Invest in human capital: a combined employee and employer’s perspective

Investments in human capital through training and courses are an essential tool to maintain or increase the competitive advantage of companies and are of great importance to increase the employability of employees. Despite the proven effectiveness of training, various studies show that participation in training is not evenly distributed among employees. Especially older employees participate less. What explains this lower participation?

This design paper provides insight into the extent to which older employees in the Netherlands are prepared to invest in their human capital and to what extent employers are prepared to invest in to older employees. To this end, we use two stated preference experiments and surveys that have been conducted in collaboration with ABP. These experiments contain vignettes that measure causally the extent of age discrimination in training allocations, as well as the determinants of the willingness of employees to invest.

Based on the results of both experiments, we can conclude that both employer and employee behavior are responsible for the age-decreasing participation in education and training courses. Nevertheless, the results for employers’ discrimination are somewhat stronger. The decline in employee motivation to follow a course with age is fairly flat until age 60. Our results lead to some concrete policy recommendations:
– The relationship between training opportunities and age is much flatter for employers who offer a relatively large number of permanent contracts and also have many development interviews with their employees. This indicates that stable work situations, which focus on a longer employment relationship and sustainable development, have a positive effect on lifelong learning. Both employers and employees are then encouraged to think about which investments are needed to make the existing employment relationship successful in the long term. Our results therefore suggest that more flexibility in the labor market and the abolition of the strong protection of the employment situation of older employees can sometimes be counterproductive for life-long learning. Employers receive fewer incentives to continue investing in the human capital of their older employees.
– The motivation of employees to invest in their human capital can be further encouraged if they can also use the skills they train in their private lives. In addition, autonomy in the choice of subjects for the course is crucial for motivation. Employees are much more motivated to continue investing if they are given co-determination.
– Career plateauing is a crucial factor that demotivates older employees to continue investing. If one aims at encouraging lifelong learning over a longer lifespan, one will also have to adjust career profiles so that employees still have the feeling that investing in their human capital is rewarded.
– Older employees are less willing to sacrifice their free time for attending courses and courses due to a higher need for recovery. For the stimulation of lifelong learning, it is therefore important that older employees are offered training and courses as much as possible during working hours.