New report links economic success, investment in training

Based on the Executive Summary, this report seems worth a read. It seems to go beyond the common rhetoric on the need for more ‘human capital development in a knowledge-based economy’ to take a serious look at economic returns to firms from training – though the scale of the suggested benefits seems rather high. I’ve always leaned to the view that one of the key contradictions of our economy is that (1) yes, enterprises need skills and should invest in them but (2) firms would rather someone else did the tranining and will do their best to deskill work and to reduce their dependency on skilled labour.

Ottawa, April 23, 2007—A new report by the Canadian Council on Learning (CCL) suggests that business leaders might be best off investing in their employees—rather than in machines, computers, or software.

The report, Connecting the Dots…Linking Training Investment to Business Outcomes and the Economy (PDF, 850 KB), brings together research from a number of sources to paint a paradoxical picture.

The research indicates that investment in training often helps businesses increase productivity and grow the economy more than upgrading equipment. However, there have been few measures to demonstrate the return on investment in employee training to employers. The report, prepared by CCL’s Work and Learning Knowledge Centre, is based on research carried out in Canada, as well as in the United States, Ireland and Australia.

“As we prepared this report, we realized many Canadian employers view training as an expense, rather than an investment,” said Dr. Paul Cappon, president of CCL. “This perception has to change, if we are to turn around recent drops in productivity.”

It’s generally acknowledged that a skilled and adaptable workforce is critical to economic success. But in Canada, fewer than three in 10 employees participate in job-related education, and Canada’s investment in workplace training lags significantly behind training investment in the United States.

Among the research findings the report highlights:

  • Investment in human capital is three times as important to economic growth as investment in physical capital
  • Training investment as a percentage of payroll is 1.55% in Canada compared to 2.34% in the United States
  • A collection of case studies of Australian firms showed returns on training investments from 30% (gained by reducing locomotive fuel usage) to more than 1,200% (from increased safety in a chemical enterprise)
  • In a study in Ireland, nine of 12 businesses studied saw returns on training investments ranging from 32% to more than 800%.

“As a matter of principle, CCL believes that learning throughout life is important. And Canada needs to make workplace learning a priority. We funded this study to demonstrate to both employees and employers the tangible benefits of ongoing learning,” said Cappon.

Cappon said that there are things that government, business, and employees can all do to improve Canada’s workplace training schemes. “Governments can create incentive programs or provide tax credits, and employers and employees can both place a higher priority on training investments.”

Cappon also noted that firms that invest more in training not only increase profits and productivity, but see increases in customer satisfaction and employee morale.

The report was commissioned by CCL’s Work and Learning Knowledge Centre, a consortium of more than 150 organizations led by Canadian Manufacturers & Exporters (CME) and the Canadian Labour Congress (CLC).

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