In a Changing Career Landscape, Employers and Workers Need a New Social Contract for Retraining

Aug 22, 2019

There’s a growing consensus that today’s economy is increasingly defined by the need for continuous learning. What hasn’t been worked out is who should bear the responsibility for this ongoing re-training—the employee or the employer, or some mix of the two? And what role should higher education play?

The reality in the tech sector is that skills have a short shelf-life. Software engineers must re-develop their skills every 12 to 18 months. In the finance and transportation industries, workers are likewise experiencing greater “skills instability”—or the need for more continuous retraining for workers to keep up in the increasingly digital economy—according to research from the World Economic Forum.

In a national survey of HR leaders that we at Northeastern University conducted last year, 64 percent of employers said that they expect the need for continuous lifelong learning will demand higher levels of education and more credentials in the future.

Recognition of this new reality is what’s fueling the growth of online courses and programs, bootcamps, apprenticeships, graduate-level education and other forms of upskilling and professional credentialing.

Looking to Employers

In a market that demands more frequent upskilling and retraining, workers are looking to their employers for support. In Northeastern’s recent international survey conducted with Gallup, 70 percent of Americans indicated that in the event that their current education or skills became outdated, they’d prefer on-the-job or other training offered by their employer. Similarly, when asked who they believe should pay for retraining programs for workers who lost their jobs because of new technology, 73 percent of Americans said employers.

However, there is a significant disconnect here: many U.S. employers don’t view such retraining as their responsibility–and there is evidence that many employers are, contrary to the conventional wisdom, unfortunately disinvesting in professional development in an age of diminishing employee and corporate loyalty, greater mobility and gig work.

According to PWC’s 2018 Global CEO survey, only around half of U.S. CEOs said they believe it is their responsibility to retrain employees whose tasks and jobs are automated by technology—compared to 85 percent of CEOs in Germany, and 84 percent in China. And, in our Gallup survey of American adults, only 29 percent of Americans said they believe that large businesses are doing enough to address the need for career-long learning and training.

Many would point to the high-profile announcements of expanded tuition-assistance programs from companies such as Starbucks, McDonald’s, Walmart and Chipotle as evidence of increased employer investment in employee development. This trend is laudable, and it is having an impact—but it masks a much more mixed picture.

The overall share of employers that provide undergraduate- or graduate-level tuition assistance benefits to employees is actually down in recent years—standing at 56 percent of employers in 2019, compared to well over 60 percent in 2008, and 79 percent back in 2002, according to annual tracking surveys from the Society for Human Resource Management. The typical reimbursement amount is down as well.

The situation is not much brighter when it comes to employers’ internal training budgets. The Association for Talent Development’s most recent 2018 state of the industry report found that talent development investment rose to $1,296 per employee—but the 1.7-percent year-over-year increase was less than the rate of inflation.

With the need for skill and talent development arguably the greatest ever, U.S. employers’ investment isn’t surging—it’s treading water.

In decades past, when employees tended to remain with the same firm for many years, employers were often the stewards of employees’ professional development. In today’s open market, more responsibility and risk falls on the employee.

This shift can be likened to what has played out in retirement benefits – a decades-long evolution from the defined-benefit employer-provided pension, to the shared-risk model of the 401(k). Just as workers today are expected to save and direct their retirement investment with some help from their employer, they’re now asked to do more in guiding their own professional development.

Changing Employer-Employee Social Contract

This changed landscape demands more attention, dialogue and new solutions.

First, we need better data on employer’s internal and external investment in learning and development—to cut through the noise and better understand the reality of the “skills gap.” Compared to the wealth of education and employment statistics that are available, the federal government stopped broadly surveying the state of employer training in 1995.

We also need to better understand the shelf life of skills. Employers need to develop new policies and practices around professional development. And business leaders need to articulate the business case for employer-provided training, which after all brings value to the employer as well as the employee.

In a world where learning on the job is more fragmented—and potentially spans multiple employers—it is also imperative to have an ecosystem that allows for the tracking and recognition of competencies and experiences, and the potential articulation into academic credit.

Microcredentials that stack into degrees, fitting together like lego blocks into larger wholes, could be key. After all, employers may be likely to pay for access to online course libraries and job-focused microcredentials rather than longer degree programs. Educational credentials—increasingly becoming digitized—should be more portable and transparent, so learners can better document and signal their competencies to employers across job contexts.

Colleges and universities also need to wake up to the opportunities and the threats posed by the changing world of work. Indeed, the markets for online education and post-baccalaureate learning are growing—but they are increasingly competitive.

Higher education institutions also have a great deal of adaptation and work to do to be perceived as the provider of choice: our recent Gallup survey revealed that workers have a low level of confidence in colleges’ ability to prepare graduates for the current and future workforce. Colleges are also facing new competitors backed by the wave of edtech investment going into postsecondary professional education and workforce training. Yet many of these new entities also represent potential partners and platforms and enablers for colleges.

More thoughtful government policies that reflect today’s realities are also needed. Only 22 percent of American adults believe government is doing enough to address the need for career-long learning and training—and perhaps this will emerge as a more important political issue in 2020. While careers are extending and upskilling is becoming a necessity, the vast majority of education spending is concentrated on those younger than age 25.

Tax incentives could be provided to incentivize employers’ investment in their workforce. Another solution could be new types of lifelong learning accounts that could enable employees and employers to save for learning costs on a pre-tax basis, similar to the concept behind 401(k)s and 529 plans. Consider also that the cap on the tax-free maximum employer tuition assistance benefit—$5,250—is not indexed to inflation and has not been increased since 1986, and this incentive has often faced the chopping block during periods of tax reform.

There are encouraging signs that leading employers are recognizing they have a larger obligation to prepare employees for the new world of work. Just this week, the Business Roundtable, an influential national association of CEOs, made headlines by releasing an updated “Statement on the Purpose of a Corporation,” signed by 181 CEOs. The statement centered on the idea that businesses should no longer focus principally to serve shareholders—but instead focus on all stakeholders, including employees. One of its key tenets is a commitment to investing in employees: “supporting them through training and education that helps develop new skills for a rapidly changing world.”

This recognition is a step in the right direction. But it’s just one part of the work ahead in preparing our society for a more rapidly-changing job market and learning landscape.


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