The hiring standards for the technician job vary within only a narrow range. Virtually every company required that the applicants be high school graduates although two would make rare exceptions in the case of a person with special work experience. Three firms required some post-high-school education or experience and one of these considered only applicants with associate or junior college degrees. The rest of the firms were satisfied with high school graduates who had taken courses in mathematics and physics. Two electronics companies mentioned specifically that they prefer applicants who were trained in the armed services. One company indicated that it would not consider applicants who had completed work on their bachelors' degrees since they quickly became dissatisfied with the responsibilities the job entailed. As a result the lab at this firm was manned with Ph. D.'s and technicians with 2 years or less of college.

The experience of these firms serves to point up the importance of on-the-job training in this rapidly expanding occupational area. It seems to me that the objectives of encouraging on-the-job training can be met only when we have a better uderstanding of current private activities in this area. And it would be my hope that this subcommittee will play an important role in this research effort.

It would be well to know, for example, the extent to which the use of on-thejob training for technicians by these companies in Boston is typical of firms in many areas of the country. For what other occupations is this a particularly important source of trained workers? Are these occupations usually specialized to a particular firm or industry?

Similarly, it is important to identify those occupational specialties in which there are currently critical shortages. What are employers doing about filling vacancies in these areas? Are they devoting greater resources to on-the-job training as they are unable to hire experienced workers? Can these additional expenditures be measured with a reasonable degree of accuracy? How are these critical shortages affecting smaller firms which are generally able to devote relatively fewer resources to training?

The answers to many of these questions, presently at least, can come only from employers, trade associations, and training personnel. These hearings provide an excellent opportunity to begin developing this kind of information for future public policy uses.

PREPARED STATEMENT OF PROF. WALTER H. FRANKE, INSTITUTE OF LABOR AND INDUSTRIAL RELATIONS, UNIVERSITY OF ILLINOIS

In discussing needed improvements in Federal training programs, the "1965 Manpower Report of the President" concludes that "the case for expansion of training rests largely on the conclusion that the training needs of unemployed workers are now being inadequately met" (p. 138). Thus, the argument for the continuation and expansion of governmental subsidies of training and retraining emphasizes inadequacies in the supply of labor. More specifically, the problem is seen mainly as one whose solution requires the upgrading of the skills of the unemployed.

An attempt will be made in this paper to suggest some alternatives to this view of the problem and to consider some factors that are relevant to the use of on-the-job training in a manpower development program. Attention to some of the more general barriers to the expansion of on-the-job training will provide some indication of possible guidelines.

BARRIERS TO THE EXPANSION OF ON-THE-JOB TRAINING

On-the-job training programs will ordinarily expand significantly only if there are substantial numbers of unfilled and difficult-to-fill job openings. Little or no incentive exists for an employer to incur training costs if he experiences or anticipates no serious difficulty in meeting his labor needs. Further, if there is public support of training and that support is conditioned on the existence of a reasonable chance of employment following training, the small number of job openings that are likely to exist under conditions of substantial labor surplus will largely neutralize the incentive provided by a public subsidy. Under such conditions it can be expected that the adoption of public on-the-job training programs will be slow and difficult and will often be concentrated in marginal endeavors in which the training allowance results primarily in a wage subsidy.

Our Federal manpower training programs of the last few years have assumed that substantial numbers of job openings occur for which there are no qualified workers even when there are substantial labor surpluses; that is, when the general unemployment rate is 5 to 6 percent or higher. It is probable that the failure of on-the-job training programs to develop more rapidly thus far under our Federal training programs is due largely to the scarcity of job vacancies for which additional trained workers are required. While this scarcity does not preclude the development of institutional training for the unemployed, it limits severely the opportunities for promoting and developing on-the-job training programs.

In a "full employment" economy, on the other hand, the prospects for developing on-the-job training programs become more favorable and the need to do so is more obvious. In the first place employers have an incentive to initiate training programs on their own. As the demand for labor increases and there are changes in the types of labor required, certain categories of labor become scarce. Under these conditions on-the-job training is likely to be viewed by employers as a desirable and feasible way to obtain a rapid increase in their labor force. Nevertheless, some counterpressures are present which tend to result in a slower development of individual training programs than might be desirable from the point of view of the total economy.

One of these is the risk associated with the investment of resources into training programs. Employers, particularly those that are small or medium sized, are often reluctant to invest in training programs for fear they will lose their workers to other companies once their training is complete. And this is a legitimate concern in a tight labor market where alternative employment opportunities are plentiful. In a study of labor shortages in a number of skilled and technical occupations in the Chicago area being conducted at the University of Illinois, we found, for example, many companies who employed no tool and die apprentices because their experience indicated a large proportion of these trainees left the company for other jobs as soon as, or even before, their apprenticeship was completed.

Another deterrent to the establishment of training programs in full or high employment periods is that employers, particularly in the short run, can meet their labor requirements by methods other than training additional workers. They can, for example, meet expanding manpower needs by making increased use of overtime work. Or they can step up their recruitment efforts more cheaply than they can establish or expand training programs. They can, for example, offer inducements to persuade employed workers to change employers; that is, raid other employers of workers in particularly critical occupations. And they can attempt to recruit workers from outside the local labor market where the supply of workers might be more plentiful. Further, they can meet some of their manpower requirements by relaxing their hiring standards. Thus, they might remove or adjust formal hiring requirements such as age, sex, or race, and they can lower quality standards by accepting inexperienced or less able workers than were formerly demanded. And they can offer inducements to workers to stay in or enter the labor force who would otherwise be outside. Examples of this would include postponement of retirement and offers of parttime employment to women whose duties prohibit them from being full-time participants in the labor force. Many of these possible adjustments, incidently, can occur long before an economy reaches full employment and can be viewed by individual employers as more attractive alternatives than expansion of training programs. The adoption of training programs which would expand the supply of labor in the long run is likely to occur only if the industry as a whole can be induced to share the costs of training or if the costs of training are offset by subsidy.

Finally, in a high or full employment economy expansion of training programs is limited if public programs are focused primarily on the unemployed. As unemployment declines to relatively low levels, the source of qualified prospective trainees among the unemployed will dry up rather quickly. It is not very likely particularly in times of low unemployment, that those who are unemployed and finding it difficult to find jobs will be those most interested in or qualified for training for higher skills that are in demand. And if public retraining courses focus mainly on the unemployed in prosperity periods, it will be difficult to fill training needs at a time when training is most in need and most likely to produce productive results. It would be helpful, therefore, to broaden the scope of training to include the employed and expect that the unemployed would take jobs vacated by those more willing and able to benefit from further training.

THE SWEDISH CASE

It might be useful as an illustration of some of the points discussed above to take a brief look at the manpower training developments in a full employment economy. In Sweden the average annual unemployment rate has been less than 2 percent for most of the last 20 years. By any reasonable standard, therefore, Sweden can be viewed as a full employment, if not an overheated, economy. It can be said that occupational training has received more attention in Sweden than in the United States, particularly for skilled and technical workers. Almost all large industrial employers have their own training schools in which youngsters are trained for the skilled industrial jobs. Great attention is given by employers to the upgrading of their workers. And there is substantial subsidization of further education and training of their workers by employers. In fact, offering prospective workers the opportunity for further education and training is viewed by employers as an important recruiting device.

Nevertheless, company-sponsored training programs and public vocational schools have not met the country's need for skilled workers. It is probably typical that a company training program supplies no more than 50 percent of its skilled manpower requirements. Employers are generally very sensitive to the problem of the costs of losing workers they have trained to other companies. It has been the experience of one company with which I am familiar that it loses 50 percent of its trainees to other companies in the first year following training and another 25 percent during the second year. Such situations set limits to the willingness of companies to train their own skilled work force unless all employers are doing the same.

It should also be noted that there is more incentive in Sweden than in the United States for companies to training their own workers under similar economic conditions. This results from less flexibility in a number of respects for Swedish employers to use devices other than training to fulfill their needs for skilled manpower. They have less flexibility, for example, in the use of overtime hours. Swedish law prohibits the use of more than 200 hours of overtime work per year per worker without special permission. Also, Swedish employers have somewhat less opportunity for hiring away manual workers from their fellow employers. A gentleman's agreement among members of the Employers Confederation prohibits advertising by individual employers for blue-collar workers. In addition employers exercise more self-restraint in competing for workers on the basis of the wage rate.

Because of the failure of the basic school system and company training programs to meet the need for trained manpower, a public program for the retraining of the unemployed was begun in 1960. As in the United States, the major emphasis up to now has been on institutional training. In March 1965, about 18,000 persons were participants in this governmental training program. Of these, only about 2,700, or 15 percent, were being trained in on-the-job training programs. Officials of the National Labor Market Board in Sweden are engaged in a drive, however, to increase substantially the proportion of trainees who are in on-the-job training programs. One reason for this is more direct relationship between the training and job opportunities that exist in on-the-job training programs. Related to this goal is a strong parallel drive to include in the training programs, particularly in on-the-job training programs, more employed persons who are qualified for training for higher skills. A prime incentive for this is that there are not enough qualified candidates among the unemployed to train for occupations in short supply.

GENERAL CONSIDERATIONS

The preceding discussion suggests that the following points are important to a consideration of the possible expansion of on-the-job training programs in the United States:

1. The relevancy of on-the-job training to our manpower requirements is closely associated with the level of economic activity. As measured by the return on the investment it is probable that it would be most rational that public investment in on-the-job training be geared to the business cycle, with a larger investment when production is high and increasing and unemployment is low. At such times employers are likely to be most amenable to participating in the program, and the investment is likely to produce the largest return in the form of increased productivity, economic expansion, and a reduction of inflationary pressure on wage levels. The latter three factors, in addition to the training

needs of the unemployed, offer a convincing rationale for governmental participation in on-the-job training.

2. The self-interests of employers to sponsor on-the-job training when their manpower needs increase or when the skill content of jobs changes cannot be relied upon completely to produce the quantity of skilled manpower that might be required by the Nation. One reason for this is the reluctance of employers to invest in training and run the risks of losing their investment and their trained workers to other employers. In addition, training may be inadequate because of the propensity of employers to use methods other than additional training to meet expanding manpower needs, particularly in the short run. It follows that the encouragement of on-the-job training through governmental support requires that training subsidies be designed to offset the costs resulting from the turnover of newly trained workers and perhaps in addition offer an incentive for employers to choose training rather than other means of expanding their work forces. The training subsidies should be determined, however, on the basis of an accounting of the costs and gains of various levels of support. Also, a form of governmental assistance in training ought to be considered which would encourage the cooperative development of training programs by groups of employers as a way of meeting the risks associated with individual company programs. To the extent that this could be accomplished the burdens of public outlays would be reduced.

3. The effectiveness and contribution of on-the-job training programs to the Nation's manpower development could be greatly enhanced by broadening the training base to include employed workers. It is not a particularly rational principle that manpower training programs should require that an adult worker must become unemployed or be in imminent peril of becoming unemployed before being accorded the privilege to participate in a governmental retraining program. An up-to-date and productive labor force is more likely to be attained if qualification for particiaption is based primarily on ability to benefit from further training. Inclusion of the employed in publicly supported retraining programs, however, will require more attention to governmental control over the nature of training. It will be necessary, for example, to guard against the use of training subsidies to support programs in occupations where shortages are the result of substandard wages or the use of public funds to finance existing programs.

STATEMENT OF DAVID P. TAYLOR, ASSISTANT PROFESSOR OF INDUSTRIAL RELATIONS, SLOAN SCHOOL OF MANAGEMENT, MASSACHUSETTS INSTITUTE OF TECHNOLOGY

Mr. TAYLOR. It is a great pleasure for me to appear before this subcommittee and participate in these hearings. Because of the concentration of electronics and other research-oriented firms in the Boston area, I have become interested in the training of technical assistants. and technicians. These are the people that work along with engineers and scientists and relieve them of the more routine duties in the laboratory or the design department.

A study was done for the Office of Education, which indicated that the need for technicians is going to be expanding substantially in the years ahead. Our current ratio of technicians to scientists and engineers is approximately 0.7 to 1, and frequently statements are made expressing a desirable ratio of about 3 to 1.

Meanwhile, in the Soviet Union this ratio is estimated at about 2.5 to 1, and in some of their light industries it is as high as 8 to 1. Thus, as the scientific and engineering fields increase in importance in this country, it is clear that the technician occupation will be expanding at an even greater rate.

Senator KENNEDY of Massachusetts. Now, what if we were to have, which you indicated as a desirable ratio of 3 to 1, how many new jobs would that involve?

Mr. TAYLOR. In the Emerson study a ratio of 2 to 1 of technicians to scientists and engineers was accepted as appropriate, and on this

basis, using the increase in scientists and engineers that is projected over the next several years, it seems to me, she predicted that there would be an annual requirement of some 200,000 technicians each year.

Senator KENNEDY of Massachusetts. How many are being trained each year?

Mr. TAYLOR. The increase from 1959 to 1960 was about 65,000. Senator KENNEDY of Massachusetts. It would be safe to say it does not nearly reach that figure?

Mr. TAYLOR. That is right, particularly because of the change in the ratio that she expects to occur.

In the Emerson monograph a study was cited as to how a group of 6,000 technicians received their skills. On-the-job training and upgrading provided the chief source of training for the following technical fields: Chemical laboratory technician, draftsman, radio, TV technician and so on.

In a survey that was recently conducted in Boston, 11 firms with research facilities were included, and of these, only one had a formal training program for its technicians. We defined a technician as a nondegree, nonexempt worker performing scientific and engineering functions, either individually or as an assistant to a more highly trained, professional employee. That is, 10 of the 11 firms surveyed performed all the in-plant training of these workers on the job.

Two of these companies, however, had added some formal aspects to what is basically an informal program. One requires the trainee to spend a given amount of time working with each of several professionals before assuming his own specific job. The other involves a similar rotation program.

As we would expect, the firm with the formal program was among the largest in the sample. The small firms had not even considered alternatives to one-the-job training, while some of the intermediatesized companies had begun tentatively to investigate formal training programs.

The experience of these firms serves to point up the importance of on-the-job training in this rapidly expanding occupational area. It seems to me that the objectives of encouraging on-the-job training can be met only when we have a better understanding of current private activities in this area. And it would be my hope that this subcommittee will play an important role in this research effort.

Senator KENNEDY of Massachusetts. You have had some experience, or at least some background, in understanding what Great Britain has done, I understand.

Mr. TAYLOR. Yes; recently Great Britain has introduced a program called the Industrial Training Act. It is just getting started and this program is organized around industry councils. These include. people from labor unions and industry and the basic objective is to encourage employers to participate in additional training.

The industry councils tax each of the employers within the industry. It is, as I understand it, a payroll tax, and its level can vary from one industry to another, so there is some flexibility introduced.

At the end of the year each of the employers who has participated in the levy can get a refund, the amount of which is determined by