Does CVT of firms in Germany suffer from poaching?

‘Non-excludability’ of skills is suspected to give rise to poaching externalities and cause under-investment in training. To substantiate this hypothesis, the paper at hand investigates the relationship between labor turnover and firms’ dedication to continuing vocational training (CVT) exploiting novel survey data on firms in Germany (BIBB-FluCT data, N = 1.238). Regression analyses of these data point at a negative correlation between turnover and CVT incidence in firms with presumably low skill needs (i.e. firms employing workers with no formal vocational education). However, the scope of the relationship is of limited economic relevance. Merely a minority of firms states to actually forego CVT because of high turnover. Also, the direction of the relationship remains debatable; a reversed negative effect of training on turnover seems unlikely, but not impossible. Eventually, when exclusively focusing on firms providing some CVT (80.6% of the sampled firms), no negative and significant relationship between turnover and CVT spending emerges in the analyses; this is regardless of whether training is rather specific, or rather general. Overall, these findings do not serve to reinforce the notion of a generally detrimental effect of turnover on CVT. Note however, that a poaching problem may not necessarily become manifest in the relationship between turnover and training. For instance, employers explicitly stating to pay attention to potential training externalities provide CVT with a slightly lower probability than other employers. They might fear a free-rider problem regardless of the actual dimension of turnover. Notwithstanding, even this effect is limited in scope suggesting that only few firms actually withdraw from CVT because of a perceived free-rider problem. Altogether, the evidence available to substantiate the hypothesis of prevalent under-investment in CVT is not very compelling. In fact, payback clauses may help employers turn ‘non-excludable’ skills into part-time private goods and mitigate potential poaching risks. The analyses indicate that payback clauses go along with considerably higher employer-spending on CVT. JEL codes: I22; J24; D61