E C O N O M I C R E P O R T O F T H E P R E S I D E N T

through a period of unpaid training. In times of rapid technological progress,workers may be unaware of the value of new training or consider it too risky: thesame rapid change that makes the skill valuable today may make it obsoletetomorrow. Finally, again as with investments in formal schooling, individualworkers may fail to invest in training because they do not take account of thefull social benefits of training in their decisionmaking.All these underinvestment scenarios provide reasons for governmentpolicies to encourage general training. One way in which governmentattempts to encourage investment in training is by allowing employers todeduct from taxable income the tuition payments for schooling they providefor their employees. Other policies are discussed below. First, however, it isworthwhile to review the evidence on the value of firm-based training.Firm-Based TrainingPrivately provided training by firms themselves is the primary mechanism bywhich workers receive training in the United States, and there is evidence thatthis firm-based training is growing. Although this source of training is difficultto measure, a number of surveys have been conducted and agree on several conclusions.First, training is very widespread: in 1994, 81 percent of all establishmentsoffered some type of formal training, and 57 percent said that they hadincreased the amount offered since 1991 (only 2 percent reported providing lesstraining). Second, firms with more than 1,000 employees are more likely toinvest in training than small firms; virtually all large firms report that they offerformal training. This may be because smaller firms have trouble financingcertain fixed costs associated with training, or because it is more difficult tomeasure the informal training that takes place in smaller firms. Third, there isconsiderable variation across industries, with a higher incidence of trainingprovision in nonmanufacturing than in manufacturing firms. Fourth, establishmentswith more highly educated workers (which also tend to be larger establishments)are more likely to provide training. Finally, training is more likelywhen the firm is already making other investments, such as investments incapital, or in new organizational practices, such as self-managed teams or other“high-performance” work practices.These data suggest that firm-based training becomes more prevalent asfirms experience rapid technological progress, but much training is specific tothe employer and is not of a general nature. For example, training in basic literacyand numeracy, in computer skills, or in teamwork is less common thantraining in safety procedures or in new, firm-specific production methods.Only 27 percent of all establishments provide training in basic educationalskills for their workers, whereas 53 percent invest in computer-related skillsand 82 percent invest in safety training. Although more workers receivetraining from their employers than from government-sponsored programs,158 | Economic Report of the President