Last month, the Aspen Institute Future of Work Initiative and General Assembly (a private education and training provider) convened a roundtable discussion on Capitol Hill, bringing together experts from the public and private sectors, to consider strategies to spur greater investment in human capital. Rapid advances in technology, including artificial intelligence and automation, are transforming industries and reshaping the skills necessary to secure and keep a job. In response to the changing nature of work, workers and employers will need to develop new systems that help build skills and competencies that are not easily automated. We believe that federal and state policymakers should respond to these challenges by developing policy solutions that encourage greater investment in human capital.
Better preparing our workforce for the jobs of the future requires both private sector innovation and effective public policy. The challenge is significant enough that one organization or one sector won’t be able to solve it alone. Diverse perspectives are needed in order to develop new solutions that meet the challenges ahead. At the roundtable, business leaders who are upskilling and reskilling their workforce outlined these efforts, and explored how policy interventions could support deeper investment in human capital development.
The discussion highlighted some of the challenges that public and private sector organizations must consider:
- The opportunity cost of training: In the private sector, a key challenge is having business leaders move toward training opportunities that allow employees to participate in skills development and training during work hours, rather than on their own time. More broadly, employers may view the time spent on developing new skills as an additional cost to the business rather than a long-term investment in the company’s talent. And at the individual level, there is not only the financial cost of pursuing training – but also what a worker is sacrificing to participate in a training program, which could include time with family.
- Who to incentivize – the employer or the worker? A core question for policymakers is whether to target incentives towards employers or workers. Will companies or individuals be more responsive to well-designed incentives? Many workers find that incentives to pursue education and training programs are not sufficient if they don’t understand whether the program will lead to a better paying or new job. Similarly, companies need to understand that an investment in their workers will have benefits for the company. For these reasons, incentives for additional investment in the workforce should be coupled with efforts that help individuals and companies better understand the outcome associated with these efforts.
- Good policy design depends on good data: When looking at the ways in which work is changing, it’s important to recognize the differences that arise across local and regional labor markets. The skills that are needed to succeed in one part of the country may look dramatically different from those needed elsewhere. In an effort to highlight these regional differences, Walmart partnered with McKinsey to publish a new report “America at Work: A National Mosaic and Roadmap for Tomorrow,” which examined community resiliency in more than 3,000 counties across the United States in the context of their capacity to address the changing nature of work. Access to this type of local data can help inform more effective and targeted policy solutions.
When it came to specific solutions that might help build a more competitive and skilled and resilient workforce a number of promising policy ideas were discussed, including:
- Worker Training Tax Credit: Helping employers provide broader access to education and training opportunities should be a key public policy objective. Unfortunately, the available data suggest that businesses have been investing less in their workers, not more. From 1996 to 2008, the percentage of workers receiving employer-sponsored or on-the-job training fell 42 percent and 36 percent, respectively. To incentivize businesses to make long-term investments in their employees, one potential solution applicable at the state or federal level is the creation of a new Worker Training Tax Credit, modeled on the popular R&D tax credit. This Worker Training Tax Credit would target resources to training low- and moderate-income workers.
- Lifelong Learning & Training Accounts: While employers play a critical role in helping workers develop the skills necessary to succeed, there are many that either don’t work for an employer that provides those types of opportunities, or is self-employer as a freelancer or independent contractor. Access to training should not limited to those fortunate enough to work for a company that invests in training for its workers. One solution to this problem is the creation of worker-controlled Lifelong Learning and Training Accounts (LLTAs). These accounts would be funded by workers, employers, and government, and could be used by workers to pay for education and training opportunities over the course of their careers.
- Updating the accounting treatment of human capital investments: Another possible lever is the creation of new accounting models that would consider training as an investment, rather than as an expense. Today, the costs of investments in physical capital, such as a new plant or new equipment, are spread over the life of the asset in order to match the cost with the benefit over time, and to ensure accounting neutrality between one-year expenses and long-term investments. But the costs of human capital investments show up entirely in the year in which they are incurred. This disparity in accounting treatment creates a bias in favor of physical investments and against human capital investments. The Financial Accounting Standards Board should explore how financial accounting standards can be revised to treat investments in human capital similarly to investments in physical capital.
These types of conversations are critical in better understanding the challenges ahead and the promising solutions to build a workforce prepared for the jobs of the future. But we believe that to rise to the challenge, we need private and public sector leaders to do more than discuss – we need leaders to act, testing new measures and implementing innovative policies.
Alastair Fitzpayne is the Executive Director of the Aspen Institute Future of Work Initiative. Liz Simon is the Vice President of Legal & External Affairs at General Assembly.