Research " HUMAN CAPITAL INVESTMENT BY PRIVATE EMPLOYERS IN BLAIR COUNTY, PENNSYLVANIA, AS MEASURED " pptx

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The Pennsylvania State University The Graduate School

Department of Adult Education, Instructional Systems and Workforce Education and Development

HUMAN CAPITAL INVESTMENT BY PRIVATE EMPLOYERS IN BLAIR COUNTY, PENNSYLVANIA, AS MEASURED

BY TRAINING PRACTICES

A Thesis in

Workforce Education and Development

by William Curley

© 2001 William Curley

Submitted in Partial Fulfillment of the Requirements

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Copyright 2002 by ProQuest Information and Learning Company All rights reserved This microform edition is protected against unauthorized copying under Title 17, United States Code

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We approve the thesis of William Curley William J Rothwell Professor of Education Thesis Advisor Chair of Committee Qheatte toll Associate Professor of Education

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Richard A Walter

Associate Professor of Education

CR ARYL EdgarP/ Yoder ;

Professor of Agricul and Extension Education

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cứneth C Gray /

Professor of Education

In Charge of Graduate Programs in Workforce Education and Development

Date of Signature

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ABSTRACT

This research project was designed to identify the extent of corporate investment in human capital as measured by training practices It focused on the largest private employers in Blair County, Pennsylvania The study was modeled on a nationwide assessment completed by the Bureau of Labor Statistics (BLS) entitled “Survey of Employer-Provided Training” (1996) as modified by Gilpin (1999)

This study examined the extent to which Blair County employers provided or financed formal training The type, amount, expenditures, employer characteristics, and practices related to training provided to the largest private employers were identified The research project described here went beyond the previously mentioned studies to examine other training practices utilized by the target population, and to anticipate future training needs

Fifty of the largest private employers in Blair County, Pennsylvania, were invited to participate in this study Specific organizations were identified by data obtained from the Pennsylvania Bureau of Research and Statistics Forty-two employers from eight different industry sectors provided data Manufacturing (N = 23) and Service (N = 11) organizations represented the bulk of the research participants Additionally,

organizations with 101 — 200 and 251 — 400 employees were represented most often in the population

A two-phase data collection process was utilized Face-to-face interviews were conducted with the individual in each organization who was most familiar with its education and training practices In the second phase of data collection, a survey

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were asked to return the survey within a specified period of time This research approach was utilized to facilitate the collection of data and to enhance the return rate

Investing in human capital through the delivery of training activities is covered broadly in the literature Several major training resources, Training Magazine, and the American Society of Training and Development each provide annual reports on national training trends Little coverage on the education and training needs of local geographic regions is offered in the literature

Data collected indicate that technical, management/supervision, safety, and orientation programs were the predominant formal trainings currently offered These topics were also heavily represented in terms of number of employees participating in training and hours of training received Dollars spent on training went mainly to external vendors and the annual budgets for training varied greatly In a number of instances, correlated relationships were established based on industry type and/or size of organization

Participants in this research project anticipate increasing the amount of training offered over the next several years Hourly employees will receive an increased amount of training, while it is anticipated that the amount of computer-based training will grow Leadership/management/supervision, computer training, and technical training in the production area were the most anticipated future training needs

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TABLE OF CONTENTS

LIST OF FIGURES — - ¬— ¬— vii LIST OF TABLES .cccececeeeeeeesceeeseeeeneceseeeseeees nh ve Vili ACKNOWLEDGMENTS - -Q SG ng ni nh nh nh cưng xi

CHAPTER I INTRODUCTION — vn ve 1

Historical Perspective .::sccsccesscsescsscneseesceesoseves ¬— l Purpose of the Study . nen ¬— 2 Significance of the Study .- nen ¬— 3

Research Questions ỒẢ L ¬ 5

Study Limitations - - "—— 6 Definitions of Terms —— v.v ng 7

Assumptions ¬— ¬ ẮắắẳẢ

Conceptual Framework ¬ ¬— 12 CHAPTER II REVIEW OF THE LITERATURE ti kg kh ve ¬— Introduction .- - ¬ ——— ¬— 14 Recent Legislation —— ¬— ¬— „ „ 18 Human Capital "— ¬— v.v ve EƑ Investing in Human Capital - . - ¬ 8 Research on Employer-Provided Training . . - cà cŸằnằằ 21

CHAPTER III METHODOLOGY - - ¬ ¬_ 34 Population ¬ — Pre-Data Collection Phase ¬ "—— "—— .<

Data Collection Phase ¬ ọẲíáđ 30

Post-Data Collection Phase hy vy ke ke ereeeeeeeeeeeseeeseeeersesesorf Ì Treatment of Missing Data Hi ky khe vi mượn 43 CHAPTER IV FINDINGS ¬— ¬— — 44

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Figure 1.1

2.1

me

Page Framework for Human Capital nvestment 13 Illustration of Davenport’s Model of Human Capital

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Table 3.1 3.2 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 LIST OF TABLES Page

Profile of Largest Private Employers in Blair and Centre

®) Ầ ắx 36

Research Questions / Variables Matrix 42 Revised Industry Categorization . -. - c7 45 Number of Employees on PayrolÌ - - 7c cs<<- 45 Formal Training Provided Over Previous 12 Months 47 Relationship Between Formal Training Provided Over

Previous l2 Months and [ndustry - - - - con sec 48 Relationship Between Formal Training Provided Over

Previous 12 Months and Number of Employees - 49 Current Training Activities Over Last Three Months 50 Relationship Between Current Training Activities and

"lì PA .Ầ.Ầ .e 51 Types of Training Activities Offered by Establishments

Over Last Three Months ccccccseeccsecceeeeceesccenecenseseeeees 53 Hours of Training by Type of Training Program 3 Number of Participants by Type of Training Program 54

Relationship Between Whether Percentage of Employees Received Formal Training Has Changed Over Last Three

Years and Number of Employees 0.ccceseeeeceesceeeceeeceees 55 Whether Number of Full-time Training Personnel on Payroll

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4.14 4.15 4.16 4.17 4.18 4.19 4.20 4.23 4.24 4.25 4.26 4.27 4.28

LIST OF TABLES (continued)

Subsidies Received for Training in the Most Recently 57 Completed Fiscal Year

Expenditures in the Most Recently Completed Fiscal Year

By Number of Employees - cà Q cuc 39 Subsidies Received for Training in the Most Recently

Completed Fiscal Year By Number of Employees 59 Whether Amount of Money Spent by Establishment on Training

Has Changed Over Last Three Years - .- - cà 5s 60 Comparison of Expenditures Per Employee Between

Centre and Blair Counties - - + Q SH ca 61 Anticipated Training Initiatives Over the Next Three Years 63 Relationship Between Anticipated Training Initiatives

Over the Next Three Years and Índustry - sec 64 Anticipated Plans to Change Amount of Training For

Various Types of Employees Over Next Three Years 65 Relationship Between Whether the Amount of Training for

Hourly Employees Will Change Over the Next Three

Years and Number of Employees 0c.cceecccescceeeeeenereese 65 Anticipated Plans to Change Types of Delivery for Training

Over Next Three Years - - - Q QQQ HH nh nu ca 66 Informal Training PractiCes - - - - - ch re 67 Relationship Between Informal Training Practices and Industry 68 Training Practices or Programs Provided by Establishment 69 Relationship Between Training Practices or Programs Provided

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LIST OF TABLES (continued)

4.29 Relationship Between Use of Mechanisms to Support Training

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ACKNOWLEDGEMENTS

Completion of this research project would have been impossible without the support of my family My wife, Barbara, has provided love and encouragement for over twenty years I have been in “school” throughout our entire time together She has been tremendously supportive and has always been there for me Our daughters, Lisa and Jenna, have sacrificed time with me and I truly appreciate their understanding My mother and father, Florence and Bill Curley, have been a constant source of love and support I only wish that my father was here to celebrate with us the completion of my graduate studies This project is dedicated to him

There have been many colleagues and friends at Penn State that have pushed, prodded, and encouraged as I progressed though my masters and doctoral programs The guidance offered by these individuals provided the motivation to continue and move forward There are too many to name individually, and I will be offering personal thanks to each and every one

I would like to thank my doctoral committee Drs Rothwell, Kolb, Walter, and Yoder Their interest, guidance, and commitment is deeply appreciated I particularly want to thank Dr Rothwell who served as chair of the committee as well as my program advisor His advice and direction helped tremendously

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Chapter I INTRODUCTION

Historical Perspective

Blair County, Pennsylvania is home to approximately 130,000 residents Altoona is its center of employment, and the community was once known as the “railroad capital of the world.” At its peak, the railroad employed approximately 17,000 individuals, many of whom built impressive steam locomotives and rail cars Today, the railroad in Blair County only employs approximately 1,000 workers and the community is in the midst of significant transformation

Since railroad jobs began to disappear in the 1940s, community leaders have been aggressively diversifying the industry base of Blair County With a strong core of manufacturing jobs, great strides are being made to strengthen the service, healthcare, hospitality, transportation, and technology sectors of employment Significant industry recruitment efforts and infrastructure improvements have supported this transformation While the community has adjusted to the loss of railroad jobs, the recent economic slowdown that is facing the nation is having a negative effect in Blair County Plant closings and reductions in force at several major employers have impacted numerous Blair County employees

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workplace learning, and development of competencies These particular issues are extremely critical to the growth and success of employers in Blair County

The community is transforming along with the needs of business Leaders are well aware that investment in human capital is required and much of what Heckman (1996) discusses is being seen in Blair County: (a) investment is most profitable when made in the young; (b) returns to firm-supplied training investment in human capital are significant; (c) it takes skilled labor to produce skilled labor; and (d) those who complete more school invest more in post-school training Blair County community leaders have developed extensive campaigns to promote education and training at all levels This includes awareness at the elementary, secondary, post-secondary, and employment levels The goal is to enhance the depth and breadth of the labor force

Given the ongoing transformation that is occurring in the community and the workplace, little is known about the extent of local corporate investment in human capital This is particularly true with regard to knowing which employers are investing in their workforce through training

Purpose of the Study

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by the largest private employers in Blair County, Pennsylvania The research project described here went beyond the previously mentioned studies to examine other training practices utilized by the target population, and to anticipate future training needs The focus was on the largest private employers in the community to determine their level of investment in human capital as measured by training practices For the purpose of this study, human capital has been defined as the knowledge, skills, and competency brought by an individual worker to the workplace

This study resulted in several key outcomes One is the identification of information that will assist participants and other stakeholders in making informed decisions about training practices in their organizations and in the community Other outcomes that resulted from this study included identification of current and future training needs, how much training is being provided, and how much is being spent on training

Significance of the Study

This study offers detailed insight to key stakeholders in Blair County Information provided to the stakeholders includes the current state of training practices in the

community, areas of focus and need with regard to training, dollars spent on workforce development, and how different types of organizations approach training The

stakeholders include employers, suppliers to industry, training providers, economic development organizations, and CareerLink sites

Employers

The data collected provide significant information, not only to the study

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an adjacent community (Centre County — Gilpin, 1999), make decisions on training delivery, and plan for future needs

Suppliers to Industry

Current management practices require suppliers to show evidence of quality standards to meet buyer expectations Knowledge of training practices may support and enhance buyer-supplier relationships

Training Providers

Understanding of the training practices of the largest private employers in the community will allow training providers to develop curricula that will meet the workforce development needs of the community

Economic Development Organizations

A key focus of organizations involved in economic development is developing the local workforce The data collected in this study assist these individuals in coordinating county-wide efforts that support the entire local workforce In Blair County, the Altoona

Blair County Development Corporation (ABCD Corp.) has hired a full-time individual to assess industry training needs and broker the services of local training providers

CareerLink Sites

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As with previous studies, this research offers base-line information useful for future comparisons In addition, training-related information may provide Blair County the opportunity to measure future progress or decline

Research Questions

The Gilpin (1999), Hickey (2000), and BLS (1996) studies focused on current formal training provided by private employers in their geographic target areas This research also examined current formal training but explored informal training practices and future training needs as well Specific attention was given to the amount of training, types of training (current and future), training expenditures, and training differences by type and size of employer

Specific research questions were as follows: Question 1

What are the most common types of formal training activities being provided by the largest private employers in Blair County?

Question 2

How much formal training are the largest private employers in Blair County providing for their workforce?

estion 3

How much money are the largest private employers in Blair County spending on formal training per year?

Question 4

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uestion 5

What anticipated training needs and delivery methods will be addressed/utilized over the next three years by the largest private employers in Blair County?

estion 6

What other types of training practices/activities are being utilized by the largest private employers in Blair County to support employee development?

Study Limitations

The limitations of this study were essentially the same as those described in the Gilpin (1999) study These include: (a) data were collected only from employers No data were collected from employees; (b) while some participating employers had operations in multiple locations, data were collected only from the operation located in Blair County; and (c) data were collected for specified periods of time This may, or may not, have been a “normal” time frame related to education and training practices One critical difference was a comparison of data provided by Centre County and Blair County employers Each study focused on the largest private employers and each set had a different make-up — employer types were similar, but not exactly the same Comparisons were not made to the Hickey (2000) study, which focused on multi-national firms in a selected geographic region of China, or the BLS research which collected data from organizations across the United States

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appropriate individual was involved in the project Data were not collected from employees

The study focused on formal and informal training practices, as well as future training needs The BLS defines formal training as “training that has a structured, formal, and defined curriculum” (BLS, 1996) Informal training (many times a significant method for workplace learning) is defined as training that is typically unstructured, unplanned, and easily adapted to situations or individuals (BLS, 1996) At times during the data collection process, research participants confused formal and informal training despite efforts to define and clarify the two concepts

Significant costs associated with training activities were not measured These included employee wages/salaries, fringe benefits, training equipment, space, travel expenses, materials, and overhead This approach (of not collecting data on associated costs) was used in the BLS study and the Gilpin study because of the difficulty in collecting data on these items

Definition of Terms

There are many terms and descriptors that define activities related to training and education For the purposes of this study, definitions offered by the Bureau of Labor Statistics in the 1995 Survey of Employer-Provided Training (1996), and the ASTD reference guide to professional human resource development roles & competencies (Rothwell & Sredl, 1992) were utilized Specific terms were defined as

follows:

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Continuing Education ~ “Education, conducted on or off the work site, that helps individuals keep abreast of changes in their occupations or professions, though not necessarily how those changes affect them on their jobs” (Rothwell & Sredl,

1992, p 512)

Cross-Training — “Training that prepares backup workers to perform critical activities in the absence of those normally assigned to them” (Rothwell & Sredl,

1992, p 513)

Education — “Employee education, when sponsored by an organization for its workers, focuses on identifying, assuring, and helping develop, through planned learning the key competencies that enable individuals to prepare for career advancement inside the organization” (Rothwell & Sredl, 1992, p 515) Learning - “A change in perceptions, attitudes, and behaviors or an individual, group, or organization” (Rothwell & Sredl, 1992, p 521)

On-The Job Training — “OST is carried out at the employees workstation It may be planned or unplanned” (Rothwell & Sredl, 1992, p 524)

Retraining — “Training intended to update workers so their knowledge, skills, and attitudes keep pace with changing technology and job requirements” (Rothwell & Sredl, 1992, p 529)

Training — “One of several methods to stimulate individual change Its focus is short term and directed at furnishing the knowledge or skill that individuals need to carry out present work duties efficiently and effectively” (Rothwell & Sredl,

1992, p 532)

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Awareness training — “Training that provides information on policies and

practices that affect employee relations or the work environment, including Equal Employment Opportunity (EEO) practices, affirmative action, workplace

diversity, sexual harassment, and AIDS awareness” (BLS, 1996, n p.)

Basic reading, writing, and arithmetic skills training — “Training in elementary reading, writing, arithmetic, and English language skills, including English as a second language” (BLS, 1996, n p.)

Clerical and administrative support skills training — “Training in areas such as typing, data entry, filing, business correspondence, record keeping, budget, and payroll” (BLS, 1996, n p.)

Communications, employee development, and quality training — “Training in public speaking, conducting meeting, writing, time management, leadership, working in groups or teams, employee involvement, total quality management, and job reengineering” (BLS, 1996, n p.)

Computer training — “Training in computer literacy, security, programming, use of standard commercial and other software, and methods for developing software applications” (BLS, 1996, n p.)

Employee health and wellness training — “Training that provides information and guidance on personal health issues such as stress management, substance abuse, nutrition, and smoking cessation” (BLS, 1996, n p.)

Formal Training — “Training that has a structured, formal, and defined curriculum” (BLS, 1996, n p.)

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Management training — “Training in supervising employees and in implementing employment practices (e.g., conducting employee appraisals, managing

employees, resolving conflicts)” (BLS, 1996, n p.)

Occupational safety training — “Training that provides information on safety hazards, procedures, and regulations” (BLS, 1996, n p.)

Orientation training — “Training that introduces new employees to personnel and workplace practices and to overall company policies” (BLS, 1996, n p.)

Production- and construction-related training — “Training in operating or repairing machinery and equipment; manufacturing, assembling, distributing, installing, and inspecting goods; and constructing, altering, or maintaining buildings and other structures” (BLS, 1996, n p.)

Professional and technical skills training — “Training in professional areas such as engineering, nursing, accounting, science, law, medicine, training, education, and business; or in technical areas such as drafting, electronics, and medical

technology” (BLS, 1996, n p.)

Sales and customer relations training — “Training in areas ranging from

maintenance and improvement of customer relations to specific selling techniques (e.g., dealing with angry customers, information about a specific product line)” (BLS, 1996, n p.)

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Assumptions

Given that the participants in this study were the largest private employers in Blair County, it was assumed that:

1 The organizations value the skill and professional development of their workforce This may have been an obvious assumption, but many times organizations will not support this value with direct investment of time and money

2 Significant investment is made in the workforce by providing formal training and education Based on intimate knowledge on the Blair County business community, these organizations strive to attract and retain talent Training and education are important components of this business strategy

3 Training is provided to a broad range of employees (all levels) within the target population This includes hourly/front line staff up through top-level executives Training all employees is critical to meet the business objectives of the

organization

4 Private employers offer a broad array of types of training to their workforce from basic skills through executive development

5 Training is offered through a variety of mechanisms This includes in-house delivery and contracting with outside training providers

6 The amount of employer-provided training has increased over the last three years

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Conceptual Framework

This research project was modeled on a national study by the BLS entitled “The 1995 Survey of Employer-Provided Training” (SEPT) (BLS, 1996) The survey was completed for the Employment Training Administration, U.S Department of Labor

The SEPT focused on formal training provided by private establishments that employed 50 or more workers The survey consisted of personal visits to more than 1000 private nonagricultural establishments from May through October 1995 It measured three different aspects of training: (1) the average number of hours of training per

employee; (2) the average number of training activities per employee; and (3) the average amount of expenditures on training per employee in four selected spending categories (BLS, 1996)

This research extended beyond the BLS study, as it was adapted by Gilpin (1999) Gilpin slightly modified the BLS instrumentation and focused strictly on employer data That study did not collect information directly from employees, as had the BLS study Hickey (2000) utilized a similar approach but also incorporated survey questions from a study completed by Ripka and Swanson (1993)

The conceptual framework for this research project comes from the work of Thomas O Davenport (1999), in his book Human capital: What it is and why people invest it Davenport describes his worker-as-investor concept and how an employer- employee exchange occurs to create return on investment for both parties This in turn allows for individual and organizational competitive advantage

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to invest; and (3) mutual acceptance Both parties (employer and employee) must trust that they will get a fair deal and live up to the others expectations Figure 1.1 depicts this framework for human capital investment

Strategy Alignment

Figure 1.1 Framework for Human Capital Investment (Davenport, 1999)

Davenport’s work offers a balanced approach, with attention given to workers and employers, and the creation of “bonds of mutual benefit” This approach offers an

interesting model through which to complete this dissertation

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Chapter II

REVIEW OF THE LITERATURE

Introduction

The following topics will be covered in this review of the literature: (a) recent legislation that supports employee development; (b) the concept of human capital; (c) investing in human capital; and (d) research on employer-provided training Human capital is the most significant asset that an organization has at its disposal How an organization develops its human capital and the extent to which it invests in its people are critical to operational success or failure, and therefore important to study This literature review examines human capital, how it has been defined, why investment is important, and what research has been done on this topic Information is presented here on investment practices from both broad (nationwide) and narrow (local) perspectives

The practice of investing in human capital is covered broadly in the literature Much has been written on the need for investment, type of investment, amount being invested, and the outcomes that result when investing in human capital A significant amount of the literature focuses on a “global” look at developing human capital, while little attention has been paid to how investments will enhance small, local economies, such as that found in Blair County, Pennsylvania

Recent Legislation

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a great deal of support for employers that need to enhance the skills of their workforce to remain competitive

The Workforce Investment Act of 1998 signed by President William Clinton consolidates more than seventy federal job training programs and provides states with the flexibility to develop streamlined, universal workforce development systems (Pantazis,

1999) The desired outcomes of the Act include the following (U.S Department of Labor, 1998):

1 Empowerment of job seekers;

2 Increase the skills of the workforce and employment retention; 3 Reduce the dependency on welfare; and

4 Enhance productivity and enhance organizational competitiveness within the United States

These concepts are critically important to employers and the workforce in Blair County They promote opportunity for organizational and worker development,

encourage personal growth and dependence, and support competitiveness at all levels This legislation promotes “work” in Blair County and beyond

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The Pennsylvania system focuses on five building blocks for workforce investment (Unified Plan for Workforce Investment, 1999) These include:

1 Shared responsibility for improved performance; 2 A customer focused/market driven approach; 3 Informed customer choice;

4 Fact based decision-making; and

5 Strengthen the connection between education and workforce development The main goal of the PA WIB is to support the continuous investment of knowledge in the primary source of the state’s competitive advantage - its people

(Unified Plan for Workforce Investment, 1999) The PA WIB also serves as a focal point for coordinating thirty-six separate training and education programs through a single delivery system that emphasizes customer choice and customer satisfaction (Team Pennsylvania, 1999)

A focus on market demand (what employers need) is critical to the new state and federal systems In the past, employment and training programs viewed individuals as their primary customer As a consequence, this supported and reinforced a supply-driven workforce development system In this new economic environment the driver of

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Human Capital

The concept of human capital and subsequent investments in it go well beyond the notion of people (workers), education, and training It is much more than the number of employees that a specific firm has on its rolls and what is done to enhance skill level

In 1776, Adam Smith was the first to suggest that an educated worker could be likened to an expensive machine The skills embodied in a person can be “rented out” to employers (Florides, 1999) This concept implies that human capital is more than just people it is what they bring with them to a potential employment setting

Recent discussion of human capital focuses on specific “assets” possessed by individuals in the workplace These include knowledge, experience, and skills

(Flamholtz & Lacey, 1981) Additional traits such as personality, appearance, reputation, and credentials have also been included in the definition of human capital (Becker, 1993)

Davenport (1999) defined human capital by breaking it down into the specific elements of ability, behavior, and effort By adding time into this mix he equated this to human capital investment Figure 2.1 details his model:

KNOWLEDGE

SKILL + [BEHAVIOR X EFFORT] X {TIME TALENT

Figure 2.1 Illustration of Davenport’s Model of Human Capital Investment

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Gray and Herr (1998) discussed the elements that comprise national wealth These include natural resources, capital and technology, and human capital They defined human capital as the skills and ingenuity of people and indicated that the most important elements of maintaining a competitive edge (micro or macro level) are the skills and initiative of the workforce

Davenport (1999) also discussed the concept of workers as more than employer- controlled human capital, but as human capital owners and investors This concept ties into the Adam Smith model in which individuals can “rent” out their talents Florides (1999) and Acemoglu and Pischke (1999) also referred to workers as investors (in

general and specific skills) and how these investments create ownership in human capital The Organization for Economic Cooperation and Development (OECD) took this notion one step further In a recent report, OECD defined human capital as the

knowledge, skills, competence, and other attributes embodied in individuals that are relevant to economic activity Human capital is therefore a notion that captures the valuation of the attributes in which people invest (Hartog, 1999)

Investing In Human Capital

The literature is full of discussions on the need to invest in human capital and the return that such an investment will afford Prominent economists offer the following:

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2 Education, training on the job and in specialized institutes, and expenditures to improve health all contribute to human capital Human capital is as much a part of the wealth of nations as are factories, housing, machinery, and other physical capital (Becker, 1996)

McCain and Pantazis (1997) suggest that investing in people is an organizations main competitive advantage Training can be equated to “learning and performance” and as global competition increases workforce development is critical “As companies move from the 20" century model of industrial organization to a 21* century model of

knowledge-based organization, creating, capturing, and leveraging knowledge will become the key competitive advantage” (McCain and Pantazis, 1997, p 2) This will require the need for organizations to include education, training, and employee

development as a part of its mission and a key corporate strategy Increasing performance through employee development will enhance an organizations chance to succeed in the future

Hartog’s (1999) discussion of return on investment on human capital is consistent with Heckman’s (1996) He indicated that investment in formal schooling tends to have a rate of return anywhere from 5 to 15 percent He stated, though, that human capital is like a mystery bag of groceries we know the price and rewards, but we do not quite know what groceries are in the bag We are not sure what it is that we learn in school that makes us more economically valuable

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5 percent higher real earnings than those who do not participate in such training Rates vary upward depending on gender, type of training, and other variables Similarly, the authors discussed the positive effect of human capital investments on firm productivity and competitiveness as well as national productivity growth

Firm success and profitability was also the focus of a study conducted for the American Society of Training and Development (ASTD) Bassi and McMurrer (1998) found that publicly traded firms that spend more money on training tended to have higher net sales and gross profits per employee and were valued more highly on Wall Street

Additional benefits of human capital investment are described by Healy (1998) Investment in education and training helps form the human capital the skills and abilities that are vital elements in assuring economic growth and individual advancement and reducing inequality It is an important element in combating unemployment and social exclusion This study explores returns on workforce investment that go beyond the workplace setting

Finally, the Research Department of the Federal Reserve Bank of Cleveland (1997) conducted studies that focus on U.S monetary policy and related issues Their study on human capital investment identified the following key items:

1 Formal training costs per worker are highest in manufacturing and lowest in retail

2 Part-time workers receive less training because corporations have a shorter time to recuperate their costs

3 The youngest and oldest employees receive less training than middle-aged employees

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than for training someone with a high school diploma or less

5 Training costs are greater in high-wage industries This includes total hours devoted to training

Research on Employer-Provided Training

Research on employer-provided investment in human capital is reviewed below As mentioned, this topic is covered broadly in terms of the effect of education and training in the workplace, but literature on specific training practices utilized by employers (particularly at the local level) is limited Research studies of recently

completed doctoral dissertations, nation-wide studies of employer provided training, and local descriptive projects are reviewed in the following texts

Bureau of Labor Statistics (SEPT, 1996)

Conducted for the Employment Training Administration, U.S Department of Labor, the BLS study (Survey of Employer-Provided Training) was designed to examine the extent of private employer-provided formal training as measured by the type of training provided, amount provided, and expenditures related to training It looked at employer-provided training by type of industry and organization size

The research methodology included personal visits to more than 1,000 private non-agricultural establishments with 50 or more employees over a six-month period in

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training; training programs and practices; and trends in the amount of formal training provided by employers

Additionally, the BLS study included interviews with over 1,000 employees Data were collected on the following: training by type and delivery method; training by demographic characteristics; training by establishment characteristics; benefits

employees received from training; how formal training is delivered; and wage and salary costs of training by establishment characteristics

Selected results of the BLS study include the following:

1 Employees in establishments with 50 or more employees received an average of 10.7 hours of formal training during the six month study period

2 The number of formal training activities averaged 2.1 per employee during the study period

3 More hours of computer training (2.1 hours per employee) were provided than any other type of formal training

4 An average of $98 per employee was spent on outside trainers and training companies

5 Establishments with high turnover train less intensively

6 Establishments with the highest proportion of part-time employment had substantially lower training expenditures per employee

7 Service workers are least likely to receive formal training

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A Descriptive Analysis of Investment in Human Capital by Private Employers in Centre County, PA (Gilpin, 1999)

The BLS study mentioned above was designed to uncover the types of training, amount of training delivered, and amount of dollars spent on training by private employers Gilpin replicated (including appropriate modifications) this study in 1999 with a focus on private employers in Centre County, Pennsylvania The purpose of her study was to describe the types and frequency of formal training as well as amounts of money spent on formal training The fifty largest private employers in Centre County, Pennsylvania, as ranked by the Department of Labor and Industry, Bureau of Research and Statistics, were the target population

Selected results of the Gilpin study are as follows:

1 Firms employing 100 — 250 individuals (N = 18) represent the largest category of the target population (N = 42)

2 Employers provided an average of 3.7 hours of formal trairing per employee during the reference period (May — October, 1998)

3 Firms employing 100 — 250 individuals provided the most formal training per employee (6.4 hours) These firms also provided the most training events (frequency) per employee (0.9 events)

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5 Computer training was the most frequently offered activity (12 events), which accounted for 146.5 total hours of training provided by the target population 6 Wages and salaries of in-house trainers accounted for the bulk of spending on training activities ($183 per employee) Also, payments to outside trainers increased with the size of the organization

7 There is little difference in training practices based on organization size or type of industry

Overall, the Gilpin study found no identifying factors that increase the incidence and intensity of, and expenditures on training in Centre County, PA One interesting finding indicated that employees in larger organizations are less likely to receive training than employees in smaller organizations This was contrary to the findings of the BLS study

Along with the BLS survey, the Gilpin study served as a model for the research project described herein The geographic proximity of the community studied (Centre County, PA), the shared labor pool, and the similarity in the populations examined provide interesting research comparison

A Survey of Current and Future Perceived MNC Manufacturing Training Needs in Tianjin (T.E.D.A.) China (Hickey 2000)

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community for the Hickey study differed significantly from those in related projects (BLS, Gilpin, Curley)

Face-to-face interviews were conducted with human resource personnel and trainers to identify the current state of training within the T.E.D.A., identify projected training needs (three-year forecast), and determine the perceived annual return on investment (ROI) from training activities A survey instrument adapted from the Gilpin (1999) and Ripka and Swanson (1993) was completed within 56 manufacturing

organizations Hickey structured his data by looking at all firms in the sample, and by separating out those firms with structured training programs

Selected results (all firms) from this study include the following:

1 72% of all companies (N = 53) reported that they conducted a front-end training needs assessment to determine training needs

2 On average, professional employees received 6.5 hours of formal training per month, while unskilled/semi-skilled employees received 3.9 hours of formal training per month

3 81% of all respondents report using external training consultants This includes organizations such as local schools, technical and trade associations, government entities, and professional providers such as DDI

4 The single most mentioned training need was for management training (22%), followed by technical training (17%) and quality control (16%)

5 Training expenditures for all companies averaged Y43,045 ($5,200) per month, with an average of Y41 ($5) per individual per month

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7 80% of the respondents reported a perceived ROI of 6% per year or greater The Hickey (2000) study will provide interesting international comparisons to research conducted (Gilpin, 1999) and currently underway While the demographics differ significantly, the data provide insight on current approaches to investment in human resources through training

Training Magazine Industry Report

Training Magazine (October 2000) conducted its nineteenth annual survey in 1999, designed to learn about the extent and nature of employer—sponsored training in the United States The data from this industry report were collected via an on-line

questionnaire that was returned by 1,347 establishments from a pool of 3,026 qualified candidates The survey measured only formal training conducted or sponsored by U.S organizations with 100 or more employees Formal training was defined as deliberately planned and structured programs Informal activities were not considered Additionally, the results on budgets only considered direct costs Salaries of trainees were not figured into total cost estimates Specific results of the survey were as follows:

Training budgets In calendar year 2000, U.S employers spent $54 billion on formal training This amount includes expenditures for training staff salaries, custom materials, seminars and conferences, off-the-shelf materials, and other training-related items The amount reported is down from previous Training Magazine reports because the 2000 survey did not collect data on training-related computer hardware purchases or about expenses for facilities and overhead