Monthly Labor Review June 1998 3

Employer-Provided Training

I

n recent years, the issue of worker training

has been pushed to the forefront of public

policy circles. Concerns center around the decline in real wages of less educated workers, the

effect of work organization on the demand for

skills in the workplace, and the question whether

U.S. workers are appropriately trained to meet

the challenge of changes in job requirements

brought about by the introduction of new technology.

1

 In spite of the importance of this issue,

substantial gaps exist in our knowledge of such

fundamental questions as how much training

takes place, who provides it, and who gets it.2

The lack of high-quality data on the amount of

training being provided and on the costs of such

training has been due primarily to the difficulty

in measuring these variables. Because no universally accepted definition of training exists, estimates on the amount of training vary considerably from survey to survey. Some surveys collect

information only on training that is highly structured, such as time spent in formal company training programs. This kind of approach ignores the

more unstructured, informal ways in which employees can learn job-related skills.

The aim of this article is to fill in some of these

gaps, making use of data recently collected in a

survey by the Bureau of Labor Statistics: the

1995 Survey of Employer-Provided Training

(SEPT95). This survey has a number of unique features that make it a valuable source of data for

studying training practices: information on both

formal and informal training is collected; the intensity of training is measured in such a way as to

minimize recall problems; data on training expenditures are collected, making use of records

already kept; and both establishments and employees at those establishments are surveyed, providing a wide range of characteristics that can be

used in an analysis of training intensity.

The sections that follow use results from

SEPT95 to address a number of different questions

about employer-provided training: How much

training is provided? How much of training is formal and how much is informal? How much do

establishments spend on training? And what types

of establishments offer training, and what types

of employees are receiving it?

SEPT95

SEPT95 was conducted by the Bureau of Labor Statistics for the Employment Training Administration of the U.S. Department of Labor in order to

provide nationally representative data on the current training practices of employers. A sample of

1,433 establishments was drawn to represent the

universe of all private establishments with 50 or

Results from the 1995 Survey

of Employer-Provided Training

A new survey finds that U.S. employers allocate

considerable time and resources to training

their employees; the incidence of formal training

tends to be higher at establishments

that are larger and that have lower turnover

and more benefits, among other characteristics

Harley Frazis,

Maury Gittleman,

Michael Horrigan,

and

Mary Joyce

Authors’ identification

is on page 12.
4 Monthly Labor Review June 1998

Employer-Provided Training

more employees.3 (The sample was restricted to establishments with 50 or more employees in part because previous

research showed that smaller establishments often have no formal training.4

) In addition to collecting data from establishments, BLS field economists interviewed randomly selected

employees in the establishments that responded to the survey.

5

A primary objective of SEPT95 was to go beyond the collection of data on the incidence of training and obtain estimates

on the intensity of training—namely, hours and costs. Information on the hours and costs of formal training provided by

employers was obtained from the respondents to the establishment survey,

6

 whereas data on the hours and wage and salary

costs of both formal and informal training received by workers were collected from randomly sampled employees.

Formal training is defined in the survey as training that is

planned in advance and that has a structured format and a

defined curriculum. Informal training is unstructured, unplanned, and easily adapted to situations and individuals.

The establishment survey consists of two survey instruments: a questionnaire and a training log. The employer

questionnaire was designed to collect information on a variety of establishment characteristics and on selected costs of

formal training. The cost items include the dollar amount spent

during 1994 on the wages and salaries of in-house trainers,

fees paid to outside training companies, tuition reimbursement, and contributions to training funds sponsored by unions,

trade associations, and other outside agencies (hereafter, outside training funds). These items were included in the survey

because field tests indicated that records were more likely to

be available on them than on other costs of training, such as

for materials or overhead. Information on the total dollar

amount spent on training during the year (that is, a training

budget) was not asked in SEPT95.7 Usable employer questionnaires were obtained from 1,062 of the respondents, for a response rate of about 74 percent.

The employer log was designed to collect information on

the amount of formal training that employers provided or

financed for their employees. Employers were asked to report

on all the formal training events provided or financed by the

establishment over a 2-week period.8 For each event, information was obtained on the number of employees in attendance,

the hours of training, the type of training, and who conducted

the training. Given that recordkeeping on training is not centralized in some establishments, a relatively short reference

period was deemed necessary to provide high-quality data

on the hours of formal training. Usable logs were collected

from 949 respondents, equivalent to a response rate of 66

percent.

A similar design was used to collect information from randomly selected employees. An employee questionnaire obtained data on such demographic characteristics as age, sex,

race, ethnicity, occupation, education, earnings, and tenure

and also included general questions on past training received.

From the 2,124 potential employees (2 employees from each

of the 1,062 establishments that responded to the employer

survey), 1,074 questionnaires were collected, for a response

rate of 50.6 percent.

The employee log was used to capture the number of hours

of both formal and informal training. Employees were asked

to keep a log for 10 calendar days.9 Employees reported any

activity in which they were taught a skill or were provided

with new information to help them do their job better. For each

learning activity, respondents were asked who or what helped

them learn the skill or information, how they learned the skill

or information, what type of skill or information was learned,

and how much time was spent learning the skill or information. On the basis of answers to the first two of these questions, the Bureau used an algorithm to classify each activity as

formal training, informal training, or self-learning.10 The response rate for the employee log was nearly 48 percent.

As mentioned, data for SEPT95 were collected through personal interviews, and the survey made use of already existing

records as much as possible or, when there were no such

records, information from respondents’ logs kept expressly

for the purposes of the survey. We believe that this approach

results in a significant improvement in the quality of data on

hours of training—particularly, hours of informal training—

because employees were not assumed to have a definition of

informal training in mind, nor were they asked to recall information from far back in time. Recall and definition problems

have caused estimates of informal training to vary greatly by

survey.

11 On the other hand, given the costliness of the approach used in SEPT95, sample sizes could not be as large as

for a survey that measures only the incidence of such training.

In addition, the period for which employer and employee respondents can be expected to keep a reliable log is fairly short.

Thus, one should keep in mind that the estimates presented in

this article—especially as regards the employee logs—will

not be as precise as those of the typical large-scale Government establishment survey.

12

Amount of training provided

Table 1 shows the findings from SEPT95 on the incidence and

intensity of employer-provided training in establishments with

50 or more employees. Nearly 93 percent of such establishments reported that they provided or financed formal training

for their employees in the last 12 months. On the employee

side, close to 70 percent of employees who worked in these

establishments reported receiving some formal training in the

last 12 months. Further, the receipt of informal training is, not

surprisingly, even more common, with 96 percent of employees reporting that they received such training while working

for their current employer.
Monthly Labor Review June 1998 5

Category Per

employee

Level (billions

of dollars)

Error range of

expenditures

(billions of

dollars)

As regards the intensity of training—that is, the hours employees spend in training—employers reported that they provided an average of about 11 hours of formal training per employee during May–October 1995. Employees said that they

spent an estimated 13 hours in formal training over the 6-

month period.13

Although the hours spent in formal training are significant,

the results from the employee survey show that informal training is a very important way in which employees acquire jobrelated skills. On average, 31 hours per employee were spent

in informal training, implying that 70 percent of the training

over the May–October 1995 period was delivered through informal instruction.

Spending on training

Another way of gauging the size of employers’ investment in

training is to measure the amount of money employers spend

on training-related activities. The measurement of training expenditures by establishments is very difficult. In general, estimates on the costs of training are hard to find, and the few that

exist vary greatly.

Given the unique design of SEPT95, the Bureau was able to

collect information on both the direct and indirect costs of

training. From the establishment survey, data were obtained

on some of the direct costs associated with providing formal

training. These costs include the dollar amount spent in 1994

on the wages and salaries of in-house training personnel, fees

paid to outside training companies, tuition reimbursement, and

contributions to outside training funds. Note that SEPT95 did

not collect information on all direct costs of training: some

of the direct costs not included in the survey are payments for

equipment, supplies, space, and travel for training.

From the employee survey, information was collected on

the wages of employees, as well as the hours they spent in

both formal and informal training. The information was used

to construct estimates of the wage and salary costs paid to

employees during their training. The wages and salaries that

employees receive while in training represent an important

indirect cost to employers of providing training, because the

time that employees spend in training is time that they could

have spent working at their jobs. The value of that time is

estimated by multiplying an employee’s hourly wage by the

hours he or she spent in training.

In obtaining the foregoing kinds of information, SEPT95 adds

data on the wage and salary opportunity costs of both formal

and informal training to the basic information that exists on

training expenditures. While SEPT95 does not provide the definitive answer to the question of how much is spent on training, the cost estimates from the survey represent a significant

improvement in many respects over existing figures.

The first four rows of table 2 provide estimates from the

employer survey on some selected direct costs of training. For

this category, the first column shows expenditures per employee, the second column reports the total dollar amount spent

during 1994, and the third column gives the range of expenditure levels calculated by taking one standard error and adding

it to, or subtracting it from, the estimate.

Establishments with 50 or more employees spent an average of $139 per employee during 1994 on the wages and salaries of (both full-time and part-time) in-house trainers. An average of $98 per employee was spent on payments to outside

trainers or training companies, and $51 per employee went

for tuition reimbursement. A smaller amount, $12 per employee, was spent on payments to outside training funds.

Establishments with 50 or more employees spent $7.7

billion on wages and salaries of in-house trainers, compared

with $5.5 billion on payments to outside trainers, during 1994.

Expenditures on tuition reimbursement programs totaled $2.8

billion, while $0.6 billion went to training funds sponsored by

unions and trade associations.

Although expenditures on these selected direct costs of

Table 1. Incidence and intensity of training, establishments

with 50 or more employees

Formal training in the

last 12 months ............. 92.5 69.8

Informal training with

current employer ......... ... 95.8

Total ............................. ... 44.5

Formal training ................ 10.7 13.4

Informal training .............. ... 31.1

Type of training

Percentage of

establishments

providing

Percentage of

employees

receiving

May–October 1995

employee survey

Hours per employee,

employer survey

Table 2. Expenditures on training, establishments with 50

or more employees

1994 selected costs of

formal training:

Wages and salaries of

in-house trainers ........ $139 $7.7 $7.0–$8.5

Payments to outside

trainers ....................... 98 5.5 4.8–6.1

Tuition reimbursements .. 51 2.8 2.6–3.0

Contributions to outside

training funds .............. 12 .6 .5–.8

May–October 1995

wages and salaries

paid to trainees ................ 647 37.1 32.8–41.4

For formal training .......... 224 12.8 11.0–14.7

For informal training ....... 423 24.2 19.9–28.5
6 Monthly Labor Review June 1998

Employer-Provided Training

Table 3. Incidence and intensity of training, by establishment size and industry

All establishments ................................. 92.5 69.8 10.7 13.4 31.1 30.1

Establishment size

50–99 employees .................................. 90.8 61.6 5.7 8.2 31.9 20.4

100–499 employees .............................. 94.4 73.0 12.1 13.5 34.5 28.1

500 or more employees ........................ 98.1 71.0 12.0 16.6 26.0 39.0

Industry

Mining ................................................... 96.7 94.7 14.4 17.2 18.9 47.7

Construction .......................................... 94.7 71.2 5.0 11.4 36.1 24.1

Manufacturing:

Durable goods ................................... 88.1 78.3 11.7 20.8 30.3 40.8

Nondurable goods ............................. 95.2 85.4 11.9 21.7 18.5 54.0

Transportation, communications, and

public utilities ..................................... 96.5 81.4 18.3 17.6 19.7 47.1

Wholesale trade .................................... 98.4 68.1 8.4 8.3 25.4 24.7

Retail trade ........................................... 88.7 48.8 3.7 4.2 32.6 11.5

Finance, insurance, and real estate ...... 95.6 87.4 16.6 15.9 34.7 31.4

Services ................................................ 93.5 70.7 11.0 13.2 37.0 26.3

Size and industry

Percent of establishments that provided

formal training in the

last 12 months

Percent of employees

who received formal

training in the last

12 months

Hours per employee in May–October 1995

Employer

survey

Employee survey

Formal

training

Formal

training

Informal

training

Percent of total

hours spent in

formal training

training are substantial, employers spent an even larger amount

on indirect wage and salary costs of training. Some $647 was

spent per employee between May and October 1995 on the

wages and salaries paid to workers during their training. About

65 percent of this amount, or $423, was spent on informal

training. In total dollars, $37 billion was spent on indirect wage

and salary costs over the May–October period: $13 billion

for time spent in formal training and $24 billion for time spent

receiving informal training.

Establishments providing training

What determines whether an establishment provides training

and how much training it provides? One simple answer is that

establishments provide training to their workers if the benefits

of the training exceed the costs. This leads to the more difficult question of what affects the benefits and costs of training.

The answer to this question is complex and likely to differ

across establishments and types of training. Without spelling

out all the various factors and motivations behind a firm’s decision to offer training, this section studies the extent to which

the incidence and intensity of training are related to a variety

of establishment characteristics, such as size, industry, labor

turnover, the nature of part-time and contract employment, the

presence of unions, the adoption of various alternative workplace practices, and the provision of benefits.

Size and industry. The size of an establishment may influence its decision to provide training, particularly formal training. For example, larger establishments might be more likely

to provide formal training, due to economies of scale. In other

words, the total cost of training may not increase much as the

number of trainees increases, because the cost of hiring a

trainer and developing a curriculum are relatively fixed. An

establishment’s industry affiliation also may affect its training

decisions, given that product market conditions, profitability,

technology, and a variety of other factors that affect the benefits and costs of training differ across industries. For example,

if demand in an industry fluctuates widely because of cyclical

or seasonal factors, managers of an establishment in that industry may be reluctant to make large investments in training,

knowing that workers might have to be laid off before a return

on the investment is realized.

Table 3 suggests that small establishments are somewhat

less likely to provide formal training than are larger ones, with

91 percent of establishments with 50–99 employees having

provided formal training in the last 12 months, compared with

94 percent of establishments with 100–499 employees and 98

percent of establishments with 500 or more employees. Similarly, findings from the employee survey show that employees

working in small establishments were less likely to receive

formal training than were those working in larger establishments. Some 62 percent of employees in establishments with

fewer than 100 employees had received formal training in the

last 12 months, as opposed to 73 percent for establishments

with 100–499 employees and 71.0 percent for establishments

with 500 or more employees.14

The percentage of establishments reporting that they had

provided formal training in the last 12 months was generally

high for all industries, ranging from 88 percent in durable-
Monthly Labor Review June 1998 7

goods manufacturing to 98 percent in wholesale trade. The

percentage of employees who reported that they had received

formal training shows more variation across industries. Employees in mining industries were the most likely to have received training in the last 12 months, at 95 percent, compared

with 68 percent of employees in wholesale trade and 49 percent in retail trade.

The amount of formal training provided also varies by

establishment size. Table 3 shows that establishments with

fewer than 100 employees provided fewer hours of formal

training per employee than did larger establishments. Establishments in the smallest size class (50–99 employees) provided approximately 6 hours of formal training per employee,

compared with 12 hours per employee for medium-sized

(100–499 employees) and large (500 or more employees) establishments. Similar findings emerge from the employee survey: the hours of formal training that employees received

in May–October 1995 range from 8 hours for small establishments to almost 17 hours for large ones; however, the hours

of informal training do not show any clear pattern by establishment size.

As the last column in the table shows, larger establishments

tend to rely more heavily on formal training as a means of

training their employees. Employees in establishments with

500 or more employees spent 39 percent of their total training

time in formal training, compared with only 20 percent for

employees in establishments with fewer than 100 employees.

These findings support the argument for economies of scale

in formal training.

The amount of formal training varies considerably across

industries. In general, establishments in the transportation,

communications, and public utilities; finance, insurance, and

real estate; and mining industries provided more hours of formal training than the average, and establishments in retail

trade, wholesale trade, and construction provided fewer hours

than the average.

Turnover. One establishment characteristic that has received

considerable attention among economists is the relationship

between training and the level of employee turnover. Turnover and training are expected to be inversely related: the

higher the level of turnover, the lower is the amount of training. This expectation is based on the reasoning that the longer

an employee stays with an employer, the higher will be the

return to training. As noted earlier, if labor turnover is high,

employers will be reluctant to invest in training, knowing that

workers might have to be laid off or quit before a return to the

investment in training can be earned. From the employee’s

view, if the training involves skills specific to the establishment, it is likely to contribute to an increase in productivity at

that establishment.15 Greater productivity at the establishment,

in turn, will tend to raise a worker’s wage above what he or

she would earn elsewhere, thus providing an incentive to stay.

In other words, training can serve to lower turnover.

The findings from SEPT95 generally support the inverse relationship between training and turnover.16 Table 4 suggests

that employees working in establishments with high turnover

are less likely to receive formal training than their counterparts in establishments with medium or low turnover. The

same relationship is found when one examines the percentage

of establishments that had provided formal training in the last

12 months obtained from the employer survey.

Table 4 also indicates that high-turnover establishments

provided less formal training than did other establishments.

Hours of formal training from both the employer and employee surveys support this finding. Hours of informal training, however, are not inversely related to turnover. Perhaps

most striking is the relationship between turnover and an

establishment’s reliance on formal training. Employees working in low-turnover establishments spent about 59 percent of

their total training time in formal training, compared with 18

percent for employees in high-turnover establishments. These

findings support the theory that employers may be reluctant

to invest in costly training (presumably, formal training is

more costly than informal training) when employee turnover

is high, as well as the theory that employers who invest in

costly training are less likely to lay off workers or have workers quit.

Unionization. There are a number of reasons that the presence of unions may lead to higher levels of training. Collective bargaining agreements often require that employers proTable 4. Incidence and intensity of training, by employee turnover

Low .................................................... 92.7 78.0 10.8 27.3 19.0 58.9

Medium .............................................. 96.0 74.7 12.5 15.6 30.4 33.8

High ................................................... 88.6 60.7 7.2 7.6 34.2 18.2

Turnover

Percent of establishments that provided

formal training in the

last 12 months

Percent of employees

who received formal

training in the last

12 months

Hours per employee in May–October 1995

Employer

survey

Employee survey

Formal

training

Formal

training

Informal

training

Percent of total

hours spent in

formal training
8 Monthly Labor Review June 1998

Employer-Provided Training

vide training. In addition, union jobs generally pay more than

nonunion jobs, and these higher wages may reduce turnover,

which, as just noted, could lead to increased training.

Alternatively, establishments with labor unions may provide less training than their nonunionized counterparts, for a

number of reasons. The higher wages of unionized workers

might encourage establishments to recruit already skilled

workers, so they would not have to incur the added expense

of training their employees. Further, unions—especially in the

construction trades—sometimes conduct their own training,

which again reduces an establishment’s need to train employees itself.

Table 5 shows very little difference in the likelihood of

providing formal training between union and nonunion establishments.17 Some differences emerge from an examination of

the number of hours of formal training per employee obtained

from the employer survey. Establishments without unions provided an average of 11 hours of formal training per employee,

slightly more than the approximately 10 hours for unionized

establishments.

One possible explanation for the lower hours of formal

training among union establishments is that workers in unionized shops may be more experienced, on average, and thus

require less training. A question concerning an employee’s

tenure with the current employer asked in the employee survey allows us to investigate this hypothesis.

As shown in the following tabulation of the distribution of

employee tenure in union and nonunion establishments, union

establishments do appear to have a larger percentage of workers with more tenure:

Tenure with current employer Nonunion Union

 Less than 1 year ................. 8.6 2.8

 1 to 5 years ......................... 41.7 25.6

 5 to 10 years ....................... 26.4 28.7

 10 or more years ................ 23.3 43.0

Forty-three percent of workers in union establishments

had a tenure of 10 years or more with their current employer,

compared with only 23 percent of workers in nonunion

establishments.

Results from the employee survey show only a small difference in the hours of formal training between union and nonunion employees. However, employees in union establishments received fewer hours of informal training. Again, this

finding is consistent with union establishments having a generally more tenured work force, and, as is shown later, older,

more tenured workers receive less informal training.

Table 5 also shows that union establishments tend to rely

more heavily on formal training than do nonunion establishments: 36 percent of total training received by employees

in union establishments was formal training, compared with

28 percent for nonunion establishments. Again, this may be

due to the differences in the distribution of workers’ tenure in

the two types of establishments, or it may result from union

efforts to promote formal training through collective bargaining agreements.

Human resource practices. Whether and how much training an establishment provides is likely to be influenced by

training’s place in a broader range of human resource practices. For instance, training is more likely to be provided if

employers expect their workers to stay for an extended period; generous benefits may help ensure that workers do not

quit before the employer is able to recoup its training costs.

SEPT95 asked about the provision of the following benefits: paid vacation, paid sick leave, health care benefits, employee assistance program, employee wellness program, pension plan, profit sharing, flexible work schedules, flexible

work site or telecommuting, employer-financed child care,

and paid parental or family leave.

In recent years, there has been much talk about changes

in workplace practices that are designed to move businesses

away from a rigid and hierarchical management style. Training has been mentioned as an integral part of successfully

implementing these practices so that workers have the necessary interactive and job skills to carry out the practices.18

SEPT95 asked whether establishments had any of the folTable 5. Incidence and intensity of training, by union presence

No employees represented

by union .......................................... 92.9 71.6 11.0 14.0 35.4 28.4

Some employees represented

by union ......................................... 90.6 65.7 9.7 12.1 21.2 36.2

Union presence

Percent of establishments that provided

formal training in the

last 12 months

Percent of employees

who received formal

training in the last

12 months Formal

training

Formal

training

Informal

training

Hours per employee in May–October 1995

Employer

survey

Employee survey

Percent of total

hours spent in

formal training
Monthly Labor Review June 1998 9

lowing workplace practices: pay increases that are directly

linked to mastering new skills; employee involvement in the

establishment’s technology and equipment decisions; job redesign or reengineering; job rotation; just-in-time inventories;

coworker review of employee performance; quality circles;

total quality management; and self-directed work teams.

Another human-resource practice that may be related to

employers’ training decisions is the use of contract workers,

although the direction of the relationship is not always clear

and most likely depends on the motivation for contracting.

Establishments using contract workers to save money may

not have the resources to provide training, while those relying

on outside employees to protect a “core” group of workers

from fluctuations in workload may actually provide substantial amounts of training to the core group.

Table 6 indicates that establishments with high numbers of

benefits and workplace practices, as well as establishments

that make use of contract employees, were more likely to provide formal training; also, employees working in such establishments were more likely to have received formal training.

These findings are supportive of the notion that some businesses are pursuing a “high-performance” strategy wherein

“core” workers are provided formal training, generous benefits, and more autonomy and flexibility to make decisions.

Findings from the employer survey suggest that establishments with more benefits and more workplace practices also

provided more formal training. Results from the employee

survey do not show as strong a relationship between the intensity of training and these human-resource practices. Hours

of formal training are higher for employees working in establishments providing more benefits and more workplace practices, but the differences are not statistically significant. Hours

of informal training found in the employee survey do not consistently increase as the number of benefits or workplace practices rises.

Results from the employee survey do show that establishments with a small number of benefits and workplace practices are less likely to rely on formal training. For instance,

employees working at establishments with fewer than four

benefits spent only 10 percent of their training time in formaltraining activities, while employees in establishments with

eight or more benefits spent nearly 30 percent of training time

in such activities.

Recipients of training

The previous section showed how training varied across different types of establishments. In this section, the focus is on

the characteristics of workers, rather than establishments. Are

some types of workers more likely than others to receive training? If so, what type of worker receives the most training?

SEPT95 asked employees various questions about themselves

and their jobs at the establishment. The demographic characteristics included age, sex, race, ethnicity, and education level.

The employment characteristics obtained were employee tenure, whether the employee was working part or full time, occupation, and earnings.

Table 7 shows the incidence and intensity of training for

workers in various age, sex, race or ethnicity, and education

groups. Only the incidence of formal training is shown, because, as mentioned earlier, the receipt of informal training

was found to be very common (90 percent or higher) for all

workers. Hours of both formal and informal training are

presented.

In general, the youngest and the oldest workers were less

likely to have received formal training during the last 12

Table 6. Incidence and intensity of training, by selected human-resource practices

Number of selected establishment

benefits:

Six or fewer .................................... 89.5 62.9 7.1 10.2 28.7 26.2

Seven or more ............................... 99.6 76.9 14.8 16.7 33.5 33.3

Number of selected establishment

workplace practices:

Three or fewer ............................... 89.1 66.9 7.6 12.0 31.4 27.6

Four or more .................................. 98.6 72.4 13.8 14.7 30.8 32.3

Presence of contract employees:

No contract employees .................. 90.2 63.6 8.1 8.7 33.2 20.7

Some contract employees ............. 98.5 77.0 13.6 18.7 28.7 39.5

Number of benefits, number

of workplace practices,

and presence of contract

employees

Percent of establishments that provided

formal training in the

last 12 months

Percent of employees

who received formal

training in the last

12 months

Hours per employee in May–October 1995

Employer

survey

Employee survey

Formal

training

Formal

training

Informal

training

Proportion of

total hours spent

in formal traning
10 Monthly Labor Review June 1998

Employer-Provided Training

months than were workers aged 25 to

44. The table also shows that the total

hours of training were low for the

youngest workers, increased with age,

and then dropped off for workers 55

years of age and older. This general

pattern is evidenced for hours of both

formal and informal training, although

only the hours of formal training are

significantly lower for the youngest

and oldest groups. As a result, only 11

percent of the youngest workers’ training is formal, compared with 30 percent for older workers.

The relatively low hours of formal

training among the very young provides some support for the notion that

employers or employees (or both) may

be delaying their investment in costly

training until the employer-employee

match is found to be a good one. The

low hours of training for workers 24

years of age or younger may also be

influenced by the fact that very young

workers tend to change jobs frequently

and may not have settled into their chosen careers.

Table 7 shows that 73 percent of

women reported receiving formal

training in the last 12 months, compared with 67 percent of

men. Men received an average of 48 hours of training during

the period from May to October 1995, as opposed to 42 hours

for women. Neither the difference in incidence nor that in

hours of training was statistically significant at conventional

levels.

Responses to the questions in the survey regarding ethnicity

and race were used to group employees into three categories:

white, black, and Hispanic. The three groups are not mutually

exclusive, as Hispanics can be either black or white. Table 7

shows small and statistically insignificant differences in the

incidence of either formal or informal training by race and

ethnicity. In general, white workers tended to receive more

hours of training over the 6-month period than did workers in

the other two categories.19 Interestingly, while black workers

received about the same number of hours of formal training

as white workers, they received significantly fewer hours of

informal training.

Table 7 also indicates that workers with a bachelor’s degree or higher were more likely to have received formal training during the last 12 months than were their less educated

counterparts. About 90 percent of those with a bachelor’s degree or higher received training during that period, compared

with 60 percent of those with a high school diploma or less

schooling. The number of hours of training also is smaller for

the least educated group, although the differences in hours

of training per employee across the different educational attainment groups are not significant. The pattern of training by

education level is consistent with past research, which has repeatedly shown that more educated workers receive more

training.20

Table 8 shows the incidence and intensity of training

by employment characteristics. One such characteristic is

whether the employee works part time or full time on his or

her job. It is expected that employers will invest more heavily

in training their full-time employees than their part-time counterparts. The results in the table are consistent with this expectation, with full-time workers (35 or more hours per week)

more likely to have received formal training in the preceding

12 months than part-time employees were (71.6 percent, compared with 56.1 percent). Similarly, full-time workers received

an average of 48.8 hours of training, compared with 12.5 hours

for part-time workers. Most of the difference is the result of

patterns in informal training, although differences are evident

for formal training as well.

Workers were put into quartiles by calculating what their

Table 7. Incidence and intensity of training, by demographic characteristics

All employees ........................ 69.8 13.4 31.1 30.1

Age

24 years and younger ............... 63.4 2.7 21.4 11.1

25 to 34 years ........................... 78.5 14.0 32.5 30.0

35 to 44 years ........................... 74.7 15.4 30.3 33.8

45 to 54 years ........................... 64.7 17.2 39.0 30.6

55 years and older .................... 50.7 5.7 17.1 25.1

Sex

Men ........................................... 66.5 12.2 35.4 25.6

Women ...................................... 73.1 14.6 26.9 35.2

Race and origin

White ......................................... 70.4 13.6 35.0 27.9

Black ......................................... 70.6 13.8 13.9 49.9

Hispanic origin .......................... 73.7 11.0 21.7 33.6

 Educational attainment

High school graduate

 or less ..................................... 60.1 10.9 24.8 30.6

Some college ............................ 67.8 14.3 37.0 27.8

Bachelor’s degree or

higher ...................................... 89.7 16.1 31.8 33.6

Percent of

employees

who received

formal training

in the last

12 months

Percent of total

training hours

spent in formal

training

Hours per employee in May–October 1995

Formal

training

Demographic

characteristic Informal

training
Monthly Labor Review June 1998 11

earnings would be if they worked 35

hours in a week and then finding their

position in the weekly earnings distribution of U.S. workers who work 35

or more hours a week. As the table

shows, a smaller proportion of those

in the bottom quartile receive formal

training than do higher earners. For instance, 62 percent of those in the bottom quartile received formal training

in the preceding 12 months, compared

with 84 percent for the top quartile.

Hours of training also are lower for

those in the bottom quartile: these individuals received an average of 4

hours of formal training, as opposed

to 23 hours for those in the top quartile.

Furthermore, lower earning employees

received a smaller share of training via

formal delivery methods than did

workers with higher earnings.

An employee’s occupation is another job characteristic that is likely to

influence the amount and kinds of

training that he or she receives. Service workers stand out in table 8 as being less likely than those in other occupations to receive formal training.

The table also shows that professional

and technical workers tend to receive

more training than the average worker,

having the highest number of hours of

training per employee for both formal

and informal training, followed by

production and construction workers.

In terms of formal training alone, there

is a considerable gap between the number of hours of training received by

professional and technical workers

(22) and that received by most other

occupations, particularly managers (4)

and service workers (6).

The survey also asked employees

about three different types of job

tenure: the amount of time the worker had been with his or

her current employer; the amount of time the worker had been

in his or her current occupation (that is, had done a particular

kind of work); and the amount of time a worker had been in

his or her current position at the establishment. Table 8 shows

the receipt of formal training in the preceding 12 months and

the hours of formal and informal training for these three kinds

of tenure. The results suggest that, after staying with the same

employer for 5 years, the likelihood of having received formal training in the last 12 months rises. A similar pattern exists for tenure in the current job, but tenure in a given occupation does not appear to have a strong association with the

receipt of formal training.

With regard to hours of training, employees with low tenure (as measured by all three types of tenure) tended to receive more hours of informal training than did more experiTable 8. Incidence and intensity of training, by employment charateristics

Percent of

employees

who received

formal training

in the last

12 months

Percent of total

training hours

spent in formal

training

Hours per employee in May–October 1995

Formal

training

Employment

characteristic Informal

training

All employees ...................... 69.8 13.4 31.1 30.1

Usual weekly hours worked

Fewer than 35 hours ............... 56.1 4.8 7.7 38.2

35 or more hours ..................... 71.6 14.6 34.2 29.9

Earnings

First quartile ............................ 61.8 4.1 30.6 11.8

Second quartile ....................... 74.5 11.6 30.5 27.6

Third quartile ........................... 62.0 15.9 39.6 28.6

Fourth quartile ......................... 84.0 22.8 21.1 52.0

Occupation

Managerial and

 administrative ........................ 80.2 4.3 22.4 16.2

Professional, paraprofessional,

 and technical ......................... 84.8 22.3 38.7 36.6

Sales, clerical, and

 administrative support ........... 72.5 10.2 23.2 30.4

Service .................................... 49.8 5.6 22.1 20.2

Production, construction,

 operating, maintenance,

 and material handling ........... 66.3 15.2 38.5 28.3

Tenure with current employer

Up to 2 years ........................... 67.5 8.9 56.5 13.6

More than 2 years and up

 to 5 years .............................. 56.8 4.5 19.5 18.8

More than 5 years and up

 to 10 years ............................ 79.7 19.5 27.0 41.9

More than 10 years ................. 75.3 21.1 20.5 50.7

Tenure in current occupation

Up to 2 years ........................... 73.4 12.5 64.7 16.2

More than 2 years and up

 to 5 years .............................. 68.4 7.5 22.4 25.0

More than 5 years and up

 to 10 years ............................ 68.9 9.6 20.0 32.4

More than 10 years ................ 69.2 19.4 24.4 44.3

Tenure in current job

Up to 2 years ........................... 73.4 13.2 48.9 21.2

More than 2 years and up

 to 5 years .............................. 59.7 4.6 20.3 18.3

More than 5 years and up

 to 10 years ............................ 78.1 22.6 14.4 61.1

More than 10 years ................. 66.5 23.6 13.7 63.3
12 Monthly Labor Review June 1998

Employer-Provided Training

enced workers. For example, workers with fewer than 2 years

of tenure with the current employer spent about 57 hours in

informal training, compared with nearly 20 hours for workers

with 2 to 5 years of tenure. As regards formal training, the

increase in hours tended to be higher for more tenured

workers: formal-training hours increased from nearly 5 to

about 20 as the worker moved from 2 to 5 years of tenure with

the current employer to 5 to 10 years. The simplest economic

models would predict training to decline with tenure on a

given job, as the earlier an employee receives training, the

longer returns to the investment in training would be received.

However, it may be that employers wait until a worker has

been on the job a while and has proven satisfactory before

heavily investing in costly formal training for that worker.21

For all three types of tenure, formal training appears to make

up a growing share of total training as tenure increases, as

shown in table 8. One explanation for this is that, as tenure

increases, workers become more likely to be the providers,

rather than the recipients, of informal training.

THIS ARTICLE HAS DISCUSSED employer-provided training using

data from SEPT95, a new BLS survey. We believe that SEPT95

represents an advance in establishment-based training surveys, as it goes beyond the incidence of training to obtain

estimates of the intensity of training provided by establishments. In addition to obtaining estimates of formal training,

the survey collected information on the extent of informal

training by interviewing randomly selected employees.

The findings from SEPT95 indicate that U.S. employers expend a considerable amount of time and resources on both

formal and informal training. For example, establishments

with 50 or more employees—the sampling frame for the survey—paid $7.7 billion to in-house training staff and $5.5 billion to outside trainers during 1994, $139 and $98 per employee, respectively. Training expenditures tend to increase

with establishment size for all types of expenditures covered

in the survey. The wage and salary cost of employees’ time

while in training represented an even greater expense, with

$224 spent per employee for employees’ time in formal training and $423 spent for informal training, from May to October 1995—rates of $448 and $864 per employee, extrapolated to 1 year.22 Employees received between 10 and 13 hours

of formal training and 31 hours of informal training during

the period from May to October 1995. Assuming an average

workweek of 40 hours, these findings suggest that workers

spend roughly 4 percent of their working hours in one or the

other kind of training.

Findings from the employer data indicate that the incidence

of formal training tends to be higher at establishments that are

larger, have lower turnover, have higher numbers of benefits,

use more alternative workplace practices, and use contract

workers.23 These findings are consistent with the idea that employers who show signs of promoting a long-term relationship

with their employees tend to offer more training. Also, because the incidence and hours of training appear to increase

with higher pay and more education, the analysis of employee

data confirms the finding from other household surveys that

more skilled workers are more likely to receive training.

Footnotes

AUTHORS’ IDENTIFICATION: Harley Frazis and Mary Joyce are research economists in the Office of Employment and Unemployment Statistics, Bureau of

Labor Statistics. Michael Horrigan is the Director of Longitudinal Research

in the same office. Maury Gittleman, a research economist for the Office of

Compensation and Working Conditions, Bureau of Labor Statistics, is currently on detail with the Organization for Economic Cooperation and Development, Paris, France. This article is a shortened version of a paper appearing in Advances in the Study of Entrepreneurship, Innovation, and Economic Growth, vol. 9 (Greenwich, CT, JAI Press, 1997), pp. 47–82. The views

expressed are those of the authors and do not necessarily reflect the views of

the U.S. Department of Labor.

1

 See Frank Levy and Richard J. Murnane, “U.S. Earnings Levels and

Earnings Inequality: A Review of Recent Trends and Proposed Explanations,” Journal of Economic Literature, September 1992, pp. 1333–81, for

a survey of recent changes in the earnings structure; Paul Osterman, “Skill,

Training and Work Organization in American Establishments,” Industrial

Relations, April 1995, pp. 125–46, for a discussion of the relationship between work organization and training; and Ann P. Bartel and Nachum

Sicherman, “Technological Change and the Skill Acquisition of Young Workers,” unpublished, April 1995, for an analysis of the effect of technological

change on young workers’ acquisition of skills.

2

 Lisa Lynch, “A Needs Analysis of Training Data: What Do We Want,

What Do We Have, Can We Ever Get It?” in J. Haltiwanger, M. E. Manser,

and R. Topel, eds., Labor Statistics Measurement Issues, NBER Studies in

Income and Wealth (Chicago, University of Chicago Press, forthcoming).

3

 The sample frame for the survey was the list of privately owned establishments on the BLS Universe Data Base. The frame units were classified

into strata based on nine industries and five employment size classes.

4

 Harley J. Frazis, Diane E. Herz, and Michael W. Horrigan, “Employerprovided training: results from a new survey,” Monthly Labor Review, May

1995, pp. 3–17.

5

 Two employees were randomly selected at each establishment.

6

 Experienced BLS interviewers were instructed to administer the survey

to the person at the establishment who was most familiar with its training

policies and practices. At larger establishments the interviewers were told to

ask for the training or human resource director, and at smaller establishments they were requested to seek the person who handles personnel and

training issues.

7

 Previous surveys that asked for total expenditures on training experienced very low response rates. The 6-percent response rate for this item on

the Columbia Human Resource Management survey is one such example.

8

 Interviewers had the option of collecting the training log data for the

preceding 2 weeks at the time of the interview or leaving the log with the

respondent to complete over the next 2 weeks. The decision as to which

alternative to choose was based on the availability and quality of training

records.

9

 Interviewers trained the employees on the use of the log by having them

recall their activities over the previous 3 days and then keep a daily log over

the next 7 days.
Monthly Labor Review June 1998 13

10 Self-learning activities are not counted as training.

11 Mark Loewenstein and James Spletzer, “Formal and Informal

Training: Evidence from the NLSY” (Bureau of Labor Statistics, unpublished, April 1998).

12 In particular, estimates of the incidence of training from the earlier

1993 Survey of Employer Provided Training (SEPT93), which contained no

measures of the intensity of the training, will be more precise. (See Frazis,

Herz, and Horrigan, “Employer-provided training,” for results from SEPT93.)

13 These two estimates of the hours of formal training were obtained

from different survey instruments and respondents, so there are a number of

methodological reasons for which they might be expected to differ. However, it is also important to keep in mind that the two estimates are independent, each measured with a different degree of precision. We conducted a

statistical test that incorporates the standard error associated with each estimate and found that the hypothesis that the two are equal could not be

rejected at the 10-percent significance level.

14 Because the incidence of informal training is relatively high in any

size of establishment (95 percent of employees received such training while

working for their current employer), very small differences across size classes

were evident for the provision of informal training.

15 A model of training that accounts for firm-specific skills was first

developed by Gary Becker, Human Capital (New York, National Bureau of

Economic Research, 1975).

16 Turnover is measured by computing the ratio of hires and separations

to employment during a 3-month period. On the basis of this computation,

establishments were placed into three categories, depending on whether their

turnover was low, medium, or high. A small number of establishments tended

to have very low turnover, with the remaining establishments spread out

fairly evenly. As a result, the low-turnover category contains only 7 percent

of all establishments, compared with 49 percent for the medium-turnover

category and 44 percent for the high-turnover one.

17 Establishments were grouped into two categories, depending on whether

any of the workers were covered by a collective bargaining arrangement.

Owing to the relatively low percentage of U.S. employees who were unionized, the vast majority of establishments (82 percent) fall into a category in

which none of the employees is a member of a labor union.

18 Thomas Bailey, Discretionary Effort and the Organization of Work:

Employee Participation and Work Reform since Hawthorne (New York,

Columbia University, 1993).

19 The differences in hours between whites and Hispanics were not

significant.

20 Charles Brown, “Empirical Evidence on Private Training,” in Investing in People, vol. 1 (U.S. Department of Labor, Commission on Workforce

Quality and Labor Market Efficiency, 1989), pp. 301–29.

21 See Mark Loewenstein and James Spletzer, “Belated Training: The

Relationship between Training, Tenure, and Wages” (Bureau of Labor Statistics, unpublished, September 1996), for evidence on “belated” formal

training in the NLSY.

22 Such extrapolation assumes no seasonal differences in the provision of

training.

23 These conclusions are based on the bivariate relationship between the

number of hours of formal training and a particular variable. To the extent

that the variables are correlated with each other (for example, larger firms

tend to use more contract workers), some of those relationships may not

hold in a multivariate context. (For a multivariate analysis of the SEPT95

data, see Harley Frazis, Maury Gittleman, and Mary Joyce, Determinants of

Training: An Analysis Using Both Employer and Employee Characteristics

(Bureau of Labor Statistics, unpublished, February 1998).