Abstract
R&D investments and innovation are the focus of spillover literature. A different and a large measure unrelated literature addresses the socioeconomic effects of general education and vocational learning. Even though empirical research has mostly addressed the private benefits (the educational premium) of education, the academic discussion has had its ultimate concern to divulge the hope for large externalities of or the large social returns (above the private returns) to education. The latter has however turned out to be something of a disappointment in that empirical research has failed to support that reasonable proposition. One reason for this negative finding may however be that most of the research on educational spillovers has been limited to the study of public schools. This study of on-the-job learning on an advanced military equipment producer therefore constitutes a needed extension of the empirical analysis into a very different form of learning.
This section is a shortened and somewhat revised version of Eliasson, 2013b, The Advanced Firm as a Technical University – A pilot study of human capital creation on the Collins Submarine project in Australia 1986 – 2004, which was presented at the CIRCLE and Swedish Entrepreneurship Forum Conference Innovation, Entrepreneurial Universities and Economic Development, Lund, Sweden 17–18 May 2013, and again at the Swedish Entrepreneurship Forum Conference Labor Market Rigidities, Human Capital and Innovation, Swedish Embassy/House of Sweden, Washington DC, 22 October 2013.
The study was made possible by the support of Deep Blue Tech Pty Ltd, Adelaide, South Australia, a wholly owned subsidiary of ASC Pty Ltd. Thanks are extended to the senior officials who participated, Mr. Hans Wicklander and Mr. Rolf Polak, and to the former personnel of the Collins submarine design and construction who participated in the interviews.
This chapter has also benefitted from long discussions with Professor Anders Klevmarken, University of Uppsala, and Professor Erik Mellander, Institute For Labor Market Policy Evaluation (IFAU), Uppsala, and from suggestions made, notably by Professor Bo Carlsson and Professor Johan Eklund at the CIRCLE and Entrepreneurship Forum conference in Lund, Sweden, May 2013.
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Notes
- 1.
- 2.
Not to the Horndal works (which had not saved its archives) but to another neighboring steel works that had the same experience.
- 3.
Remember that I use the term production to cover the entire value added chain, from concept formulation, design, engineering through physical manufacturing, to distribution and marketing. So the Collins submarines were designed and engineered at Kockums in Malmö, Sweden, and manufactured in Adelaide, South Australia.
- 4.
Except perhaps that some of the young Collins employees might have had to pay themselves for some of the training obtained through lower wages. See further on this below.
- 5.
There is also the implicit “charge” by the employer for organizing the employees into a firm hierarchy, for supplying the infrastructure capital necessary for that, and for carrying the business risks, problems to which I return when discussing the private economics of self-employment as an alternative to wage employment in a firm.
- 6.
A few theoretical observations are in place here. For one thing I also assume that the new employer of the former Collins employee pays for the higher productivity that comes with the now larger human capital acquired on the Collins project (a typical neoclassical assumption). If the employee who has learned has paid for his/her lower productivity on the job, while learning, through a lower wage, his or her higher wage increase when leaving Collins for a new job can be seen as a return to the additional human capital he/she has acquired on the job. If, on the other hand, the individual did not get less pay because he was a learner (we will never be able to know), we should expect his increase in compensation to be smaller, because his or her wage/salary was already high. However, the new employer might know perfectly what he is paying for and keeps the wage level at the employee’s marginal productivity in order not to lose a skilled employee to a competitor. Then, under the neoclassical assumption, he/she would not be able to raise his/her pay by moving to a new employer, unless the new employer finds a new and more profitable use for the human capital of the employee. Hence, as long as we are thinking in terms of a homogenous human capital, the neoclassical interpretation of the wage/salary increase earned when leaving Collins for a new job is a true return for what the employee has learned on the job and paid for himself or herself through a lower salary. But the human capital may not be neoclassically homogenous. While working on the Collins project for a wage/salary compatible with his or her productivity on the job, the Collins employee might have accumulated an entirely different human capital that the new employer has found valuable and pays fully for. If so, the pay increase is a pure spillover.
- 7.
There is one further statistical problem to remember, namely, that firms do not regularly collect statistics on their internal training and educational investments. Their internal accounts regularly register expenses related to sending staff to external educational activities and the costs for hiring outside teachers and lecturers. Kazamaki Ottersten, Lindh, and Mellander (1999) have used the data in the Planning Survey of the Swedish Federation of Industries, which frequently included questions on firm-sponsored training investments. Such data is however only a small part of the resources invested when taking staff out of production to learn about new production technologies, new machines, or new organizational solutions (Eliasson 1986:89ff).
- 8.
Formulated by Solow (1987), who observed that “you can see the computer age everywhere, but in the productivity statistics.” He asked: “How come we have seen so little economic progress in the statistics despite the enormous investments in computers and communications equipment in the past decade?”
- 9.
As it happened only men were interviewed, even though there were many women workers on the Collins staff. In case a larger survey study will be conducted, we will attend to this.
- 10.
This person in fact told us about the useful organizational principle he had learned at another firm (BEA Systems) later in his career, namely, that of “dual management.” Each project had one technical and one project manager. The latter should not be technically knowledgeable and be concerned with ultimate project performance such as delivery and budget discipline and “that things in general worked well.” The project managers always had the final say.
- 11.
The methods used for such estimates are accelerated cost recovery systems, Terbourgh’s procedure for equipment replacement analysis, and capital investment analysis from the Machine and Allied Product Institute (MAPI).
A recent Swedish court decision on manufacturers’ responsibility for mildew damages to homes built with inadequately tested new insulation methods illustrates. The court observes that it is a tradition in the home building sector that new techniques are tested in “full scale.” The producer then waits to see if any negative side effects occur. If they occur they are regarded as “development mistakes” for which the home buyer becomes responsible. The court decided that despite the fact that the problems with one stage Exterior Insulation Finishing System (EIFS) had been known in the USA since the mid-1990s, the home buyer was still responsible (Ny Teknik, (15), 10 April 2013: 4f). Learning at workplaces that allow such irresponsible behavior is of course very different from learning at workplaces that take strict responsibility for product quality.
- 12.
- 13.
The largest private cost of formal education for an individual is the loss of income during those years, even though that income most often is much smaller than the income captured after education.
- 14.
Some of that outcome depends on the fact that large chunks of low-level rote job tasks have been outlocalized to low-income countries. There is also the opposing tendency that service jobs, for instance, in elderly care, which require much individual professional attention and therefore also entrepreneurial capabilities on the part of the performer, in welfare countries such as Sweden, are subjected to cost pressure from tight public budgets. The jobs therefore become mechanically and impersonally performed by badly paid and uneducated individuals, except for the few who can afford to pay privately for high-quality individually tailored service. Also, and a more recent development, a number of professional services, including those of the medical and legal professions, management consultants, and the like, are increasingly challenged by new IT technology that help individuals service themselves, imposing a kind of deskilling on the profession of the kind that ladies in typist pools were subjected to during the 1980s, when people using new PC-based word processing technology learned to type themselves.
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Eliasson, G. (2017). Worker and Engineer Learning on the Australian Collins Submarine Project: Human Capital Spillovers and the Case of Swedish Kockums in Australia. In: Visible Costs and Invisible Benefits. Economics of Science, Technology and Innovation. Springer, Cham. https://doi.org/10.1007/978-3-319-66993-9_8
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