Companies are cutting training and it could have a $2bn effect on the economy

Upskilling employees is a smart business move. It boosts the skillset of staff while engaging them, keeping all involved satisfied. Why then are organisations cutting down on development, and what danger could this pose to the economy?

Skills gaps are affecting a variety of industries. Tech skills are leading the charge, and according to research from RMIT Online and Deloitte Access Economics, 1.8 million new tech skills will be needed by 2030. Meanwhile, four of the top five skills gaps are digital-related.

Despite the necessity of providing learning and development opportunities, nearly half of surveyed employers admitted they aren’t prioritising training budgets to reflect these gaps.

Furthermore, an eighth of medium and large businesses across Australia are planning to spend half as much on training opportunities in 2024. RMIT and Deloitte revealed this could result in a skills loss equal to $2 billion, or $5.6 million each day.

“Australian businesses have a strategic opportunity to evaluate workforce proficiencies and gaps, and to develop learning and development frameworks that fortify teams for the future. If businesses are to maximise their return on investment, they must get their priorities in check to develop capabilities in the areas the workforce most needs,” commented RMIT Online chief executive, Nic Cola.

In regards to digital skills, 36 per cent of respondents said they don’t have the skill level, or their skills are out of date. There is a responsibility for employers to get their staff up to speed to reduce the chances of falling behind. Despite this, 47 per cent of surveyed employees had never used generative AI in their role, and 73 per cent said it’s because they don’t believe generative AI is relevant. However, research shows that 86 per cent of all occupations will be affected, highlighting a clear disconnect.

Providing opportunities to develop skills isn’t just a smart move for boosting efficiency – it can keep employees happy. The research found that 70 per cent of respondents said they’d like their employer to invest more in learning and development, and 64 per cent said businesses aren’t doing enough in this area.

There is a noticeable increase in training spending overall in 2024, with Australian businesses expected to spend around $8 billion on learning and development this year, up 15 per cent from last year.

However, with fewer businesses opting to go for these opportunities, more employers run the risk of lagging behind the competition. RMIT and Deloitte revealed that for every $1 cut from learning and development budgets, businesses lose skills that are valued at $3.40 on average.

“In an era of uncertainty, there is still a strategic opportunity for businesses to make a robust assessment of their workforce skill needs. It’s imperative those businesses who are considering cutting learning and development budgets are aware of the possible ongoing impact this may have,” said John O’Mahony, partner at Deloitte Access Economics.

“Encouragingly, those businesses that do appear to recognise the training imperative and have, on the whole, increased their learning and development budgets for 2024 will build on the skills they need for success. However, the question remains as to whether this will be enough to meet the rapidly evolving nature of work.”

If Australia doesn't make increases in learning and development, it risks falling behind other nations. Almost half of European Union workers have participated in some form of non-formal learning, whereas we sit at 32 per cent, coming 24 out of 32. According to RMIT and Deloitte, Australia’s participation in non-formal learning has been on a downward trend since 2013.