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there was a stronger preference for institutional training. In educational and Federal agencies there is an overwhelming sentiment in favor of institutional training and little interest in Government onthe-job training projects. Nondurable manufacturing, public utilities, and finance-real estate-insurance were the only industrial classifications in which the majority of respondents favored no Government assistance for training the unemployed.

6. The advantages of on-the-job training indicated by employers include (in order of importance): (a) A greater element of company control over the training course, (6) training for specific company jobs, (c) use of up-to-date equipment, and (d) immediate placement of trainees.

To these stated reasons must be added the productivity benefits which can be readily obtained by employers in certain industries and occupations at relatively low cost under Government subsidy. It seems that this motive was important in the attitudes of hospitals toward the training of nurses' aids and orderlies; and in the training of service station attendants and retail clerks. In occupations characterized by high rates of turnover, relatively low skill and low wages, employers can benefit from the services of subsidized trainees during the training period.

Although some respondents were critical of the "bureaucracy" (such as the transportation executives who "wasted” several weeks on discussion with various Government agencies before receiving a rejection of his on-the-job training proposal), others had high praise for the contribution of on-the-job training projects in their own establishments. For example, one respondent noted that "the Department of Labor has been very helpful and realistic about reports, inspections, and so forth," and he stressed that it would have been very difficult for the formerly unskilled, unemployed trainees to have acquired this training opportunity in any way other than through Government support.

CONCLUSIONS AND RECOMMENDATIONS Even though the results reported in these surveys are based on limited samples, there seem to be reasonable grounds for the conclusion that the on-the-job training provisions of Manpower Development and Training Act have considerably greater potential than one might infer from the small numbers enrolled in such projects to date. A decided majority of the surveyed employers who have hired Manpower Development and Training Act trainees, as well as a cross section of managerial personnel engaged in the training field, favor Government-sponsored training; and, of these, the number who prefer on-the-job training projects is only a little smaller than those who prefer the more traditional area of Government aid through vocational schools,

Some recommendations follow:

1. It is clear that more promotional work must be done in bringing the availability of the on-the-job training program to the attention of employers. This is especially true among small employers, where private programs of on-the-job training are inhibited by cost factors and inadequate training facilities. Special attention to the provision of additional facilities in small establishments would have a salutary effect in increasing acceptance of on-the-job training projects.

2. Benefit-cost analyses of on-the-job training projects should be conducted in order to provide data which would prove useful in selling the program to employers in particular industries, areas, and occupations.

3. Further efforts should be made to induce large firms, well endowed with training facilities, to conduct on-the-job training projects for the benefit of smaller firmis in their area. Japan and other countries have adopted such a procedure with considerable success.

4. Consideration should be given to an extension of the subsidy program into apprenticeable trades, with the cooperation of union and management oficials. Here, again, major returns would result in the smaller establishments.

5. Although on-the-job training can be especially useful in the upgrading training of underemployed workers already in the establishment (and there is an obvious expansion in this direction),13 caution must be observed to see that these programs do not merely substitute for existing private projects and that the interests of the unemployed are not forfeited. Employers should be encouraged to include unemploved as well as upgraded employees in the same project whenever feasible. 6. Since on-the-job training projects now include a smaller proportion of the hard-core unemployed, as compared with institutional projects,'t an expansion of on-the-job training should be accompanied by greater efforts to integrate on-the-job training programs with experimental and demonstration projects. Some successful examples of such an integration already on record provide a basis for optimism in

Senator KENNEDY of Massachusetts. Mr. Franke.
Mr. Franke. Thank you very much, Senator Kennedy.

this regard

STATEMENT OF PROF. WALTER FRANKE, INSTITUTE OF LABOR

AND INDUSTRIAL RELATIONS, UNIVERSITY OF ILLINOIS

for our economy:

Mr. FRANKF. Senator Kenned«, I am very pleased that your committee is investigating the subject of the possible expansion of onthe-job training programs, because I think as Professor Somers does, that the potential value of expande:l on-the-job training is very great

You indicated in your opening statement, Senator Kennedy, that the purpose of the hearings were exploratory and educational, and because of that I have approached the subject very generally and tried to raise what I consider to be some of the more general questions that ought to be considered in thinking about possible expansion of governmentally subsidized on-the-job training,

The first point that my statement considers is the economic conditions under which on-the-job training can be expected to contribute the most to our economy. I have argued that the contribution may

greater in periods of economic expansion and low unemployment than in periods when we have a lot of unemployment. I think the benefits will come in the form of increased productivity, economic expansion, and control over rising prices to a greater degree under

be

" Manpower Research and Training, p. 34. ** Ibid., pp. 197–198, 200.

conditions of full employment than under conditions of high unemployment.

Therefore, I think there is an even greater need for on-the-job training as the economy approaches full employment. I raise this point because much of the discussion of expanded training programs seems to be conditioned on the argument that we have many unemployed people whose skills are not great enough for them to be hired, and I would like to emphasize the point that there may be also a great need for encouragement of training programs when unemploy, ment is low. At such times there is more urgent need for trained people, and the economy can make more effective use of these people after they receive their training. There is also a greater possibility of developing meaningful programs, I think, when the economy is operating at a high level. The jobs on which useful training can be given will be available, and it will be easier to encourage employers to participate in an expansion of on-the-job training.

I might briefly mention here a study we have been doing at the University of Illinois of some of the barriers to meeting the needs for labor in certain skilled and technical occupations.

While we are still in the midst of this study, I might indicate that our survey of employers indicated that very large proportions of them thought there were shortages of labor in the particular occupations we were studying. For some of these occupations as many as five employers out of six said that they saw a serious shortage of labor for these occupations. When we asked the question of whether they have any unfilled openings at the time we were surveying them, however, something like two out of three among the same employers said they had a unfilled openings at the present time. This suggests that even though they see a shortage for these occupations, they find ways of meeting this shortage.

This leads to the second point that I emphasized in the statement, which is that there are a variety of approaches available to employers for dealing with labor shortages, and many of these approaches under particular conditions may be cheaper than expanding their training programs. Employers may choose these methods to the detriment of the economy as a whole and its need for a long-run expansion of the skilled labor force. The various methods which employers might choose, other than expanding their training programs for meeting shortages of labor are cited in my prepared statement.

I also cite what some of the barriers are to expanding training programs and suggest that one of the most important of these is the risk in investing in training programs. The risk is that after the investment of substantial funds, an employer may lose his trained employees to other employers so that unless employers generally in the labor market are all engaged in training, it is difficult for an individual employer to make the decision to expand his training program and take the risk of losing the investment. This suggests that some kind of incentive would be useful which would stimulate groups of employers to develop training programs together, so that this risk would be reduced.

The final point I make in the paper is that it might be well to consider increasing the investment of governmental training re

asso

sources for the training of employed workers. I am not suggesting that the unemployed be disregarded, but that the return on the investment in governmental funds might be greater if some of the training takes place among employed workers-not just among employed workers whose skills are becoming obsolete, but among workers whose potential for increased productivity could be increased by further training;

I have cited in this respect the experience of Sweden in their retraining programs. The emphasis in Sweden recently has been in the direction of increasing on-the-job training programs and reducing emphasis on institutional training, and second, an increasing emphasis on the training of employed workers with the hope that increasing the skills of employed workers will move them up the occupational level and open up jobs for those who are unemployed.

I think those are the major points raised in my statement. Senator KENNEDY of Massachusetts. Thank you very much, Mr. Franke.

In your testimony you mentioned that one of the things that ought to be attempted is to develop groups in industry-trade ciations--to encourage on-the-job training so that there would not be raiding of companies that move ahead in training some of their employees and up-grading their skills. Do you think this is realistic from your own understanding of the particular needs of industry today and the strength of the various trade associations?

Mr. FRANKE. I have not considered the possibilities thoroughly. However, it is my impression that there are plenty of organizations and associations of employers in the various industrial groups at the local level. It should not be particularly difficult to find vehicles through which joint employer training programs could be operated a proper incentive is given.

Perhaps the idea that Professor Somers mentioned is part of the answer; namely, that increased promotional efforts among trade organizations possibly through the local employment offices or some kind of regional labor market organization could encourage the cooperation of employers. I don't believe employers have considered pery much yet the possibilities of their cooperating. If I may refer briefly to the Swedish situation again, I found there that quite apart from any formal organization in the labor market~trade associations, for example-employers engaged in voluntary cooperative efforts in training with no particular incentive even from Government. Their training needs were so great-I must point out here that in Sweden there is a very serious shortage of almost all kinds of labor and their needs for training are very great--that some employers got together an a purely voluntary basis and developed cooperative training programs. I would think that through some emphasis on a cooperative approach to training and some promotion, as Professor Somers indicated, you might be able to encourage a good deal of cooperative effort. even if the formal structures would have to be developed beyond

Mr. Taylor. I might interject that in your February hearings this subcommittee brought out an example of cooperative efforts by a trade association in the Connecticut restaurant industry. I thought this

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was particularly interesting because there was cooperation not only within an industry, but the restaurant association got assistance from the National Tool, Die & Precision Machining Association in establishing and structuring the training programs.

Senator KENNEDY of Massachusetts. Do you see this as really the only way possible to prevent the raiding of skilled employees by other companies that are not going ahead in training?

Mr. FRANKE. I think you are either going to have to subsidize the training costs that an employer incurs to a great degree or you have to have some kind of pooling of the risk

Senator KENNEDY of Massachusetts. That creates divergence in the trades. For example, if you encouraged the shoe manufacturing industry to train hand-sewers of shoes now. They get a certain rate in Massachusetts and generally throughout New England, and I would not think it would matter a great deal whether it was the Brown Shoe Co. of Brockton or the Plymouth Shoe Co. in Middleboro, because the hand-sewers get a certain basic grade. So I would think if the Plymouth Shoe Co. trained these people, I would not see why another company would necessarily raid them if there was a certain standardization in regards to wages in an industry. I would think it would vary significantly from industry to industry.

Mr. FRANKE. I think it is not the problem of differences in wages that necessarily causes the raiding, but the opportunity to get a worker who is already trained without having to invest the funds in his training can result in competition by a number of methods. If you cannot do it through the wage rate because of some kind of standard wage rate, you may do it through offering of overtime work or other special inducements. And in many of our labor markets wages for many occupations are not that standardized. Employers are able to compete for workers on the basis of wage incentives.

Mr. SOMERS. I wonder if this problem of raiding is not a little exaggerated, although you might have some evidence that I do not have. The turnover rates in American industry are not quite that high, and most of the voluntary quits that do occur are among very young people, often involving the same person flitting from job to job.

If unemployed adult workers were trained and given a good job in a stable company, I doubt if there would be a serious problem of their quitting and going to another company. At least I would like to see some additional research findings before coming to a conclusion on this question.

Our own study of the mobility and turnover of trained workers indicates that this may not be quite as serious a problem as you seem to imply. Most of the turnover occurs among female trainees in very low-level, low-paid service occupations.

Mr. FRANKE. Well, I think the seriousness of it will vary with the labor market, and while it may not be so serious when you have unemployment rates of 5 percent, I think the chances are it will be more serious if you have a low unemployment rate and the risks of changing jobs are less.

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