Working Under Different Rules

3. Payoffs to Alternative Training Strategies at Work

PAYOFFS TO ALTERNATIVE TRAINING STRATEGIES AT WORK Lisa M. Lynch In the 1970s labor market analysts and policymakers were concerned about absorbing into the labor market an "overeducated American"-the cohort of young, baby-boom college graduates who flooded the labor market and experienced reduced earnings and employment opportunities (Freeman, 1976). In the 1980s and 1990s discussion has focused on a very different issue: how to stimulate the skill development of an "undertrained America." In 1983, the National Commission on Excellence in Education, and later in 1989, the Secretary of Labor's Commission on Workforce Quality and Labor Market Efficiency, both concluded that for u.s. firms to compete internationally immediate reforms were needed in the education and training institutions in America. What happened to cause such an apparently sharp reversal in the appraisal of U.S. workers' skills? In the past, many u.s. workers without a college degree could look forward to a good paying job with moderate skills requirements in manufacturing. The required skills could be obtained through a system of informal "learning by doing." However, as technologies changed and firms organized work in new ways to increase productivity, demand increased for workers with problem-solving skills and with knowledge to deal with the new, often computer-based, technology. Part of this increased demand for highly skilled workers has shown up in the increasing wage premium college graduates receive relative to those with a high school degree or less (see Chapter 2, this 63 64 WORKING UNDER DIFFERENT RULES volume). Even nonmanagerial workers without a college degree are now expected to take on responsibilities for quality control and trouble-shooting that were not required under old, Fordist production systems. Leaner work organizations now require workers to have a broader range of skills. In addition, continuing technological change will mean that many workers, even if they remain w4th the same employer, may not be doing the same job ten years from now. In a world of changing work force requirements workers must be retrainable and adaptable to new technologies and work organizations . The problem facing new entrants, especially those without a college degree, is obtaining the training needed for an entry-level high-skill, high-wage job as opposed to a low-skill, low-wage job. For older workers who have already completed their formal education , the problem lies in acquiring new skills. To understand the nature of this "training deficit," it is necessary to examine not only the skills development of new entrants to the labor force, but also the adaptability of workers already in the labor force to changing skills requirements. While there seems to be an emerging consensus that U.S. workers ' skills are not on a par with those of workers in Europe and Japan (see u.s. GAO, 1990; U.S. OTA, 1990; Lynch, 1991a and 1993b; Kochan and Osterman, 1991), this is based on limited evidence of how skills and skills preparation vary from country to country. There are relatively good studies of how education and government training programs affect labor market outcomes but much less evidence for how private-sector training affects wages or what impact alternative training strategies have on firm productivity and competitiveness. This chapter summarizes new findings on the payoffs received from alternative training strategies in various advanced industrialized countries.! I will contrast the characteristics of national training systems and the institutional structures that support these systems, and seek to determine why different countries adopt different training systems. I will also present evidence on the "bottom line" question: how alternative types of training affect productivity and wages. Finally, I will draw lessons from different countries' experiences with training strategies for the development of alternative proposals to modify the system of post-school training in the United States. PAYOFFS TO ALTERNATIVE TRAINING STRATEGIES AT WORK 65 CHARACTERISTICS OF TRAINING SYSTEMS ACROSS COUNTRIES If there is an emerging consensus in the United States that training is necessary for competitiveness, why isn't everyone doing more training? Firms may not provide training, especially training which workers could use throughout the economy, for a variety ofreasons. Smaller firms often have higher training costs per employee than larger firms, because they cannot spread fixed costs of training over a larger group ofemployees. In addition, the loss in production from having one worker in off-site training is probably much higher for a small firm than for a larger firm. As a...