Managing Skills and Signals: Firm Training with Career-Concerned Workers

Abstract

We study how firms design training content to manage the skill distribution of careerconcerned workers. Core training builds common skills, leveling the playing field for promotions, whereas idiosyncratic training (e.g., mentorship) builds unique skills that improve the signaling value of promotions. We show that firms optimally bias the mix toward core training to attract workers and boost overall performance, despite dampening e§ort. Unlike the existing work, firms over-certify training to amplify career concerns and may sponsor general (transferable) training in competitive labor markets. We also analyze how promotional pay gaps, asymmetric information about performance, and cohort size affect training design.