Positive impact of training on productivity in food industry
A study published in 2008 uses company-level panel data on training provided by employers in order to estimate its impact on productivity and wages, especially in the food industry. The productivity premium for a trained worker is estimated at 23%, while the wage premium of training is estimated at 12%. The study concludes that, by training its workers, a company can realise an extra added value per worker amounting to €1,385 higher than the cost of the required training.
In a study by Konings, Sels and Vanormelingen (2008), commissioned by the Sectoral Training Fund in the Food Industry (Initiatieven voor Professionele Vorming van de Voedingsnijverheid-Initiatives de Formation Professionnelle de l’industrie alimentaire, IPV-IFP), the authors investigated the productivity effects of company training.
Data used in study
Belgian companies are obliged by law to submit a supplement to their annual report which contains information on various elements of training, such as the proportion of workers who received training, the number of hours they were trained and the cost of training to the company. These data make it possible to measure the impact of training on both wages and productivity at company level. Based on these data, the study can infer whether trained workers are paid the value of their marginal product or not. The econometric modelling based on these annual account data of Belgian companies for the period 1997–2006 is supplemented with a literature review on the performance effects of training.
The literature review shows that the impact of company training on a range of human resources (HR), operational and financial performance indicators can be very different. However, in general, it appears that company training has a positive influence on job satisfaction and employee commitment, as well as on productivity and product quality.
Figures on training from the annual accounts of Belgian companies – taken from their social balance sheet – show that, in particular, large enterprises offer training to their workers. As a result, only 5% of the companies provided training to their workers in 2006, resulting in 30% of Belgian workers participating in training. The share of total training costs as a proportion of overall labour costs was 1%. The most training-intensive sectors of the economy included the chemical industry, the energy sector and telecommunications. On average, workers in industry are offered training more often than workers in the services sector.
In the food industry, 40% of the workers completed training in 2006. The share of training expenses amounted to 0.8% of the total labour costs in the sector.
In comparison with other Belgian industrial sectors, the food industry scores an average level concerning the number of trained employees and slightly below average concerning training costs. This indicates that the training cost per employee is on average lower in the sector. However, the share of training costs as a proportion of total labour costs and the total amount of workers who completed training throughout the year has risen sharply in recent times in the food sector compared with other industries.
In addition, between the subsectors of the food industry, substantial differences exist in the number of employees being trained and in the total training investments of companies. The most training-intensive subsectors are the dairy and beverage industries.
Based on econometric modelling, the study furthermore shows that a trained employee is on average almost 4.2% more productive than an untrained employee in the food industry (while controlling for variables like capital intensity of the company). The gross earnings of a trained employee are on average 2.4% higher than the gross earnings of a worker who has not been offered training. These results suggest that the average company in the food industry can increase its competitive advantage by investing in the training of workers.
Combining these results leads to the final conclusion that a company can realise an extra added value per worker amounting to €1,385 higher than the cost of training.
Later study confirms findings
In a more recent paper, Konings and Vanormelingen (2009) confirmed and expanded their analysis to the whole Belgian private sector. Again, the findings showed that training has a positive impact on productivity and wages. The marginal product of a trained worker is on average 23% higher than that of an untrained worker while wages increase by 12% as a result of training. Among the manufacturing subsectors, the largest productivity gains can be found in the chemicals and rubber and plastic industries. Finally, the study’s authors found no differential impact of training on the productivity of male versus female workers; however, wages increase more in response to training for women than for men.
Konings, J. and Vanormelingen, S., The impact of training on productivity and wages: Firm level evidence, LICOS Discussion Paper 244/2009, Leuven, LICOS Centre for Institutions and Economic Performance, Catholic University of Leuven, 2009.
Konings, K., Sels, L. and Vanormelingen, S., L’effet de la formation en entreprise sur la productivité dans l’industrie alimentaire (128Kb PDF), Brussels, IPV-IPH, 2008.
Guy Van Gyes, Higher Institute for Labour Studies (HIVA), Catholic University of Leuven (KUL)