The return on investing in developing soft skills of the lowest paid workers

August 23, 2017 Richard Justenhoven

image low paid worker

Impact on performance of investing in development

For employers of low wage workers in countries such as India where costs are monitored closely in order to deliver profit, employers tend to perceive that there is little to be gained in investing in teaching their employees basic skills.

But an experiment in India suggests that there is a pay-off – both for the worker and the company.

A randomised, controlled trial in five factory units of India’s biggest garment export firm in Bangalore included over 2,700 workers.

The study

The study set out to look at the impact of soft skills training on outcomes including staff retention, productivity, and salary – as well as changes in the workers’ knowledge and behaviour and their personality traits. A programme of life skills training designed by Gap, Inc. called Personal Advancement and Career Enhancement (PACE) was given to female garment workers, teaching some of the softer skills needed in life and at work: communication; time management; decision making; problem solving; and financial literacy. Workers within and across production lines were split randomly into PACE training and the control (no PACE) groups.

Results from the study

The study showed that PACE-trained workers as:

  • Showing higher self-regard and sociability
  • More productive post-training
  • Able to deal with greater complexity of sewing operations
  • More likely to request training in technical skills
  • More likely to report that they expect a promotion within the next six months
  • Having higher retention levels during the training programme
  • More likely to save for their children’s education and use state-sponsored health care and pension schemes

Return on investment

Nine months after the completion of the PACE programme, the researchers looked at the net rate of return of the company’s investment in the training; it was around 250%. The researchers comment that the high return was due to the relatively modest costs which stopped accruing after the programme was completed and yet the benefits gained through productivity continued to increase. There was, the researchers found, also a spill-over effect, with those ‘untrained’ workers who were on the same production lines as those being ‘trained’ showing an increase in production greater than the control workers.

This study suggests that programmes that invest in low-wage employees such as PACE have the potential to both increase the skill sets of workers and be profitable for firms.

Reference:
Adhvaryu, A., Kala, N., & Nyshadham, A. (2016). Soft Skills to Pay the Bills: Evidence from Female Garment Workers. 58p

About the Author

Richard Justenhoven

Richard Justenhoven is the product development director within Aon's Assessment Solutions. A leading organizational psychologist, Richard is an acknowledged expert in the design, implementation and evaluation of online assessments and a sought after speaker about such topics.

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