Behavioral Economics and Workforce Development: A Review of the Literature from Labor Economics and the Broader Field

Objective: This review of current literature explores the strengths and limitations of applying tools of behavioral sciences to increase the participation and completion rate of training for lower-wage, frontline incumbent workers in ways that benefit both workers and sponsoring firms. Background: While behavioral economics may have deep roots in labor economics, its application in other fields, such as psychology and education, have drawn much of the recent attention it is receiving. Method: We reviewed studies in the field of social sciences that present potentially transferable lessons for behavioral economic approaches aiming to increase participation in employer-sponsored training. Results: Recent studies in the fields of labor economics, psychology, education and recent efforts of applying behavioral economics present promising practices and models for developing tools to assisting individuals to pursue educational goals. Conclusion: Evidence from the field provide valuable lessons and insight into the challenges employers face when creating effective programs to train low-wage, frontline incumbent workers. Application: Interventions ranging from choice architecture to individualized goal clarification may contribute to the creation of a bridge for frontline workers to enter into and complete training programs offered by employers.