Research

Summary page

Research

Approaches to measuring and understanding employer training expenditure

It is reasonable to say that past approaches to collecting information on employer training expenditure and practices have not been robust. There are issues in relation to the validity and reliability of the data collected, conflicting estimates from various quantitative sources, contradictory evidence from qualitative research and a lack of good comparative international data.

It is also recognised that collecting such data is problematic. While the major national survey, Employer Training Expenditure and Practices (TEPS), conducted by the Australian Bureau of Statistics (ABS), did meet its main objective in providing broad-level training expenditure data, it did not sufficiently probe the type, nature and extent of training activity undertaken by employees. In many firms suitable records of the training undertaken are not clear. Where records are kept, there may be significant logistical issues in bringing the records together, particularly in large public sector organisations.

This project, conducted in the context of these limitations, explored ways in which information on employer expenditure has been gathered and how it could be improved and involved interviews with experts and stakeholders and case studies of firms in four industries: construction, retail trade, manufacturing, and health and community services. It also involved looking at Australian and international surveys related to employers and employer expenditure.

The following research questions were addressed:

What data do firms maintain on training activity?
What expenditure is made on vocational training by employers and what is the balance between various forms of training and groups of people?
How are these different forms of training funded: government, employer and individual?
Can the variation in expenditure and sources of funding across industries and firms be explained?
What are the implications for policies that would encourage employers to increase their total investment in learning and development?

It was expected that the methodology for the project would provide information on a range of aspects relating to training expenditure, although the qualitative approach used in this report was not expected to yield exact quantitative findings. This was confirmed at an early stage in the study when it became clear that neither industry experts nor firms themselves appeared able to provide good quantitative information on spending. To focus more effectively on this, the participants in the case studies were asked to consider the questionnaire used in the Employer Training Expenditure and Practices Survey to establish the items for which they could provide useful responses and those which would be less readily answered.

Data

The case studies confirmed that it was difficult for most organisations to answer the quantitative questions on expenditure asked in the Employer Training Expenditure and Practices Survey. In smaller organisations very few records were kept and estimates of training expenditure by managers in these organisations were little more than informed guesses. In the larger organisations more extensive records of training activities and expenditure on training were kept, but they often covered only part of the training provided.

Types of expenditure and training

The case studies and the interviews were able to give useful insights into training provision. They indicated a high level of variation in training expenditure between employers, even in the same sector. Size was a factor, but often smaller employers outspend larger employers per employee. The case studies illustrated the spread of nationally recognised training, especially among larger organisations. Support from government funding (for example, for apprentices) led to an emphasis on the training of younger entrants, but the importance of training existing workers was stressed by many participants in the interviews and case studies. However, the lack of training records and data on training expenditure maintained by the case study organisations made it difficult for the research team to assess the relative amounts of expenditure on training across different groups in the workforce.

Funding

Most of the organisations included in the case studies received government funding to underwrite their training programs; the funding largely comprised the incentives associated with apprenticeship and traineeship programs and support for training under user choice. The availability of government funding persuaded senior executives in larger organisations to commit to training programs; however, it played little part in their ongoing commitment to the training of employees.

It did seem that the majority of the costs of training in organisations are borne by the employer. The research suggested that, although there was little direct confirmation of this, individual employees played a very minor role in the funding of the training they received and this is restricted to certain types of formal training. The cost of informal and unaccredited training is borne solely by the employer.

Drivers

The research probed the drivers of training at the organisational level. The key drivers, from the case studies and from the expert interviews, appear to be the availability of government funds, skills and labour shortages, the need to improve the overall capability of organisations, and compliance with external regulations and legislative or licensing requirements. A further driver was the desire to project an image as an ‘employer of choice’ in a tight labour market. The relative importance of these factors varied from one organisation to another, and between different industries. In construction, shortages were a major factor. In retail trade, where turnover was high, becoming an employer of choice was important. In manufacturing, international competition was seen to be driving training of existing workers. Compliance with regulations or standards was important across all sectors, but especially so in community services and health.

Expanding employer spending?

The research has contributed some understanding of the drivers of training and hence of the factors that could support its expansion.

Employers respond to mandated changes in the minimum levels of training for employment in a particular occupation. This has been most obvious in the changes in the community services and health sector. Related to this is the effect of the firm’s quality assurance regimes, whether voluntarily entered, such as the ISO 9000, or mandated, such as the registration requirements for aged care facilities, which specify the need for trained staff.

The effects of other factors are more varied. For example, employers may react to shortages by providing training, but they have also looked for shorter forms of training in targeted skill sets rather than full qualifications and, as argued by the Australian Industry Group, the pressures of international competition may stimulate training provision. The provision of training to become recognised as an employer of choice has been fostered and adopted in some industries, but the extent to which it will drive training expenditure is not clear. The concern to build firm capability affects different firms in various ways, although this generally prompts an increase in training.

Surveys

This project focused on three Australian surveys and two overseas surveys. The main Australian survey considered was Employer Training Expenditure and Practices—which is no longer conducted. Its aim was to provide an overall picture of employer expenditure on structured training, information on the reasons for training or not training, and some detail on the characteristics of the firms, the types of training, the forms of provision, the people receiving it and the subsidies obtained. It was necessary for this research to consider what this survey had covered and alternative ways of gaining relevant information through the available surveys.

Analysis of the surveys suggested the following enhancements to existing surveys to enable information on the measurement of employer training expenditure to be captured more successfully.

To validate and supplement the Employer Training Expenditure and Practices Survey it may be possible to make greater use of the Survey of Education and Training, also conducted by the Australian Bureau of Statistics (ABS 2006a). This survey has more detail about the training that employees receive in Australian workplaces; however, it would require some modification to clarify the range of training activities covered.
The Survey of Employer Use and Views of the VET Sector conducted by the National Centre for Vocational Education Research (NCVER) provides additional information on employers’ practices and has the potential to be adapted, in conjunction with the other surveys.
The English and European surveys, unlike the Employer Training Expenditure and Practices Survey, estimate the wages and salaries paid to workers during training. Some ways of estimating these wages and salaries should be considered for future Australian surveys.
It is worth undertaking a survey like Employer Training Expenditure and Practices. Stakeholder and expert opinion and case studies of firms and industries may help in understanding training expenditure but will not provide the quantitative baseline data that can be obtained by a national survey.
A fairly short survey along the lines of the corresponding English survey may be sufficient to produce an approximate estimate of the broad parameters and provide fairly consistent data over time and across different categories of employers.

Summing up

Understanding expenditure on training and the links that training has to the business situation of firms can be obtained by industry studies and by studies of particular firms. The case studies and interviews in this project highlighted the relationship between training and skills shortages, retention of workers, government subsidies, and the link between training and the business plan and the importance of informal learning much more clearly than the data provided in the Employer Training Expenditure and Practices Survey.

Case studies of firms and industries will not, however, yield coherent information on the overall level and distribution of expenditure on training. There is still a strong case for continuing with surveys that provide some quantitative measures of employer training expenditure.