Upgrading employee skill levels can generally be achieved by job training. This article examines the decision making problem about the firm's selection of job training, and investigate the factor which have influence for the firm to select an appropriate training program. For this examination, this paper classifies job training into two types; on-the-job training and further training. Further training comprises off-the-job training in order to upgrade the competency of the incumbent employee, while in-the-job training comprises formal induction training for the new employee and informal training through a system of learning-by-doing.
This study suggests the following results. First, once the firm take the investment it is clear that the firm has incentive to provide in-the-job training for new employees and further training for more senior employees. Second, once the firm has incentive to provide further training, the decision to actually carry out the training will ultimately depend upon such factors as; a gap of wage between new employees and senior employees, a difference of training costs between on-the-job training and further training, the discount rate related with training investment. The firm has incentive to provide further training to more new employees, when a wage gap is high, a difference of training costs is low, and the discount rate is low. Thus three factors become important elements of government policy to encourage job training by the firm.