Ross Moloney: Make more profit from people

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[asset_ref id=”1122″]The birth of the economics of education as an academic discipline is said to have occurred on the 28th December 1960 in St Louis. There, Theodore Shultz delivered his lecture to the American Economic Association on the topic of “investment in human capital”. So the subject is a relatively new one.

That economists should have waited so long to enter this field is surprising in view of the massive amount of resources devoted to education: education accounts for as much public spending in the UK as either defence or the National Health Service; some 18 per cent of the population is currently in full-time education and around eight per cent of all employees work in the education industry.

In my life there is plenty of evidence that I recognise the value of skills. I went to university – I went to university a lot. I am aware that I am becoming an obsessive parent. I never miss parent’s evenings. I make sure my daughter completes her homework. When she doesn’t have homework from school, I set her some and watch over her until she completes it.

And when she turns five, I will probably be even stricter with her!

Despite the cost of attending university, students continue to apply in record numbers. They know that investing in skills and training today brings economic benefits afterwards.

Many of you will have experience of this. You will have pushed yourselves at school, at college, at university. You will encourage your families to do the same. As in mine, there is evidence in your life showing that you recognise the worth and value of skills. You know that learning brings benefits.

And yet for many employers, training does not retain this status. Perhaps employers think that all the benefits of training go the individual. Perhaps they believe that a trained employee is one who either gets a pay rise or leaves for a competitor.

Consequently, my team investigated the returns to training. If employers are wasting their money when they train their staff we wanted to be able to tell them. We conducted an in-depth and thorough review of research evidence on the topic.

We discovered that the evidence clearly shows that spending on training brings significant returns to the employer. The findings in the Sector Skills Assessment include:

  • All things being equal, organisations who provide training are less than half as likely to fail as those who do not.
  •  Increasing the number of training days by one per cent can increase productivity by three per cent.
  • The trained worker can be on average 23 per cent higher in productivity.
  • Employees who have five or more training days per year are significantly more committed to their employers.

In the SSA we set out in a clear at-a-glance table, which may be of interest and use. There we present more fully the benefits of training. In our table we categorise the benefits of skills to individuals, to employers and to the economy.

Our evidence is exactly that – evidence. What we present in our SSA is a thorough and complete review of research which presents the multiple benefits of training.

The literature clearly shows that the government benefits from a more highly skilled workforce. A trained population is healthier, is less likely to commit crime and is more likely to have healthy and skilled children. Employers who train their workforce are more likely to survive and thrive. Individuals with skills are less likely to be out of work and will be generally more engaged members of society.

This evidence invites a response. Policy makers who know about it should work it into their thinking. Individuals who know about these benefits may want to reconsider their views on training and gaining skills.

Crucially for the employers with which we work in the logistics sector – this is evidence that should encourage them to re-evaluate their approach towards training. Training is not a “good” thing to do from an altruistic perspective. Up-skilling your workforce is not simply something to think about in respect of Corporate Social Responsibility. Here is evidence showing that from a purely economic perspective, training your workforce is something worth considering.

We know that the trading environment in which employers are operating has rarely, if ever been tougher. Skills for Logistics works to help employers in the logistics sector become more productive and more efficient. The work we present in our SSA on the value of skills could help you and your business. We hope you will access and consider it.

Ross Moloney is head of intelligence at Skills For Logistics

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