Worker training helps strengthen a region’s manufacturing sector

As the Council on Foundations observes Community Foundation Week, this November 12-18, we will be posting stories from across the country of members who exemplify the ability of place-based philanthropy to drive innovation and strategy. If you would like your organization featured here, contact john.cochrane@cof.org.

Andrea Lubov, PhD, recently completed a follow-up to WCI’s 2007 Workforce 2020 study “Using labor turnover to measure the cost-effectiveness of labor training.”

Labor turnover is a hidden, but very real, cost of doing business. It could mean overtime costs to the firm until a new employee is hired and working up to speed. There are also direct costs of hiring someone new—the personnel department costs, advertising, interviewing, training, and the costs of an employment agency or a search firm. In west central Minnesota, West Central Initiative (WCI) has possibly discovered a new way to reduce these costs. Through its Workforce 2020 program WCI is providing funds to support skills training for employees in manufacturing firms.

Employers want to have a well-trained workforce. More training means that the workforce is better prepared, more productive and less prone to accidents. At the same time, employers are sometimes wary of providing training for their employees, fearing that they will take their new skills and seek employment elsewhere in search of higher wages. The lower labor turnover in the west central Minnesota manufacturing sector suggests the opposite is true. Labor turnover among manufacturers providing employee training through the WCI Workforce 2020 program are experiencing statistically lower turnover than manufacturers in the region who are not participating.

Like its predecessor in 2007, this study finds that firms that received training support have considerably lower turnover than firms that don’t, even though fewer employees were trained and the nation was in a recession.

Labor market statistics from 2006-2011 in the region showed that:

· Employment in the manufacturing sector is growing relative to manufacturing employment in the rest of Greater Minnesota;

· Manufacturing unemployment is lower than in the rest of Greater Minnesota and employment fell by less during the 2008–2009 recession; and

· While average weekly wages for manufacturing employees are lower than in the rest of Greater Minnesota combined, they are growing faster.

Did fewer employees trained make a difference? The study found that during the 23 quarters of the study period, average labor turnover among the firms participating in training programs was lower in 22 quarters and the difference in turnover rates was statistically significant in all 22 quarters.

Andrea Lubov, PhD, authored the Impact of West Central Initiative’s Subsidy of Employee Training Programs in West Central Minnesota for the West Central Initiative.