To the “Three R’s” Add One More: Writhing

Companies will feel ever more pain as the shortage of technically skilled workers intensifies.

Money Isn’t Everything

Sounds like Econ 101 on paper, but in the real world it may not be so simple. To begin with, who wants to be the first to raise the wage in an industry or region? “Once it starts, it becomes the bar for everyone, and that’s a tough position to be in,” says Doherty of MI Windows and Doors.

American Electric Power’s Tierney adds that success can hinge on factors other than pay. For example, his company plans to open a new facility near Hope, Arkansas, in 2012. To make sure it has a sufficient talent pool, the company has partnered with a local community college on a training program it hopes will provide half of the 110 skilled workers it anticipates needing.

And, says Saul Basch, CFO of HSB Group, an insurer and quality-assurance provider that employs 1,200 engineers, “it’s not like 100% of the population has the aptitude for this kind of work. The number of smart-enough people to choose from is constrained.”

And many jobs once considered blue-collar are acquiring a white-collar dimension. “Transitioning from physical jobs to knowledge jobs is a major trend in manufacturing,” says Jeff Schwartz, a human-capital consultant with Deloitte & Touche. He gives the example of a midwestern state that recently tried to hire welders to work on wind-energy turbines. It was able to find workers who knew how to weld, and others who knew how to read technical blueprints, but very few who could do both.

Gordon laments a general societal decline in reading that he says is contributing heavily to the problem. “Instead, they’re doing cool stuff like tweeting and IM-ing. Well, guess what? They’re not learning much,” he says.

Gordon adds that many workers need to unlearn something: the idea that a high-school diploma can land them a well-paying job. “They’re wrong,” says Gordon. “Those days are over.”

David McCann is senior editor for human capital and careers at CFO.

 

 

Investing in Training

The Case for an Accounting-Rule Change

Author and workforce consultant Edward Gordon has what he thinks could be at least a partial solution to the lack of skilled workers, and he hopes the Financial Accounting Standards Board will listen up.

Gordon is calling on FASB to change accounting rules so that companies can capitalize employee training and education costs, as they do now for newly built plants and new equipment. “These are long-term investments that companies aren’t motivated to make, because of the big hit on earnings that they’ll take in the short term,” he opines.

Current U.S. accounting standards were largely written for a 20th-century mass-production economy that changed slowly and in which unskilled and semiskilled jobs predominated. American businesses need a new financial metric that appears as an investment on a balance sheet in order to help them keep up with the need to enlarge the talent pool and keep workers’ skills up to date, says Gordon.

For tax purposes, the Internal Revenue Service already allows companies to capitalize the purchase price, setup charges, and training costs for new equipment on which employees need to be trained. But a company buying, say, a new computer system may incur costs for training the system’s operators that aren’t necessarily covered under IRS rules, such as for advanced verbal and math education, team building, and interpersonal skills.

IRS Ruling 96-62 states, “Training costs may be capitalized only in the unusual circumstances where training is intended primarily to obtain future benefits significantly beyond those traditionally associated with training provided in ordinary course of the taxpayer’s trade or business.” Whether that would encompass the above-mentioned ancillary costs is on the murky side.

Tax rules aside, if FASB made the change, it wouldn’t solve the whole problem, Gordon says, but it would alleviate one portion of what he identifies as a systemic failure. He suggests that if FASB does not act, Congress should legislate the ability to capitalize training and education costs on balance sheets. — D.M.

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