A key area of personnel economics focuses on the provision of human resource practices by firms, such as why one type of compensation is offered over another (Edward P. Lazear and Paul Oyer 2007). While this area of research includes various types of wage compensation, it also includes types of nonwage compensation, which have been shown to have sizable effects on worker behavior, such as mobility in the case of health insurance and traditional pension plans. The present analysis examines the effect of employer sponsored investment in general human capital, administered through tuition reimbursement programs, on employee turnover. Employer provided tuition reimbursement is a widespread program in which firms provide financial assistance for the direct cost of coursework taken by employees. Estimates of the percentage of firms that offer this program are as high as 85 percent (Peter Cappelli 2004). These programs support investment in an employee’s general human capital—skills that are transferable across employers—because accredited academic institutions are responsible for curriculum development, instruction, and certification and serve students employed at a wide variety of establishments. These programs represent a puzzle because firms are unlikely to make general human capital investments without some expectation of receiving an ex post return, but standard human capital theory Human Capital, Work, and outComes

We study how firms’ personnel practices react to labor market regulation. While a company is compelled to comply with a new law, what is the ripple effect of the change on existing personnel policies and practices? We provide evidence using passage of the Age Discrimination in Employment Act and nearly two decades of administrative data from a large US firm. In line with theory, we find a weakening of long-term implicit incentives and movement toward pay for performance. Furthermore, the data are consistent with the firm carefully managing its personnel practices according to economic principles to preserve incentives for employees.

Stop the Clock Policies and Career Success in Academia by Colleen Flaherty Manchester, Lisa M. Leslie and Amit Kramer. Published in volume 100, issue 2, pages 219-23 of American Economic Review, May 2010