The effects of education and qualified workforce on improving corporate competitiveness

Abstract

To boost economy, it is essential to enhance the research and development performance of secondary and tertiary educational institutions, which can contribute to increased performance in the whole profit and non-profit sphere. This can in turn help improve national economic performance (GDP). In our view, it is also worth examining education and competitiveness at the regional level. With a view to achieving strategic objectives aimed at boosting Hungarian economic performance, special attention must be paid to improving research and development regionally in the future. Competitiveness of the national economy can be viewed as the synthesis of regional competitiveness. There is a need for the reinvention of the whole structure, as well as the structural, methodological and financing background of vocational training, the adaptation of international best practices, not only for the sake of convergence in underdeveloped areas and regions lagging behind, but also for improving the competitiveness of the national economy. Looking at Hungary’s innovation system, it can be concluded that based on the indicators used by the WEF the country is behind the EU average. Corporate innovation capacity is poor; the majority of businesses still base their production on cheap labour and cannot or will not innovate. However, in order to become a knowledge-based society in the future, Hungary needs increased investment (financial investment and a paradigm shift) in the areas of education and innovation.

Journal of Economic Literature (JEL) Codes:

Key words: competitiveness, growth, education, healthcare, training, corporate growth

Introduction

Today most developing and developed countries view knowledge-based society as an important means of economic development, which, however, can only be achieved by greater and consolidated public commitment, the creation of a solid macro-economic basis (a fiscal, monetary, growth and in the future competitiveness turnaround), to ensure a more dynamic and sustainable growth path (Kolozsi et al., 2017; Lentner, 2015; Kozma et.al,2016; Tóth et.al,2017). In 2015 The UNESCO already drew attention to the growing importance of continuous knowledge development and life-long learning, which is one of the key drivers of knowlwdge-based societies and national economies (UNESCO, 2005.). Today’s societies can be clearly considered knowledge-based, knowledge-intensive societies. In the 21^st century, besides raw materials, technique and technology, as well as data and information are the major economic drives, which require continuously updated knowledge and skills to be used and utilised. Alongside life-long learning, education also has a vital role in acquiring this knowledge, given that one of its aims is transmitting learning skills. Teaching these skills is not only needed in primary, secondary and tertiary education, but also in vocational training. Technological developments in the rapidly changing economic and business environment highlight the importance of knowledge, learning skills and abilities on every level of the economy and society (national economy, company, social/local community, individual). The basic interests and goals of economic and social actors differ. While from the point of view of the entire national economy the advantages of the knowledge-based society led economy are, for example GDP growth, secure and growing tax revenues, promoting and maintaining full employment; at the corporate level it means business stability, profitability, and efficiency. On the individual level knowledge is manifest in a different form, for example, a competitive salary, secure livelihood or higher standard of living. From the perspective of the national economy knowledge has a significant effect on competitiveness, and economic growth as innovation always has a strong presence in a knowledge-based society. In Hungary the early phases of innovation, research and development are characteristic, however, the next step has to be taken, creating a prototype, as well as developing and strengthening the forthcoming phases. At the individual, the employee’s level, there is coherence and synergy between knowledge and wages. Skilled professionals can easily find a job, realise competitive wages which help them improve their living standard – they use more products and/or services – thus indirectly pay more taxes (PIT, VAT, etc.) and generate further demand in the economy (multiplier effect). Knowledge and unemployment are in an inversely proportional relationship. The more knowledge and experience an employee has, the better position they are in at the labour market (and lower the chances of them ending up unemployed). This is beneficial for the national economy for more than one reason. Firstly, the unemployment rate and the related state transfer is lower. Secondly, there is an increase in the number of skilled workers having a stable (fix) income, and thereby increasing tax revenues. The world-famous American competitiveness researcher economist M. Porter says, “The better a country’s innovation capabilities and higher its level of general knowledge, the higher chances it has for a successful competitive economy. Chances, however, can become the reality only in the possession of appropriate state development policies. In their absence knowledge and skills remain unused and may even deteriorate.”

The globalised world of the 21^st century poses employers and employees such challenges that have led to a change in demands concerning knowledge. Organisations require the possession of new knowledge, skills and competences from employees, which can only be acquired to a limited extent within the traditional frameworks of education (Berde-Móré, 2014). Schultz (1993) emphasises the role of human capital and the embodied knowledge in economic growth. His conclusion is that human capital investments yield higher growth rates than physical capital, as investment in human education and development increases people’s capacity to work, their value-creating capacities. According to Poór and his co-authors (2018), on-the-job trainings, through competence development, contribute to the realisation of corporate objectives, such as quality improvement, productivity growth, preparation for the introduction of new technologies, increasing organisational flexibility, improving job satisfaction or changing the organisational structure. Knowledge and the person in possession of knowledge have become the main promoters of the long-term survival of organisations. Expertise, people’s capacity to work, and to create value can be considered as human capital available for organisations. Efficient human knowledge management may enable companies to use employee knowledge and skills optimally; and all the while develop such human resource management models that are fitted to the needs of the environment, contributing to improving corporate performance (Sánchez et al., 2015; Csillag et al., 2018).

In the view of the Central Bank of Hungary (MNB) the competitive operation of the national economy not only requires macro-financial and real economic stability, but also the availability of high standard education and healthcare, among others. Based on these, a well-functioning and predictable business environment can be created, investment and innovation may be promoted, which through the appreciation of the skilled workforce can eventually lead to increased productivity and permanent economic and social convergence. This idea was also confirmed and elaborated by Lentner (2007), whose study clearly showed that alongside a stable environment for public finances, modern education and healthy highly skilled workforce are also prerequisites for national economic competitiveness. Training today means much more than it did 20 years ago. According to Lentner, in developed market economies education-training is less likely to end with acquiring the first degree. Continuing technical and economic progress makes it necessary to take part in several different forms of training, periodic further training, as well as professional changes due to the continual transformation of the economic structure. From another angle, Csath (2018) also highlights that the level of the education system influences the competitiveness of a country, that is, there is a close link between competitiveness and the standard of education. In his opinion, it can be explained by the fact that competitiveness is highly dependent on new value creation in a given country. New value creation, on the other hand, is also influenced by the existence of an appropriate number of professionals needed for greater added value creation. In addition to the above, Csath (2019) says that a healthy population is a matter of national interest, as the economy can only be successfully operated with the help of such people on a permanent basis. It is clearly visible that this viewpoint is close to professor Lentner’s way of thinking detailed above.

The aforementioned ideas show that one of the basic criteria for competitiveness is human capital, assets. This is confirmed by the results of the MNB (2019) publication of its competitiveness workshop. According to the Competitiveness Mirror (2019) publication, Hungary’s greatest asset is its available skilled human resource, which is the key to the survival and successful convergence of the country. In answer to this idea the Ministry for Innovation and Technology worked out (2019) the mid-term strategy ‘VET 4.0 – for the renewal of VET and Adult Education (AE),’ the policy answer to the challenges of the 4^th Industrial Revolution, with the major aim of educating future professionals who can support efficient production and service creating higher added value, and are in possession of adequate knowledge to meet the needs of the current market. It is also worth mentioning Zéman’s idea (2019), who stresses the future importance of the dynamic and inductive relationship of the sciences, education and best practices trio, which will only operate well, if their connectedness and functional efficiency are improved.

Investment in education and vocational training is fully returned since

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corporate innovation capability and willingness are improved,

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companies create higher value-added products and services,

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corporate productivity and efficiency increase,

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businesses are more likely to appear on the international market (integrate into global value chains).

Based on the above, education clearly improves competitiveness, which indirectly brings about increased tax revenues.

The role of education in increasing competitveness

One of the most important factors of economic growth and increased corporate competitiveness is human capital, which affects economy through the number and the skill level of the workforce alike. To improve competitiveness, increasing employment rate is not enough tough, it requires the expansion of workplaces that generate higher added value, which is difficult to achieve without the existence of a knowledge-based society. This all means that businesses that are capable of generating higher added value need highly skilled workforce. Investment in education and vocational training become manifest in economy with differing intensity. While public education expendi-

ture is recovered in the long run on the national economy level, adult training and further training (can) even yield short-term results. The Europe 2020 strategy announced the EU’s employment and growth strategy for this decade (2010-2020), with objectives relating to areas of employment, research and development, energy management, education and fight against poverty and social exclusion (Kõrösi, 2012). In terms of education there is a special emphasis on drop-out rate, on optimising the number of students in tertiary education. The strategy aims at lowering the rate of early school leavers below 10%, and increasing the rate of higher education qualifications of the 30-34 year-old EU population to minimum 40% (European Commission, 2010).

In accordance with the education objectives and financing opportunities, Hungary has already taken steps towards change in the tertiary education sector. At the end of 2014 the Changing Gears in Higher Education strategy for restructuring tertiary education was adopted. The Government’s aim is to develop a future performance-oriented higher education, in which institutions have clearly defined educational profiles that help them provide high quality education in their specific educational area. This may help create competition among institutions to concentrate on improving knowledge quality and standard. Creating such an institutional network contributes to improving the competitiveness position of disadvantaged regions. There is a focus on reducing drop-out rates, increasing pushing motivation among students, skills and abilities development, and meeting labour market needs with the fundamental aim of transferring knowledge that enables graduates to find effective and efficient employment in both the domestic and foreign job market. The main objective of the concept is to create a high quality tertiary education network of optimal size and composition: the development of knowledge-based society, which is capable of efficiently reacting to the social and economic-cultural challenges in Hungary and abroad. (Changing Gears in Higher Education, 2014).

After reviewing the concept, based on the experience and the lessons learned from the 2014-2016 period, a strategy including more exacted objectives and interventions was adopted. The Changing Gears in Higher Education 2.0 was accompanied by an Action Plan for the 2016-2020 period. The strategy set the 2030 deadline for transforming higher education, with a view to developing future educational programmes in which student abilities are appropriately differentiated and which focuses on both student and teacher performance enhancement. To create the basis for quality education, teachers’ attitudes, both professionally and in terms of methodology need development. In the restructured institutional system each institution is specialised, has a distinct educational profile and there is space for both cooperation and healthy competition among institutions. Thus unused capacities would cease to exist and by reallocating resources there could be more emphasis on research initiatives. The parallel functioning and operation of research and development with education activities can contribute, on the student level, to increased attraction of international students, while on the instructor level, to improved social and economic competitiveness (Changing Gears in Higher Education, 2016).

In summary, a tertiary educational system of an appropriate size and quality that can react to economic and social challenges is needed, one, in which competition, quality, performance and success play a key role. These can ensure that specific institutions become real centres of knowledge.

A possible means of strengthening the link between the education and the economic sector is the creation (preferably on the higher education level) of Knowledge Centres that are focused on economic (market) demands. These knowledge centres may also become key actors in domestic RD&I activity. Research, development and innovation activities are funded by both the state and the private sector. However, it can be clearly stated that the domestic private sector is in lack of appropriate amounts of capital power, which decidedly hinders domestic SME actors in the acute market competition. Added value generated by RD&I activity is evidently a decisive competition factor today. Looking at the research and development investments of the national economy in the past 15 years, it is concluded that in Hungary the R&D-to-GDP ratio reached 1% in 2009, and it has been on the increase ever since, reaching its (1.49%) record level in 2018 (HCSO). It shows that the state has acknowledged the importance of RD&I in competitiveness. However, Hungary is still among the medium-performing countries in terms of innovation. Industries already involved in global value-chains – such as the pharmaceutical industry, the ICT sector and vehicle production –, as well as research and development companies with international relations significantly strengthen domestic innovation performance. Nevertheless, the RD&I performance of the majority of domestic businesses is well below the performance of their counterparts in more developed countries. Naturally, RD&I is closely linked with higher education and investment in this sector. Unfortunately, in Hungary this situation is far from shiny: recent investment in R&D in tertiary education could only conserve the current situation. Oftentimes this sector is characterised by divestment. It has to be highlighted that countries that prioritise tertiary education quality improvement and RD&I activity support in this area, are in a much favourable position in both IMD and WEF rankings. There are encouraging signs though showing that Hungarian tertiary education institutions are starting to take to partnerships with businesses. This is also indicated by the fact that institutions and companies cooperate in more and more areas, which can be mutually advantageous and students may also benefit. An example for the realisation of this cooperation is the dual education at universities.

The success of research and development activities is not only measurable in terms of increased investment. Without an appropriate level of education, which provides the conditions for research and development from the human resource side, the expansion of R&D activities is inconceivable. High quality human capital training and improvement contributes to national productivity. The standards of education and healthcare play a decisive role in developing competitiveness (Lentner, 2007). Therefore, alongside focusing on economic growth, attention must be paid to social welfare. To evaluate and monitor these, the OECD developed an indicator system, including key indicators that are indispensable for well-being (Mizobuchi, 2014). The Better Life Index maps and measures well-being on the basis of 11 indicators. Besides income, it includes community, education, civic engagement and health factors as well (Durand, 2015). A speciality of the concept is that there is no objective or absolute ranking among the participating countries, as the countries themselves determine several parameters. Hungary is below the OECD average in terms of education, subjective well-being, social relations and health.

Going back to education, the role of higher education institutions is also significant as by providing information to the community about the intellectual value created by them, as well as by its economic utilisation, institutions contribute to regional social and economic growth. Changes over the past two decades have markedly influenced the regional structure of higher education. Besides its social role, tertiary education also has a decisive role in economy. Several studies reflect on the significance of higher education in rural areas. Higher education institutions in a region contribute to its strength and development. The educational spectrum and training structure provided by universities are integral parts of regional development and renewal opportunities (Rechnizter, 2009; Sisa et al., 2018a).

The Hungarian higher education has undergone several transformations; the higher education reform has finished: both the financing system and the institutional background have been restructured. There is observable commitment to create a performance and quality-oriented, increasingly more internationalised Hungarian higher education system which supports value creation, has the ability to react to global and social trends of the world, and takes into consideration the generational characteristics and attitudes of the participants of higher education (Sisa et al., 2018b). Tertiary institutions, besides their educational and research activities, play a major role in the socio-economic development of a nation and providing its intellectual capital. Among the multiple functions of higher education in Hungary, supporting social mobility has to be emphasised which needs to be provided in the disadvantaged regions as well.

Higher education plays a considerable role in the less developed regions of the country, where there is a demand for both social mobility and economic development. Consequently, it is the task of higher education to create a segment in its institutional system that is dedicated to local prosperity. Specific institutions need to take into account and adapt to regional labour market needs when they develop their educational programmes. Practice-oriented training has to be the first and foremost objective, to provide youngsters with the basics for their future career path. To boost economy, tertiary institutions need high research and development performance, which contributes to the development of the entrepreneur sphere and eventually to GDP growth.

As we see it, adjusted to the strategic guidelines defined for higher education, the secondary level vocational education system should also be rethought. A good starting point could be – talking Winarno (2019) as an example – increased SME-actor involvement in vocational training, with mapping SME-sector labour needs as the first step. The aim is to create an integrated model which builds on vocational training (education) – business cooperation. The key elements of the integrated cooperation model are: product (service), production (service provision), human resources, management, marketing, financial system, the elements of value creation and the foundation of a sustainable training centre (Winarno et al., 2019). Small and medium enterprises have a vital role in economic growth and improved competitiveness; therefore the role of entrepreneurship education is unquestionable (Imreh-Tóth, 214).

There are various models of education that help integrate higher education and work experience. The first direction is the opening of the so-called university branches on the basis of existing enterprises. In this case, students will undergo practical training, seminars on the basis of the enterprise under the guidance of specialists of the enterprise. The topics of the classes should be agreed upon and approved in advance from both sides. The second direction is the involvement of specialists of enterprises corresponding to the profile of training in conducting classes at universities. In this case, according to a pre-prepared program, students are deepening their knowledge in their profession. For example, when it comes to marketing, it makes sense to attract leading marketers. And in both cases we can hope that more highly qualified specialists will be trained, which will entail an increase in the profitability of the enterprise and the country’s economy as a whole.

Knowledge, competences, skills are all driving forces of economy on all the levels (employee, employer) of the national economy. Countries, companies and individuals regard the development of skills and competences as long-term objectives; therefore, constant learning can be viewed as a strategic objective on both macro and micro levels, both at the company and individual employee levels. Thus, all actors seek to increase investment in the development of skills and competences, during which the concerned parties need to face common challenges. The major challenges are demographic changes, the globalisation of markets, the EU2020 strategy’s three pillars of smart, sustainable and inclusive growth objectives, digital revolution, climate change and the incentives for the creation of a greener and more sustainable economy.

Employees need to develop their skills and competences in line with career specific challenges; however, life-long learning increases their chances of successful employment (International Labour Organization, 2011.) It seems that companies today invest in extensive human resource development projects in response to the changes of the labour market environment (Beinicke-Bipp, 2018). Despite the importance of a qualified workforce and the preferred, strategic role of knowledge, companies unfortunately have negative experiences as well. In many cases, companies come up against the fact that knowledge and competences acquired at different levels of education are not transferred with appropriate efficiency in the workplace. This problem is often explained by limited workplace opportunities (with an emphasis on low levels of support for superiors and staff members), and the – typically – high levels of pressure at workplaces (Grossman-Salas, 2011; Solga, 2011; Zhao et.al. 2014). This phenomenon, which is defined as ‘transfer problem’, is highlighted in several international studies (for example, Baldwin-Ford 1988; Grossman-Salas 2011; Saks et al. 2014).

Skilled (and well-paid) workers are more efficient in a given working environment when they have an overview of the work

processes at the company and also when they can use the given technology better; thus by using their expertise they efficiently support companies that create the appropriate working environment for them. Moreover, good working conditions and competitive wages lower employee turnover, shortening the initial training period, while in a period of intensive turnover businesses are burdened with the continual training of newcomers. A stable highly qualified workforce works efficiently, generates higher added value for the business, thus improves corporate profitability. Higher work efficiency lowers per capita labour costs – and with the same corporate cost structure and tax regulations –, increases profit before tax and corporate tax payable. Highly skilled workforce – under favourable labour market conditions and due to the effect of the increasing minimum wage – realises competitive wages which improves their living standard. This, in turn, raises the demand for certain products and services, which indirectly increases VAT revenues.

Domestic and international outlook

Human capital has a major effect on economic growth and improved corporate competitiveness; firstly, by means of quantitative change (staff increase), secondly, by means of quality change (higher skills).

Human capital is one of the levers of long-term economic growth; however, its macro-economic determinants are far less known. The mutual relationship between human capital skill levels, that is, the level of educational attainment, and the national macro-economic performance is also highlighted by co-authors Blanchard and Olney (2017), who say there is a causal link between the composition of exports and educational attainment. Human capital skill levels influences national economic performance, while the sectoral and exports composition of the national economy also has an influence on the skill level of the labour force. Based on a 102-country study, they provide proof that the increase in less skill-intensive export lowers educational attainment, whereas growth in more skill-intensive export increases it, pressing the need for a higher general educational attainment. These results have also provided insights into those types of sectoral growth that are the most advantageous for the long-term development of human capital. Such sectors are linked with the capital-intensive service sector, in contrast with the least human capital-intensive agricultural sector.

The latest works of Jones (2014) and Lucas (2015) further strengthen the causal link between human capital skill levels and national economic performance, also suggesting that the differences in the quality of human capital stock (with a special emphasis on the level of attainment) might cause the income gap between rich and poor countries.

The MNB publication Growth Report (2018) shows – analysing 2010- 2017 EU data – that employment rate increase and per capita GDP changes have a positive relationship. In Hun-

gary rates for the 15-74 year-old population increased by 10% point; thus per capita GDP grew almost by 20% by 2017.

The strong labour demand of the past few years originates in government measures taken in previous years to increase employment. Consequently employment rate increase resulted in about 20% per capita GDP growth, while demographic changes had a negative influence on the indicator. Given that due to demographic changes the labour force is continuously shrinking – and also because of labour shortages in the sector and improved productivity efficiency –, increasing employment in itself is not enough to maintain competitiveness. It is indispensable that certain work processes are rationalised and digitised, for which skilled labour must be provided. This requires training and vocational training even in the short term. The current education and (vocational) training system calls for development, updating and fine-tuning.

The figure (2.) below clearly shows the positive effect of improved employment on per capita GDP growth.

The reduced pace of employment growth rate is also shown in the report on the 2018 labour market by the Hungarian Central Statistical Office published in April 2019. Data show that in 2018 the number of employed persons kept increasing, amounting to 4,469 thousand employed, a 1.1% increase, about 50 thousand employed, compared to the previous year. Although both 2018 and 2019 show positive employment growth, the pace of growth slowed down despite having significant shortages in the labour market. Increased labour demand – supported by constant conscious government measures – redirected a part of previous public sector employees into this market segment. In addition, the significant scale of pay rises in recent years also contributed to stopping the increase in the number of workers seeking employment abroad. To sum up, Hungary is nearing full employment. This means that businesses need to restructure their labour capacities and employment to be able to meet increased market demands and increase productivity. This can only be achieved by automatisation (digitisation) and by employing and training (more) highly skilled labour.

Own research

Domestic and international practice shows that companies that provide employees with personalised training programmes fitted to their jobs, are more effective and efficient in their everyday operation. As evident from the previous sections, it can be stated that in today’s turbulent world, education and training are vital in the development of the individual and the company alike. Based on all these, a targeted survey was conducted among businesses (both SME-sector and large companies) for the 2016-2018 period, which looked into training opportunities provided by employers, their results and the lessons learned, and their effect on corporate productivity, efficiency and business operation. Our research is primarily deductive and explanatory in nature, which in this case means that we tried to find “trend-like relationships” in connection with corporate trainings.

The company training questionnaire examined whether companies supported or are going to support employee training it the past and forthcoming 3 years, respectively, in what form, and what the motivation for supporting further training was. Additionally, it was examined how entrepreneurs view the supported trainings, how these relate to corporate operation (profit, growth, etc.), and what role they play in employee retention.

Corporate training

This section presents the results of those companies which stated in the survey that they supported or are going to support professional employee development and training it the past and forthcoming 3 years, respectively. 86% of respondent companies supported employee development and training, which confirms that businesses find it more and more important to provide employee training opportunities. 46% of these businesses have practical training places related to dual training.

Next, the distribution of companies supporting employee training according to the number of staff, revenue and region were examined. While in businesses employing 1-9 workers willingness to support employee training is 63%, large companies show significantly higher results. It can be concluded that as the number of staff increases, so does the number of companies that support employee training and professional development.

Looking at staff number and revenue categories, it can also be established that with their growth training support exponentially grows, too. Based on the results it can be said that there is only one outstanding result, that is, significant difference among the categories: in the smallest category for both number of staff and revenue. Basically this is caused by smaller company size, narrower and less complex scope of activities, and more simple organisational structure. (The smallest businesses support employee development the least.) Smaller companies are characterised by less precise separation of functions, simpler management structure and less complex or digitised work processes, thus there is lower demand for training. At the same time, in the next staff and revenue category (10-49 workers and above 100 M HUF revenue) companies need to develop a more complex organisational structure, where decision-making, organisational tasks and work processes are clearly separated; therefore they require specialised knowledge and skills at their disposal at all times – hence training is of importance.

Characteristics of supported trainings

In the previous section those companies were presented that support employee training. This part analyses the major characteristics of supported trainings (level and type, content, motivation for training, initiators, aims and forms of training). The analysis of employer supported trainings draws a distinction based on training level, content and form. The next chapters detail these categories.

Level of supported training

The level of training refers to (1) own internal training, (2) state-recognised trainings in the National Vocational Qualification Register (NVQR) and/or other supported trainings outside the NVQR, and (3) higher education. In terms of training level, in the past 3 years 81% of participating companies supported state-recognised trainings in the NVQR and other supported trainings outside the NVQR, 71% supported internal professional trainings, whereas 51% supported higher educational training (college/university). Training levels were examined in connection with company size (number of staff) to see different training type preferences for different sizes. In this respect, a high percentage of companies with smaller than 50 and larger than 100 staff supported NVQR training, while companies with 50-100 staff preferred internal training, but they supported NVQR trainings as well. Higher educational programmes (college/university) were mostly preferred by companies having more than 250 workers; however, for this size – similarly to other company sizes – NVQR trainings were still prevalent.

Supporting higher educational programmes is justified by the complexity of corporate processes, the higher standard of professional knowledge requirements and the development of a knowledge-based competitiveness model. Larger companies are more likely to have a human resource strategy, which helps long-term planning for individual workers, and provides them with future prospects that motivate participation in longer educational programmes.

Content and direction of supported training

Based on training content we created 5 categories as follows: (1) language trainings, (2) digital competences, (3) compulsory professional training (e.g.: certified accountant training), (4) non-compulsory professional training, retraining (5) organisational development (marketing, strategy, etc.).

It is important to remark that non-compulsory training serves as an umbrella term for all trainings that were initiated individually by businesses, that is, not out of compliance with legal obligations. Within the non-compulsory professional training category, a few important areas were highlighted, such as digital competences development, organisational development and language trainings. This area has the highest value (63%), which indicates that those training types are prioritised which help improve corporate development, efficiency and effectiveness.

Apart from compulsory and non-compulsory professional trainings the participant companies prefer language trainings followed by organisational development courses. Digital competences development, however, takes the last place among supported trainings. The low ranking of digital competences development shows that businesses are not aware that today digital competences are needed to secure their market position, profitability and stability, partly through digital development of operations, and partly through professional development of employees using these tools and systems. It is also possible that companies do not consider it their task to develop employees’ digital competence, instead view it as a prerequisite for employment in a certain position, which, no matter the level of attainment, should primarily be acquired at school. Naturally, digital competence continues to develop even after employment due to using different softwares and digital applications in practice. This alleged employer (corporate) requirement poses a huge challenge for educational institutions, especially in terms of the technological development of education.

The effect of corporate trainings on pay rise

From the employee’s point of view, besides self-fulfilment, the possibility of pay rise is also a motivating factor. For this reason, pay rise following the successful completion of a training was also examined in connection with the form of training (external training company and/or internal training), and also compared to the type of training (internal training, NVQR or other supported trainings, higher education). Overall, it was found that 60% of participant employers rewarded their employees with a pay rise after they have successfully completed their studies.

Comparing the types of training to the rate of pay rise, it is visible that in the case of company-independent and blended trainings employee wages increased at a higher rate than following the completion of “only” internal training courses. Pay rise following training completion showed the highest rate (65%) in those companies where blended (external training company and internal training) forms were used. The lowest rate of pay rise was characteristic of companies that only offered internal training. The prospect of pay rise following successful training completion is not only dependent on the form of training, but also on the type of supported training. The following was found in terms of the connection between training type and pay rise: 81% of companies supported NVQR or other supported trainings, 71% supported their own internal professional training, while 51% supported higher education (college/university) training programmes. Companies mainly prefer shorter duration trainings rather than longer, occasionally 3-5 year-long, higher educational programmes.

The possible reasons for this could be that the company operation requires employees taking part in short and more targeted training, or, if an employee with higher skills is needed, they prefer hiring new adequately qualified employees instead of enrolling existing workforce. It also has to be noted that in several companies there is a perceivable lack of consciously designed human resources strategy, which could help them choose the most fitting form of training for a certain job, employee or task.

The rate of companies rewarding their employees with a pay rise following the successful completion of a training does not differ greatly based on the type of training. While for internal trainings 61% of companies reported employee pay rise, in companies supporting “only” NVQR trainings, the rate was 62%. Respective data for higher education was 67%. Based on data analysis it is favourable that pay rise is present for all training types. This shows that companies acknowledge employees’ knowledge expansion financially as well.

Future plans for company training

The study also investigated how companies are planning to support corporate training in the forthcoming period. 67% of companies asked are planning to support employee training to the same extent as in previous years, while more than a quarter of the businesses are planning on a larger scale support compared to previous years. The rate of companies that intend to invest less in employee training than is past years is minimal.

Future plans for employee training were also examined in terms of the number of staff. Based on the survey, for all company sizes the willingness to support at the same rate is 60-75%, 21-36% at a higher rate compared to previous years. Companies employing 50-99 workers are planning to increase training support at the highest rate (36%), while companies employing 1-9 and 10-49 workers have plans for the least amount of support (23% and 21%) in the future (see Figure 19).

Provisions for employee training can be viewed as parts of growth strategy, a key element of which is providing and improving up-to-date knowledge important for the company. It can be seen that companies in this category prioritise active, controlled growth, a basis of which are trainings.

Future corporate support plans were also examined by sector. Companies that are planning to increase employee training support belong to those sectors that are facing significant technological transition, such as trade, creative industries, engineering, etc. Other sectors affected by technological changes (e.g. construction, transport, human services, public administration) are planning to provide employee training expenditure to the same extent as in previous years. Due to labour shortage in these sectors, further training of existing employees is not a viable option, especially as it would mean additional – temporary – labour deficit for the companies.

Companies that did not provide support for employee training in the past 3 years were also asked about their future plans for employee training support. These companies make up 14% of the population. 55% of these companies have no support plans for the near future, while 45% have plans for supporting employee development in the forthcoming 3 years. It must be noted though that one of the pillars of corporate development is education; therefore, those companies that regard training less important are risking their future growth.

Reasons for not supporting corporate training

Today, when digitisation is fundamentally transforming economic and social systems, up-to-date knowledge is essential, and it can only be acquired and maintained by means of continuous (re- and further) training. From this point of view, it is even more important to find out what factors result in the fact that supported employee trainings are not held in a company. The following section is partially devoted to finding the reasons, the factors that lie behind supported professional trainings not taking place.

86% of businesses supported, while the remaining 14% did not support their employees. Those companies that did not provide support for their employees’ training were asked about their reasons and about their plans for the 3 forthcoming years to support employee professional development. On the positive side, more than half of the companies making up the 14% have plans to support employee further training in the forthcoming years. However, it refers to the lack of employee motivation that according to over 40% of companies not supporting employee training “There were no employees willing to take part in professional training”, and an additional over 42% said that “There was no employee demand” for supported professional trainings.”

Concerning corporate competitiveness and employee competency development, besides encouraging forms of training and corporate training support, it would also be important to provide employees a future vision, to let them feel they are also part of corporate development. Increasing motivation is of paramount importance from the point of view of the employee, the employer and the state/institution as well.

Views on company training

In the survey the businesses were also asked about their opinion whether they believe in a relationship between their supported employee trainings and the following factors: turnover, stability, growth, changes or increase in tax paid, employee retention and the company’s external image.

76% of companies that support employee training see a link between supported employee training and company stability. 89% of these companies think that supported employee training has an influence on both the company’s external image and employee retention. Near 60% of businesses assume that there is also a connection between employee trainings supported by them and corporate profit and growth. In general, companies mainly promote employee professional development because they believe they can better retain their workers; strengthen their external image and simultaneously corporate stability, which has a positive effect on growth, corporate profit and revenue-generating ability.

The link between training and corporate operational characteristics was also investigated by company size and sector. While the main motivation for promoting professionals with appropriate knowledge is improving profitability and increasing profits for smaller (micro-, small) enterprises, for medium-sized businesses growth is the key factor. In the case of large companies, growth is not a primary factor, instead they value stability, maintaining their market position, for which external image and employee retention are indispensable.

The overall conclusion is that trainings provided by companies to their employees have indisputable advantages from the point of view of employees, employers and the state; however, this is still not natural for businesses. More than two thirds of companies that supported employee professional development in the previous 3 years gave account of improved chances of long-term continuation and employee retention power. Near two thirds of them also experienced improvement in the corporate competitive position and partner/customer confidence. Due to the trainings over a third of businesses witnessed improvements in their income situation (turnover, profit, sales volume).

According to the objectives of the Europe 2020 strategy (European Committee, 2010) the aims to be pursued relate to five main areas: employment, research and innovation, climate change and energy, education, and fighting poverty. These aims are closely interlinked since developing a knowledge- and innovation-based, sustainable and competitive economy and high employment is simply inconceivable without the development of an appropriate educational system (Sisa et al., 2020).

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Dr. Karabassov Rassul Ph.D.

Candidate of Sciences in Economics. Associate Professor Acting

Dr. Róbert Tóth Ph.D.

Chief Economist, PhD in Economics, Szent Istvan University, Hungarian Chamber of Commerce and Industry

Dr. Krisztina Sisa Ph.D.

college associate professor, Budapest Business School

Boglárka Szijártó

doctoral student, Szent István University, assistant lecturer, Budapest Business School