Workers at European companies that provide training earn on average 9% more than their counterparts whose employers do not invest in upskilling their workforce, a recent paper from the research project UNTANGLED finds.
For IT employees the gap widens to 17%.
Cecilia Jona-Lasinio and Francesco Venturini of the University of Perugia sought to measure the extent to which wage dispersion, where workers who do similar jobs are paid differently, is caused by firms’ propensity to invest in upskilling. The authors analysed spending both on general training and on IT-specific courses.
“Training is seen as a tool for improving employees’ opportunities and working conditions, and for increasing company productivity,” Cecilia Jona-Lasinio said. “The need for training increases with the pace of technological change. With adoption of new technologies and acceleration of automation, formal education and experience are not sufficient, so new competencies are required.”
While previous studies showed 16% of European workers are exposed to skill-displacing technological change, the paper from Jona-Lasinio and Venturini shows that the adverse effects of digitalisation can be also tackled at the company level through training policies.
The authors analysed data from 112,000 companies, employing between 10 and 999 workers, from twelve European countries, and found that 65% provided general training, with the highest proportions observed in France (84%) and the lowest in Bulgaria (26%). One-third of the companies also offered training in advanced digital skills, with the highest number in the UK, Norway, Germany and Denmark.
Data show that firms which invest in training tend to be bigger. The highest wages are paid by organisations where the spending on upskilling is the highest, and where the largest share of the workforce is trained. In terms of the type of training, i.e. internal or external offered by a specialised institution, the combination of both yields the best results, as it gives employees a mixture of company-specific skills and more general ones.
“On an individual level our study shows that people who want to earn more should be ready for lifelong learning, and search for employers who offer training,” – Francesco Venturini says. “Our study also suggests that the wage differences across firms might widen if laggard companies were unable to systematically organise training. We should keep this in mind when designing policies on innovation and support for companies.”
Cecilia Jona-Lasinio & Francesco Venturini (2022). Firm human capital investment, wage inequality and employment (Deliverable 5.4). Leuven: UNTANGLED project 1001004776 – H2020.
The paper is available here