not be aware of the magnitude of the increase, or they may not know how long the current high benefits will persist.

  • Greater social than private benefits to education. It is possible that the value placed on training by society as a whole exceeds the value to individual workers and firms because of “externalities.” (For example, increases in training may increase income and therefore reduce dependence on public assistance programs.) As a result, without government subsidization, firms and workers will underinvest in training, relative to the level of investment desired by society as a whole, since they will not reap the full social benefits (only the private benefits).

Training for IT workers can be undertaken by both workers (as described above) and firms. But because firms are hesitant to invest in their workers' general skills given that the workers might leave before the firm can recoup its investment, the committee focused on approaches that have been used or proposed for government to compensate the employer for part of the costs that result from training an employee. 10 Potential government incentives include the following:11

  • Tax credits. If firms were permitted to take tax credits for qualified training activities, the cost of training to firms would be reduced, and they would likely expand their use of training. Tax incentives have been used in the United States to encourage expanding employment, hiring workers with particular characteristics, expanding investment, and expanding research and development. Evaluations of these activities have shown mixed results, so the design must be carefully crafted to achieve the desired results and preclude windfalls.

  • Subsidized loans. The federal government already offers subsidized loans for education, disaster relief, and establishing or operating small businesses. For several years, the U.S. Department of Labor has been exploring the feasibility of a loan program to encourage more employer training.

  • Direct grants to employers for training. Several states have operated training grant programs for a number of years. States that operate such

10  

Such actions may also help to relieve perceptions of age discrimination on the part of certain older workers. Because companies may be reluctant to hire individuals who have retrained themselves in new technologies but lack experience in working with them in an on-the-job setting, recent college graduates who have had internship opportunities to obtain work experience that supplements classroom training have an advantage over older workers who would rarely have such opportunities.

11  

See Barnow, Burt S., Amy B. Chasanov, and Abhay Pande. 1990. Financial Incentives for Employer-Provided Worker Training: A Review of Relevant Experience in the U.S. and Abroad. Washington, D.C.: The Urban Institute, March.



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