Undereducated

By Jennifer Schramm Sep 1, 2011
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With workforces still lean, organizations continue to expect higher employee productivity. Employers are aware that productivity gains depend on a well-educated workforce with up-to-date skills. Many organizations say they want to invest more in training and development. Yet fewer are providing educational assistance. Whether this trend intensifies or is reversed depends on factors such as the cost of higher education, the rising demand for graduates and competing strains on benefits budgets.

In 2007, 68 percent of the HR professionals surveyed in the Society for Human Resource Management's (SHRM) annual benefits survey said their organizations offered educational assistance for undergraduate education, while 65 percent offered graduate education assistance. In 2011, these rates declined to 58 percent and 54 percent, respectively. The declines are being driven mainly by small and medium-sized organizations.

Cost is no doubt a factor. According to the most recent data from the SHRM Human Capital Database, the average maximum reimbursement for tuition/education expenses is $4,563 per year.

Further erosion of educational assistance benefits could add to what some education experts say is already a serious shortage of college graduates in the United States. A June study, The Undereducated American, by the Georgetown University Center on Education and the Workforce, posits that over the past 30 years, the demand for college-educated workers has outpaced supply. The authors, Anthony Carnevale and Stephen Rose, say the recession and slow recovery have obscured this undersupply as many young graduates struggle to find jobs. Nevertheless, they estimate that an additional 20 million workers with post-secondary education will be needed in the United States by 2025.

Eventually, more organizations may conclude that providing education assistance is a cost-effective solution to the shortage.

But uncertainties could influence such a decision. For example, will education costs continue to rise faster than the rate of inflation? If so, will these high costs discourage employers from offering assistance or lead them to reduce reimbursements? Even those organizations that continue to offer education benefits may find lower employee participation. Another factor will be the degree to which overall benefits budgets are strained by other competing costs, including rising health care costs. Yet another uncertainty is whether Congress will eliminate tax credits offered to employers with educational assistance programs.

With the importance of having employees with higher education and more-advanced skills growing, a complete elimination of employer-sponsored educational assistance programs is unlikely. Instead, organizations may alter their approach. They could encourage employees to obtain college degrees in ways that keep costs down—by limiting reimbursements or supporting less expensive forms of higher education, for example. Organizations may get more involved in their local community colleges to ensure that courses have direct business applications. And some employers are giving more support to online degrees and seeking more flexible education options that enable employees to optimize their time both on the job and in school.

The author is manager of the Workplace Trends and Forecasting program at SHRM.

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