers’ needs. Additionally, the scale of policy intervention might need to be extensive, as most wage benefits of training were found from training completed during the pandemic – when more people attended training, especially lower-educated respondents. This has implications on policies targeting lower-educated workers, who are more likely to face access and time barriers to skills training.

Authors

• Zhi Han Tan, National University of Singapore
  Presenting Author

• Irene YH Ng, National University of Singapore
  Non-Presenting Co-Author