How Much Do Employers Spend on Training?
Benson, George, Training & Development
What do we spend on training? For years, training managers and researchers have struggled with that question and a surprising lack of information on the scope of workforce training in the United States. In spite of growing interest in training as a means to improve company performance, reliable benchmarks for training time and expenditures are notoriously difficult to come by. Fortunately, a study released in July 1996 by the U.S. Bureau of Labor Statistics provides some enlightening new figures.
Until now, the absence of information on the scope of training in U.S. firms has made it impossible to get a complete picture of training in the United States. Though several past studies investigated employer-provided training, they fell short of determining how much training actually occurs in companies.
For example, the 1991 Current Population Survey provided a wealth of demographic details on the characteristics of employees that received training, but it made no connection between those employees and the companies in which they worked. A 1993 BLS study detailed factors that contribute to a formal company-training program, but it provided no insight into the extent of the training. Until the July BLS survey, the federal government had never attempted to estimate the scope of either formal or informal company training.
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The 1995 Survey of Employer-Provided Training was conducted in two phases. During the first phase, BLS surveyed 1,800 organizations with 50 or more employees on their training practices and programs. Training logs documented all of the skill-development activities sponsored by the employers during a two-week period. The data collection took place May through October 1995.
Previous research confirmed
The 1995 Survey of Employer-Provided Training provides three types of information:
* the scope of training in companies, including the number of hours of formal training, number of participants, and cost
* estimates of the total wage and salary costs for formal training
* information from employees from which we can estimate the total amount and percentage of time spent in formal and informal training.
The results from the employer portion of the survey confirm many of the findings from previous research. The new data also clarifies the factors contributing to the existence and scope of company training programs.
First, the survey examines how employees spend their time in formal training programs. The survey reports both the number of training activities per employee and the average training hours per year, in nine industry classifications. The survey also reports the average expenditure per employee by industry and firm size.
Findings on training time and expenditures show organization size to be a major determinant of employer-provided training. Across all industries, small organizations (50 to 99 employees) spent less money on training and provided significantly less training time per employee than larger organizations. Employees in the small companies also participated in the fewest number of training activities.
That situation is largely because organizations without formal training programs almost always have fewer than 100 employees. In 1993, BLS found that nearly 98 percent of all firms with more than 100 employees had formal training programs, compared with only 69 percent of small employers.
The 1995 Survey of Employer-Provided Training also investigated several workplace characteristics for their possible effects on formal training. The survey found that high levels of employee turnover and part-time employment correlate with low expenditures and less employee-training time. Across all industries, innovative workplace practices and employee benefits corresponded with high levels of training expenditure and training hours per employee.
Training abounds with high commitment
Overall, the survey findings provide additional evidence that employer-provided training is more likely to be found in firms with a high degree of employer-employee commitment and involvement. Extensive training efforts occur in companies with such employee-friendly benefits as paid parental leave, wellness programs, and flexible work schedules. The same is true for companies with such high-involvement practices as quality circles and peer reviews of employee performance. The low turnover rates in companies with extensive training efforts indicate that commitment is reciprocal.
Last, BLS estimated the total training expenditure for all U.S. firms in three size categories and nine industry classifications. The results provide a foundation for developing reliable estimates of economy-wide training expenditures. By combining data from the BLS survey with other key pieces of research, ASTD developed up-to-date figures on what U.S. employers spent on training in 1995: Private sector employers spent $27.1 billion on such indirect costs as employees' wages during training and the salaries of training staff. Direct costs of training were $25.2 billion. The government spent $3 billion to train civilian employees. Together, the two sectors spent $55.3 billion for employer-provided training.
Although $55.3 billion is a significant investment in training, it is only part of the picture. When the rest of the 1995 Survey of Employer-Provided Training is released, the training community will have its first-ever assessment of informal training in the U.S. workplace. It is likely that the data (taken from employee-activity logs) will completely alter our understanding of training in the United States. Regardless of the outcomes, such studies are sure to improve the work of training professionals and researchers alike.
RELATED ARTICLE: SURVEY AT A GLANCE
Here are some highlights of the 1995 BLS Survey of Employer-Provided Training.
* Industries that provided the most hours of formal training per employee were transportation, communication, public utilities, finance, insurance, real estate, and mining.
* Industries that provided the fewest hours Of formal training per employee were retail trade and construction.
* Job-specific skills training accounted for 67 percent of the total hours of training and 48 percent of all training activities.
* Management training was the most prevalent type of job-skills training, occurring in 67 percent of all organizations surveyed.
* More hours of computer training - 20 percent of all training time across industries - were delivered than any other job-skills training.
* Only 10 percent of training participants attended computer courses, suggesting that computer training tends to take a long time.
* Among different types of basic-skills training, the most hours per employee were in communications, quality, employee development, and occupational safety.
* Occupational-safety training accounted for 11 percent of total training time, with the most training activities per employee.
* Seventy-two percent of the companies surveyed offered orientation training - virtually all of which was delivered by in-house staff.
* Seventy percent of all firms reported an increase in the amount spent on training over the past three years.
* Sixty-five percent reported an increase in the percentage of employees receiving training each year.
* Spending for training varied substantially by industry, with manufacturing, construction. and retail trade spending the least per employee.
* The industries that spent the most per employee were transportation, communications. public utilities, and mining.
* Small companies (50 to 99 employees) spent a larger part of their total training budgets on external suppliers than did companies of 100 employees or more.
* Companies of 500 or more employees were more likely to outsource training to community colleges or other educational institutions.
* Eighty percent of organizations reported financing off-site training for employees.
* Product suppliers provided some training in half of the companies surveyed.
* Organizations with low rates of employee turnover. high rates of employment growth, and few part-time workers provided more hours of training per employee than contrasting organizations.
* The number of formal training hours per employee tended to be higher among organizations that offered such benefits as paid parental leave, employer-financed child care, and flexible work schedules.
* All industries reported increases in training efforts during the last three years.
Research Capsules is a quarterly column that summarizes recent HRD research. Send submissions, comments, and suggestions to Pam Leigh, Training & Development, 1640 King Street, Box 1443, Alexandria, VA 22313-2043. Phone 703/683-8130: fax 703/683-9203; e-mail Pleigh @astd.org.
George Benson is a research analyst at the American Society for Training and Development. Phone 703/683-8159; e-mail firstname.lastname@example.org. For copies of the Department of Labor press release, "BLS Reports the Amount of Employer-Provided Formal Training," call 202/606-5902.…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: How Much Do Employers Spend on Training?. Contributors: Benson, George - Author. Magazine title: Training & Development. Volume: 50. Issue: 10 Publication date: October 1996. Page number: 56+. © 1991 American Society for Training & Development, Inc. COPYRIGHT 1996 Gale Group.
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