6 The Effect of Tuition Reimbursement on Turnover A Case Study Analysis. Introduction Becker’s (1964) seminal work on investment in human capital makes a fundamental distinction between general and firm-specific skills, which has implications for investment and employee turnover | 6 The Effect of Tuition Reimbursement on Turnover A Case Study Analysis Colleen Flaherty Manchester Introduction Becker s 1964 seminal work on investment in human capital makes a fundamental distinction between general and firm-specific skills which has implications for investment and employee turnover. Firm-specific human capital is defined as having value only to the current employment relationship while general human capital is valuable to both current and potential employers. Becker s theory predicts that employees will bear the full cost of general skills training either by paying for training directly or by accepting lower wages during training periods because employers face the threat of not capturing the return on their investment due to poaching of trained employees by other employers. In a competitive labor market workers have the incentive to invest efficiently in general human capital because they receive a wage equal to the value of their marginal Colleen Flaherty Manchester is an assistant professor at the Carlson School of Management University of Minnesota. I would like to thank the participants at the Conference for the Analysis of Firms and Employees CAFE for their comments and suggestions as well as the editors and reviewers of this conference volume. In addition to the conference sponsors this research was made possible by the Hawley-Shoven Fellowship Fund through a grant to the Stanford Institute for Economic Policy Research. I would like to thank my advisors John Shoven Michael Boskin John Pencdvel and Edward Lazear as well as members of the labor reading group at Stanford University for their comments and feedback. I would also like to thank Harley Frazis Merrisa Piazza Maury Gittleman and James Spletzer at the . Bureau of Labor Statistics as well as the Human Resource Department at the case study institution for access to the data used in this analysis. The views presented in this paper are mine alone and do not reflect those of my .
