Tracing the connections: short-termism, training and recession

It is frequently claimed that some employers act to maximise short-term gains at the expense of long-term rewards, hence reducing the level of employee training. In addition, during a recession such employers are expected to be the keenest to make further cutbacks. This paper examines the empirical validity of these two claims by examining the links between three proxies for short-termism and the incidence and volume of training activity as well as recession-induced changes to training expenditure and the proportion of the workforce trained. The results are based on establishment-level data taken from 67,599 private sector employers in England in 2009 and enriched with data from other sources (with sample sizes falling accordingly). The results suggest that short-termism plays a role in explaining both the level of training activity supported by employers and its sensitivity to the economic cycle. However, the results are rather ambiguous with one of the proxies suggesting that, contrary to theoretical reasoning, training incidence and volume is higher, not lower, in establishments which belong to stock market listed rather than unlisted enterprises. To make further analytical headway, then, direct measures of short-termism are needed rather than indirect, albeit improved, measures of the type used here.