Who Should Pay for Upskilling?

The most forward-thinking companies increasingly are viewing investments in employee education, training, and development not as a fringe benefit, but as a matter of economic competitiveness, reskilling their employees for internal mobility.

The COVID-19 crisis has left millions of displaced workers struggling to retool for pandemic-proof careers. Many of them are low-income heads of household, women, and people of color. Disproportionately impacted by the economic downturn—and already entering the recession carrying the crippling burden of student loan debt—they are facing an unfair and high-stakes proposition. They must decide whether and how they can afford the costs of training or short-term education programs in the hopes of seeing an economic boost down the road.

The challenge stems, at least in part, from a misalignment of incentives: the risks and rewards associated with training—and who pays for it.

Within the balance of power in education and workforce finance, learners have almost always shouldered a disproportionate amount of the risk. The proof is in the $1.5 trillion in student loan debt on the federal government’s balance sheet—not to mention the untold millions in consumer credit card and unsecured loan debt used to pay out of pocket for training and education not covered through federal loans. During the record growth and low unemployment of the late 2010s, when jobs were plentiful but talent gaps were persistent, that began to change, with companies feeling hyper-motivated to invest in developing and retaining talent.

Despite the COVID-19 pandemic, companies don’t seem to be throwing in the towel quite yet. Instead, corporate investment in employee education, training, and talent development has been remarkably resilient. Even amid the unprecedented economic collapse of the past year, U.S. companies still invested more than $83 billion in corporate learning and development in 2020 alone. And there’s growing evidence suggesting now is precisely the time for companies to continue doubling down on employee education investments.

Worth the Investment

Research on the impact of providing training as a benefit also suggests it’s worth the investment. More than 90 percent of employees say they would remain with a company longer if it helped them gain the training they needed to advance in their careers. A Lumina Foundation analysis of training programs provided by Discover Financial to its employees found that the company earned $1.44 in savings for each dollar spent on education reimbursement.

But employers understandably worry about the sunk costs of training. They fear workers might leave to work for a competitor after completing a program the company paid for. With nearly one million credentials now on offer in the United States, there’s still a lack of transparency around what works and what is the best fit for a company and its workers. Fortunately, a growing number of employers are finding ways to increase investment in employee education and training while reducing these risks.

Rocket Mortgage, for example, has partnered with colleges and universities to offer any team members who have worked with the company for at least six months the opportunity to go back to school for free. Companies such as restaurant chain Taziki’s Mediterranean Cafe provide English language training to their employees through online language learning programs that improve customer service and boost employee retention.

Increasingly, companies also are finding creative ways to make employee education investments “stickier,” such as offering retention bonuses for workers who complete upskilling programs and stay on the job for a certain period of time. The approach has gained traction in industries such as commercial aviation, long-haul trucking, and others where the costs of recruitment and training are significant and employee attrition and burnout run high. After weathering a year of major air travel slowdowns during the pandemic, United Airlines even took the step of acquiring its own flight academy in 2020, and recently announced plans to train 5,000 pilot, half of its pilot workforce, in-house and pledging significant tuition assistance benefits.

Risks vs. Rewards

It’s true: The most forward-thinking companies  increasingly are viewing investments in employee education, training, and development not as a fringe benefit, but as a matter of economic competitiveness, reskilling their employees for internal mobility.

Businesses are finding that the rewards more than pay for the risks of providing training and education to their workers. Research has shown that education programs such as these can help increase the number of high-quality job applicants by 25 percent while also reducing turnover. Chipotle, for example, has seen its turnover rate drop from about 150 percent to 5 percent among employees who are also Guild students. Employees enrolled in the program are 2.6 times more likely to be promoted.

As the country begins to emerge from the pandemic, employers are finding a new way to strike the right balance between the risks—and potential rewards—in upskilling and reskilling.

And the stakes for making the right employee education investments have never been higher. Bruised and battered from the economic havoc of the last year, employers now are facing an inflection point on how they think about employee education benefits as a business strategy. They can shrink away from the trend that began in the years before the pandemic, saving money in the short term by passing the costs and risks of upskilling to struggling workers.

Or they can renew their commitment to their employees—and the long-term health and competitiveness of their organizations—by implementing new models that rebalance the risks and rewards of training, aligning business success with the educational advancement of workers.

Beck Pryor, chief business development officer at Meritize, has more than a decade of experience in strategy and business development across a variety of sectors including social impact, technology, and finance. She previously served as director of Business Development for Digital Insights, a new business building digital tools for agriculture at Cargill, where she led strategy and growth through investments and partnerships, and several years in Cargill’s Corporate Strategy and Development group working on strategy and M&A across businesses from aquaculture to oil & gas. She also worked at Community Enterprise Solutions, an international development nonprofit. Pryor holds a Bachelor of Arts in Music Science from Columbia University and a Master of Business Administration from the University of Chicago Booth School of Business. Meritize is a leading provider of financing solutions for skills-based education and workforce development. The company’s proprietary merit-based lending program goes beyond traditional underwriting and uses an individual’s academic or military achievements to enhance credit evaluation and expand funding opportunities, resulting in increased access to educational funding and improved outcomes. In addition to its merit-based lending platform for students and training partners, Meritize works directly with employers on customized talent development solutions to help meet the demand for qualified workers. For more information, visit: www.meritize.com.