Amazon, Facebook, Home Depot Among Companies Paying to Train Workforce

In the midst of a tight labor market and historically lackluster financial support from federal and state governments, major corporations are increasingly focusing on closing a perceived U.S. skills gap -- investing in training and upskilling programs to improve the skills of current and prospective employees rather than initiating layoffs and recruiting new workers.

Employers from a variety of industries -- including Amazon, Facebook, Chevron, Home Depot and Siemens -- have in recent years announced plans to collectively pump hundreds of millions of dollars into domestic skills training courses; partnerships with high schools, community colleges and universities; or other types of public-private partnerships.

Amazon pledged last year to improve the skills of 100,000 U.S. employees at an estimated cost of more than $700 million. In January, Nationwide announced plans to spend $160 million over five years to improve employees' digital literacy.

The corporate investment trend -- often focused on so-called middle skills positions for which specified training is essential but for which a four-year university degree may not be necessary -- is a reversal from a longstanding corporate mentality that "it really should be the government or the universities who are doing this," says Matthew Bidwell, a management professor at the University of Pennsylvania's Wharton School.

"U.S. corporations actually paying to train people is somewhat unorthodox, because it's something they've historically resisted," he says, saying there has been reluctance on the part of businesses to justify investing in skills training. "But saying, 'This is a government or university problem to solve,' means there's probably nothing that's going to happen for 5 or 10 years. Waiting for the government or education isn't going to fill jobs by next quarter."

And therein lies the rub for corporations hoping to maximize shareholder value in the short term. With the U.S. approaching its 11th straight year of economic expansion and the labor market maintaining an unemployment rate that hasn't ticked higher than 4% in nearly two years, there aren't enough unemployed but qualified candidates to go around.

According to data from the Bureau of Labor Statistics, employers were looking to fill 6.4 million openings in December, but the government estimates only about 5.7 million Americans were unemployed and actively looking for work that month.

And more than 80% of human resource professionals surveyed as a part of a Society for Human Resource Management study published last year said they "had trouble recruiting suitable candidates in the past 12 months." Three-quarters of that group cited a skills shortage as an exacerbating factor. More than half said the U.S. skills gap has worsened in the past two years, and middle-skill and high-skill positions, in particular, were cited as being particularly problematic openings for which to recruit.

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"If you need skills, you need to go out and hire, and that creates problems. Hiring is quite expensive. You don't know how long it's going to take you to find someone with certain types of skills," Bidwell says. "There's a decent argument that if you upskill, you don't have all these other aspects to consider. You know more of what you're getting."

Upskilling initiatives vary widely based on individual companies' needs. Guardian Life Insurance Company announced a widespread digital skills initiative in 2018 to provide employees greater digital and data literacy. Home Depot announced a $50 million initiative a few months later to support skills trade professions -- or, ostensibly, its current and future customer base.

"Really thinking about the (return on investment) of upskilling is important," says Amanda Bergson-Shilcock, a senior fellow at the National Skills Coalition. "When your company does provide some investment in your skills, that can get rewarded with greater loyalty. Turnover costs go down. They can bill you out at a higher rate, so their revenue goes up. There are all kinds of positive outcomes that can come from upskilling."

It's also been a necessity for companies to invest in training programs, Bergson-Shilcock argues, because federal workforce investment has fallen in recent decades. The National Skills Coalition estimates Workforce Innovation and Opportunity Act investments -- which were enacted as part of 1998's Workforce Investment Act to direct federal funds to workforce development programs -- are down 40% since 2001, with funding for Perkins Career and Technical Education programs down 28% over the same window.

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"Unfortunately, federal investments in workforce training have been cut, in inflation-adjusted terms, over the last 10 to 15 years," she says. "Where it's particularly hard is for small- and mid-sized employers. They don't have the bandwidth to run in-house upskilling."

That's forced companies to operate "with one arm tied behind their backs," Bergson-Shilcock says, because the shortage of government funding has meant public-private partnerships -- one of the more traditional vehicles through which skills training has been funded over the years -- are increasingly reliant on private support as opposed to public dollars.

And in some areas, tight state and local budgets further tie up resources that could be directed toward upskilling workers.

"There's wide variation. There are certainly some states that have made investments in worker upskilling," Bergson-Shilcock says. "Some of them are states that have pretty robust budgets, like California. When you're the fifth-largest economy in the world, you can do things like that."

Democratic Gov. Gavin Newsom of California last year unveiled the state's Future of Work Commission, tasked with figuring out how best to prepare Californians for the jobs of tomorrow. His 2020-2021 budget includes a $900 million teacher training allocation and calls for the creation of a new Department of Better Jobs and Higher Wages to consolidate the state's workforce training and investment efforts.

Meanwhile, Democratic Mayor Eric Garcetti of Los Angeles in October unveiled LA MADE 4.0, a partnership program to train manufacturing workers for more technology-focused roles. And the state government partnered with IBM in November to roll out a technology apprenticeship program to address "a statewide skills shortage," according to a press release accompanying the announcement.

"I like to remind folks that 1 in 10 Americans is a Californian. When California does something, it's not just one of the 50 states doing something. It's hitting a lot of people when California does something," Bergson-Shilcock says. "And then there are some states like South Carolina that have done really creative things without enormous amounts of money."

She points to Apprenticeship Carolina, a program run out of the South Carolina Technical College System that helps local employers set up training and apprenticeship programs. More than 33,000 apprentices have benefited from the initiative, according to the program's website. The program helps companies navigate the bureaucratic "red tape" and human resource logistics required to get apprenticeship and training programs off the ground, Bergson-Shilcock says.

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She says the initiative has been a boon to small- and mid-sized businesses because they often lack the resources necessary to launch training opportunities that larger companies with more substantial budgets can provide.

"That was really borne out of the recognition that, yeah, states can do some tax credits to encourage employers to set up apprenticeships. But for a lot of employers, a tax credit is not super motivating," she says. "Some states are doing it with money. But more of them are doing it with technical assistance and support, especially for those small- and mid-sized businesses who may not have a dedicated HR person."

But even in states such as California and South Carolina -- where state and local governments are working to address skills mismatches in the workforce -- corporate participation is crucial to ensuring local labor markets are stocked with the types of employees that businesses need.

However, whether that trend holds up if the economy worsens, the unemployment rate rises or the scarcity of qualified workers dissipates is a question to which neither Bidwell nor Bergson-Shilcock has an answer. Both caution that employer interest in upskilling appears to be largely tied to the state of the economy. Without more meaningful governmental contributions, the upskilling landscape could look considerably different in the years ahead, they say.

"Where I would worry is: Is this a response to a particular set of circumstances?" Bidwell says. "We have seen periods like this. It looked like this around 1999 and 2000. It looked like this in the early '70s. But those were pretty short periods."

Andrew Soergel is a senior writer covering economics for U.S. News & World Report. He joined the company in 2014 as an intern in the News section, and began covering the economy, trade, and workforce and labor issues full-time in 2015. He previously wrote for the Washington and Lee University Law Alumni Magazine, and was an intern with The Roanoke Times and WPXI-TV. He is a 2019 Economics of Aging and Work Fellow of AP-NORC Center for Public Affairs Research. Follow him on Twitter, connect with him on LinkedIn or email him at asoergel@usnews.com.