Your rivals (whether they make competing products or merely use their success to bid against you for employees) net most of the benefit from your training investment when your trainees aren't going to spend the majority of their career with you. Vocational training becomes a http://en.wikipedia.org/wiki/Public_good when there's no mutual expectation of longevity and loyalty. We're eating each others' seed corn.
CFO asks his CEO, "What happens if we invest in developing our people and then they leave the company?"
CEO answers, "What happens if we don't, and they stay?"
Your rivals (whether they make competing products or merely use their success to bid against you for employees) net most of the benefit from your training investment when your trainees aren't going to spend the majority of their career with you.
Great, then the issue is to figure out "how do we create an environment and culture where people will stay here for a very long time?"
Permit me to tilt at a windmill for a moment and point out that employee training is neither non-rivalrous nor non-excludable. It is not a public good.
Not true, or rather, not completely true. It depends on whether you're talking from the point of view of the employer or the employee.
If I'm employing someone, a competitor can't easily employ them at the same time (sort-of excludable, up until they quit). And the costs of training an employee are usually fairly fixed - paying for a course plus wages - so they're rivalrous, since an extra training course will cost the same.
As an employee, on the other hand, I can certainly deny my training/experience to those who don't pay for it (ie. it's excludable).
The original point was that maintaining a pool of skilled employees is in the best interests of a group of companies even if they're rivals, since more people with the skill will tend to drive wages down. If, on the other hand, they neglect training and fewer people are available, then production suffers and wages go up. The "public" in this case is the group of companies.
It's true that work from a skilled employee is a rival resource, what you pay me to do only benefits you and not the rest of the industry (unless it's open source). But it doesn't seem excludable—if I train employees, there's no mechanism I can use to prevent you from hiring them later if you didn't contribute to the training costs.
Here's where I confess I don't understand why nonrivalry is built into the definition of a public good, since it's nonexcludability that gives rise to the free rider problem.
