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Learning and Development Outlook

Learning and Development: The Skills-Training Disconnect

Michael Bloom, Vice-President, Organizational Effectiveness and Learning
August 17, 2009

Until the recession hit, shortages of skilled labour were holding back economic growth in Canada, especially in Alberta and British Columbia, where the oil boom and preparations for the 2010 Olympic Winter Games were fuelling rapid expansion. Yet the Conference Board’s latest data, published in the Learning and Development Outlook 2009: Learning in Tough Times, reveal a surprising skills-training disconnect: the average amount spent per employee has not risen to compensate for the widely publicized skills shortages facing employers. In fact, training expenditures have continued a long, slow decline and are now at levels not seen since the early-1990s recession. At their 1993 peak, training expenditures per employee were 42 per cent higher than they are today, despite considerable economic growth and increasing skills requirements during the intervening years.

This finding does not square with human capital theory, which holds that employers will compensate for shortages of skilled labour by spending more on training their workforce.

The Difference Between Theory and Evidence

Part of the explanation is that the latest training data do not include a portion of actual spending. Some organizations are responding to mounting time and budgetary pressures by turning to informal learning activities—for example, mentoring and experiential learning—as an alternative to some forms of formal training. Survey results indicate that informal learning as a proportion of all learning jumped from 33 per cent in 2004 to 42 per cent in 2006 and to 56 per cent in 2008. Some informal learning costs are paid out of operational budgets rather than training, learning, and development budgets. Even if part of the reported growth is due to more accurate reporting, the scale of the increase indicates that a genuine change in the mix of learning activities is underway. For this reason, the training decline, although serious, is not as severe as budget data would suggest.

Training expenditures have continued a long, slow decline and are now at levels not seen since the early-1990s recession.

Groups Not Targeted

Compounding the problem of declining budgets is the fact that training is not being targeted toward two large employee populations that could benefit from it: mature workers and immigrants. That is largely because organizational leaders do not consider these groups essential to their success.

Currently, only ;8 per cent of organizations report that retaining mature workers is a top or high priority for them; by comparison, 45 per cent see it as a low priority or not a priority at all. Less than a quarter of employers have programs tailored to improving the skills of their mature workers, and only 7 per cent are providing them with skills training for a new profession or job. In addition, 46 per cent of organizations are taking no targeted learning action to develop their mature workers, despite the demographic reality of an aging workforce. They are more likely to invest in transferring knowledge to younger employees than in retaining older workers—32 per cent of organizations have training practices in place to facilitate the transfer of knowledge to younger workers.

Training is not being targeted toward two large employee populations that could benefit from it: mature workers and immigrants.

Organizations tend to be even less aware of the learning needs of immigrants—36 per cent report that they do not know whether new Canadians need more, the same, or less training than the rest of the workforce. Another 35 per cent, however, believe that new Canadians need more training, on average, than native-born Canadians do. Few employers align their views with their training plans: only 9 per cent assess the specific needs of their new Canadian employees and less than a quarter have learning and development activities designed specifically to help new Canadians.The failure of employers to assess and train their new Canadian employees helps to explain why immigrants are not earning incomes commensurate with their educational qualifications and international work experience.

The long-term pattern of training decline may be due for a change. There is a close relationship between the pattern of per-employee training expenditures and unemployment levels in the Canadian economy. Could it be that in the early 1990s, organizations overcame recession-induced “downsizing” with increased training? If so, will we see a similar pattern of higher training expenditures when the recession ends, as firms that have shed employees at record rates in recent months seek to increase production?

Michael Bloom
Organizational Effectiveness and Learning
613-526-3090 ext. 229
Learning and Development Outlook 2009: Learning in Tough Times

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