Are Training Subsidies for Firms Effective? The Michigan Experience

One of the central problems in managing technological change and maintaining a competitive advantage in business is improving the skills of the workforce through investment in human capital and a variety of training practices. This paper explores the evidence on the impact of training investment on productivity in 14 Canadian industries from 1999 to 2005. Our productivity analysis demonstrates that in 12 out of 14 industries, training had a positive effect on productivity. However, when the analysis is put within a financial context, the return on investment was positive in only four industries. Faced with negative rates of return, why should managers in most of the industries in the study promote investment in training? Probably the best explanation is that new technology requires an investment in training. The investment in training is necessary just for the firm to maintain its current labour productivity. Employee turnover necessarily impedes the efficacy of training, because trained workers leave, and untrained workers arrive. Thus, training in this instance again is necessary just to maintain current labour productivity.

Section: The Relationships Between Training and Productivity And Traimentioning

confidence: 99%

Return on investment for workplace training: the Canadian experience

Percival

Cozzarin

Formaneck

2013

“…Other research found that companies receiving training grant assistance increased their number of training hours and reduced their product scrap rate (Holzer et al, 1993). Furthermore, Clements and Josiam (1995) demonstrated that the financial gains of training outweighed the cost.…”

Section: Training and Performancementioning

confidence: 99%

An exploration of the relationship between training grants and profitability of UK construction companies

Abdel‐Wahab

Dainty

Ison

et al. 2008

A levy/grant system exists in the UK construction industry to provide financial support for companies undertaking training activities. With the current UK government skills policy, there is an emphasis on ensuring that training support provided to employers is aimed at enhancing companies' profitability. This paper explores the profitability of construction companies in relation to training grants. Inferential and descriptive statistics were used to analyze a uniquely combined dataset over the period 2002-2005. The research revealed that there is not a simple linear relationship between training grants and profitability. However, large and more profitable companies claimed more training grants in relation to the following areas of training: management, qualifying their existing workforce (certifying the skills of their existing workforce) and developing training plans. The authors argue that training grants should be targeted and focused towards specific areas of training if profitability gains are to be achievable. Future research should consider training grant utilization within the context of construction companies in order to ascertain the real contribution of training grants to their profitability.

“…During the 1990s, along with a worldwide productivity slowdown, a number of authors explored the impact of training on corporate performance at the firm level. Bishop (1991), Holzer et al (1993), Bartel (1994), Black and Lynch (1996) and Ichniowski et al (1997) are among the first to use data from establishments in the United States (US) to assess the micro-econometric consequences of training provision on labour productivity. Those pioneering contributions immediately reveal the intrinsic difficulties of this task; indeed, estimation techniques as well as database details appear crucial to detecting a positive and significant productivity impact of vocational training on the performance of surveyed businesses.…”

Section: Literature Reviewmentioning

confidence: 99%

The effect of training on Italian firms’ productivity: microeconomic and macroeconomic perspectives

Guerrazzi

2016

In this article, I explore the effect of training on the productivity of a sample of Italian firms and the impact of training on EU economic growth. Specifically, retrieving data from a survey performed by the Italian Institute for the Development of Vocational Training in 2009, I find that employer-sponsored training displays a positive and significant effect on the main corporate performance indexes. However, in comparison with companion longitudinal evidence, the magnitude of this impact appears quite narrow. Untangling the determinants of training provision at the firm level and exploring the consequences of training on growth rates by means of the EU's Continuous Vocational Training Survey 4 records, I show that this finding is the outcome of microeconomic and macroeconomic size effects that influence, respectively, the identification of the training impact on corporate productivity and the aggregate performance of the whole economy