HRSDC-IC-SSHRC Skills Research Initiative

Working Paper Series

Firm Provision of Training: Establishment Level Analysis

by Richard Chaykowski and George Slotsve.

• Request this document

Abstract

Human capital formation through training is acknowledged widely as a major factor underpinning worker and firm productivity. The shift in Canada in favour of knowledge-based industries requires an adequate supply of trained workers with the required levels and types of skills. Employer-based formal and informal training is a major source of supply of skills.

Our analysis builds upon previous work in three ways. First, we estimate the classroom and on-the-job training decisions as being correlated and simultaneously made, whereas previous analyses tend to estimate these training outcomes separately. Second, we estimate the training expenditure equation taking into account the bivariate selection mechanism. Finally, we specifically examined the effect of collective agreement clauses and work organization practices, in addition to the variables controlled for in previous studies.

We estimate our model using data from the Workplace and Employee Survey (WES). WES is a longitudinal, matched employer-employee survey that has information on the number of employees receiving training, the type of training provided, training expenditures and the characteristics of employers and employees.

We find that not distinguishing between the classroom training decision and the on-the-job training decision masks important differences between the decisions. Consistent with earlier results, we find that larger firm size increases the likelihood that an establishment offers classroom or on-the-job training. However, we also find that larger establishments spend less per employee when offering only classroom training and when offering both classroom and on-the-job training. Establishments in a number of service sector industries notably business services, finance/insurance and communications/utilities have a higher likelihood of offering both classroom and on-the-job training and a lower likelihood of not offering any training; this is also the case for establishments in the construction industry. Other factors found to affect the provision of training include the occupational composition of the firm's workforce (a greater representation of professional and technical occupations increases the likelihood of training), process and product innovation (more innovative firms are more likely to train), employee turnover (higher turnover increases the probability of providing training), market characteristics, and firm-level factors including clauses in collective agreements, alternative forms of work organization and the presence of labour-management committees.