Council for Adult and Experiential Learning (CAEL)
Lifelong Learning Accounts Needs and Benefits
NEEDS
The proposal for a Lifelong Learning Accounts (LiLA) Demonstration program is designed to fill two very critical gaps in access to on-going education and training:
Most working adults access training and education through their employers-whether on the job or through benefits
Access to these benefits is unequal. Those in low wage jobs receive the least training, and are least likely to receive training that will prepare to advance into higher lever jobs. At the same time they can least afford the cost of training and education outside of work.
Small companies, firms with low profit margins, and temporary staffing agencies are least likely to provide education and training benefits to their employees.
The public sector support for training and education for the existing workforce has been limited. It generally focuses on full time students (within specific age categories), dislocated workers, and public assistance recipients, or very job-specific training.
The following information illustrates the gap.
Overview
Research shows that not all individuals have equal access to employer-sponsored education and training benefits. Employees' access to education and training benefits may be limited by several variables, including: company size; job level; employment status; and income level. Following is a brief discussion of the impacts of these four variables.
Company Size
Over half of the entire US workforce is employed in small companies. Small businesses with fewer than 500 workers employ 53 percent of the private non-farm workforce and are responsible for 51 percent of the private gross domestic product. They are more likely to employ younger and older workers, former welfare recipients, and women (U.S. Small Business Administration, 1999).
Small companies generally have fewer resources to provide employee education and training than do medium and large companies. Of 114 companies surveyed by The International Foundation of Employee Benefit Plans, large employers were 2.2 times more likely to have educational benefits than small employers (under 500 employees). Of those companies without educational benefit programs, almost half were small employers (The International Foundation of Employee Benefit Plans, January 2000).
Employees who work in small companies have less access to tuition benefits. According to the Bureau of Labor Statistics, in 1994 tuition benefits averaged $30 per employee in small companies compared to $76 per employee in large companies.
Those who work in small companies often have fewer financial resources for education and training. Total hourly compensation (wages and benefits) in small companies averages just over $17, compared to almost $27 for workers in large companies (Bureau of Labor Statistics, March 2000).
Job Level
Employees in frontline and lower-level occupations have less access to company education and training funds than executives, managers, professionals, and technical employees. According to the U.S. Department of Labor, 70 percent of training dollars spent by companies is targeted to managers, professionals, and technical employees.
Of over 2500 adults enrolled in credential programs (i.e., seeking a college degree or vocational diploma), only 4 percent of those who worked as handlers, cleaners, helpers, or laborers received financial assistance from their employers, compared to 50 percent of those who were executives, administrators, and managers. (National Center for Education Statistics, U.S. Department of Education, June, 1999)
Employment statusM
Part-time employees have less access to education and training benefits than full-time employees. A study published by the U.S. Department of Education found that adults who worked part-time were less likely to receive employer financial aid if they enrolled in credential programs than those who worked full-time. Only 7 percent of adults who worked part-time received cash assistance from their employers if they took credential programs, compared with 37 percent of those who worked full time. (National Center for Education Statistics, U.S. Department of Education, June, 1999)
Income level
Employees with annual incomes below $25,000 have less access to employer education and training funds. According to the U.S. Department of Education, adults who earn less than $20,000 annually receive less cash support from their employers for participation in work-related education and training than do those earning more than $20,000. Additionally, employees with higher incomes who participated in credential programs were more likely to receive employer financial assistance for their educational expenses than were others. (National Center for Education Statistics, U.S. Department of Education, June, 1999)
EMPLOYEE BENEFITS
The LiLA demonstration offers several potential benefits for employees and employers, based on established knowledge of the role of education in wage progression, employee satisfaction, productivity and retention. Among the anticipated benefits:
1. Career flexibility. The average individual now will change careers seven times over the course of his or her life. Education can play an important role in facilitating these transitions by promoting development of new competencies and skills.
2. Wages. Education has a clear and compelling impact on salary levels and has become more critical over time. Entry-level wages for individuals with less education fell precipitously during the period between 1973 and 1999. In 1999, an individual without a high school diploma could expect to earn only $8.83 per hour, while in 1973, the same level of education would have commanded $11.64 in hourly wages. In 1999, an individual with a high school diploma could expect to earn 34% more per hour than someone who had not completed high school; a college degree boosted the hourly wage of a high school graduate by 74% (see attached Table, Economic Policy Institute, 2001).
3. Increasing skill requirements. The average skill requirement for many positions is increasing in both the short- and long-term. The top four U.S. occupations that provide compensation of $10 or more per hour (based on anticipated demand in the next five years) will require post-secondary skills. These include health therapists, nursing, computer systems analysts, and teachers (Educational Testing Services, 1999). In the next 20 years, at least 70% of jobs in America will require some technical education beyond high school.
4. Personal satisfaction. Individuals who have the opportunity to develop their skills experience greater motivation and higher morale (CAEL, 2000).
EMPLOYER BENEFITS
1. Increased productivity. Several studies have linked worker productivity increases to skill development. A 1996 study at the University of Pennsylvania estimated that one year of additional education typically correlates with an 8.6% increase in productivity measures. Manufacturing firms that instituted formal training programs experienced a 19% increase in productivity over a three-year period. The Upjohn Institute has reported 11-17% increases in productivity among companies participating in literacy programs (National Alliance of Business, 1995).
2. Improved retention. A 1999 Hay Group study of more than 500,000 employees in 300 companies found that, among 50 retention factors, pay was the least important. An American Society of Training and Development study of 2,000 respondents indicated similar results. Career growth, learning and development are cited as the three top qualities respondents gave for wanting to stay with a company (Training and Development, April 2000). A 2000 study by Ranstad North America reported that 37% of 6,000 workers surveyed cited tuition reimbursement as an important reason to stay in a job when considering a competing offer.
CHANGES IN REAL HOURLY WAGES FOR ALL BY EDUCATION 1973-99 (in 1999 dollars)
Changes in Real Hourly Wages for All By Education, 1973-99 (in 1999
dollars)
Year
Less than high school
High school
Some college
College
Advanced degree
1973
11.64
13.34
14.37
19.46
23.53
1989
9.73
11.86
13.32
18.68
24.08
1999
8.83
11.83
13.37
20.58
26.44
(Source: Economic Policy Institute, 2001)
CAEL is a national non-profit organization focused on life-long learning in companies, educational institutions, and communities. It assists employers, colleges and universities, and adult learners. For more information, contact Amy Sherman at asherman@cael.org or 312.499.2635 or go to CAEL's web site at: www.cael.org.