Assignment 4

Subsidized employee training programs are employee training initiatives funded partly by the state,
federal, local government or other partners. Such programs enable businesses to train their workers at a
lower or no cost.

Most researchers evaluated the impact of offering subsidized employee training and the conclusion was
that this has led to greater skill accumulation, higher employment rates and higher earnings for workers.

Wages:

Training of workers will give them specialized training and skill, this will consequently increase their
value in the labor market and eventually leading to higher wages. There are a number of economic
theories which explains wage differentials and level of education or skills possessed is one of the major
reasons why wages differ between people in the same industry. A person with a master’s degree is
usually paid more than a person with bachelor’s degree. The impact of training on wages is that it may
lead to a rise in wage rate, however, if the supply of trained workers exceeds the demand for it, then
this could lead to a contraction in the wage rate which is a situation whereby the wages for skilled
positions do not increase significantly due to a surplus of qualified candidates.

From the theory of supply and demand, a shift of the supply curve to the right will cause a relative
decrease in the price of labor; (wages).

Employment:

There are different sources of unemployment of which one of them is structural. This is when a person
may not be employed because of lack of relevant skills needed within an industry, therefore, a
subsidized training could lead to an increase in employment opportunities as firms are incentivized to
create new jobs that can be filled by the newly trained workers. This may help the government to
achieve its one of the main macroeconomic objectives.

The program may help reduce overall unemployment rates by providing training to disadvantaged
workers provided the skills taught are in high demand.

The re-employment probabilities for the disadvantaged would be increased since they would have
gained new or more skills through the training.

The labor market would be full of skilled workers which usually increase efficiency in terms of
production and the employers may end up employing labor for capital intensive.

Hours of work:

This program leads to creation of new jobs as discussed above, there may be an increase in the
availability of full time positions hence leading to more stable hours of work for employs.

On the other hand, firms may vary the hours of work based on the business needs and the number of
trained workers available which could lead to some unpredictability in working hours for employees.
The other aspect is that, once the labor market floods with skilled or trained workers, firms may choose
to hire workers on shift mode or piece jobs which implies that the number of hours one would spend at
work is reduced.

In a nutshell, the program is associated with positive impact on employment since it creates job
opportunities and provides skills to workers.

The actual effects on wages and hours of work will depend on the labor market forces of the supply of
trained workers and the demand for their skills.

The other aspect to consider is the long run sustainability of the macroeconomic policy by the
government of Zambia to subsidize training of disadvantaged workers. Usually, the money that is used
by the government is sourced through taxing producers and consumers, if the revenue of the
government falls it means the policy may not be effective in the long run.

The other challenge is to balance the supply of trained labor to their demand. If the government
continues to subsidize training, the labor market may be flooded and this would put pressure on the
wage rate to go down. An effective supply side policy should seek to balance an increase in labor as well
as an increase in economic growth to maintain higher wage rates since an increase in supply of labor
should be complimented by an increase in the demand for products. Demand for labor is a derived
demand since labor is demanded as a result of an increase in demand for products. Therefore, it is
important for the government of Zambia to implement a policy that is effective in the long run.