Study shows employer-offered soft-skills training increases productivity, with high ROIs
October 23, 2024
Research has consistently shown that soft skills are in high demand globally, and workers who have them tend to enjoy success in the labor market. Moreover, data suggests that some soft skills, especially those most relevant to teamwork, predict productivity too.
Still, it has remained unclear whether training in soft skills (not just soft skills themselves) benefit individuals and employers. Maybe soft skills can’t be learned in adulthood. Maybe employers reap no benefit from training employees in soft skills. Maybe employees who learn soft skills tend to leave their employers in search of higher wages.
Writing in Journal of Political Economy, researchers, including from MIT, have found compelling evidence that soft-skills training programs can measurably raise individual and firm-level productivity. Furthermore, the research, conducted among female workers in garment manufacturing in India, found that soft-skills training had no effect on wages and retention, suggesting that firms (rather than employees) benefited financially from the training.
After undergoing a training program called Personal Advancement and Career Enhancement (PACE), workers in a treatment group were 7.4% more productive. These gains in productivity were 13.5% higher than they were for a control group, which did not receive training.
Even more impressive were returns on investment. The study found that eight months after the training program ended, firms that participated received 256% ROI. The program cost 102,000 USD while it produced benefits estimated at 360,000 USD.
The study’s design made it uniquely possible to measure how soft-skills training produces a large ROI through gains in productivity. The researchers enrolled 2,703 research participants, all of whom were women working at one of five garment factories in Bengaluru, India. Participants were assigned to a treatment group (1,087 workers) or control (1,616). Among the control group, 778 worked on control production lines, where no one attended the PACE program, and 837 worked on lines alongside participants in the treatment group. By assigning controls this way, the researchers could measure spillover effects, as the productivity gains enjoyed by the treatment group spilled over, affecting productivity among other workers on the same line.
The PACE program was designed and first used by the apparel company Gap. The program takes 80 hours to complete, and offers modules focused on “life skills—such as time management, effective communication, and problem solving and decision-making,” write the researchers. Learners attend training for two hours per week: one hour paid by the employer, the other hour supplied from employees’ own time. The program concludes with a month-long module in which learners co-complete a team simulation, to “plan and execute an imaginary garment order while being observed by trainers.”
The study shows that soft-skills training can increase productivity and financial gains. But why?
The researchers propose that gains “are largely driven by teamwork and collaboration skills,” skills that are especially important in garment manufacturing, in which multiple production lines and employees must coordinate precisely. This interpretation, the researchers write, has been supported by other studies too.
Some employees appeared to benefit more from soft-skills training than others. Employees who were “identified by factory HR representatives to be lacking in leadership skills” had the greatest gains in productivity, indicating that the training works by providing absent skills.
The training also had greater impacts in various other situations. It resulted in greater gains when employees worked for managers who had higher “managerial autonomy,” meaning they could make production decisions without consulting higher management. And the training seemed to compensate for poor “managerial attention,” situations in which a manager paid insufficient attention to the problems occurring on the production line they supervised.
Despite improved productivity and high ROIs, participants in PACE training saw no statistically significant gains in wages. There was also no significant change in employee retention.
These latter two results, write the researchers, “suggest that the firm captures most of the gains from the increased marginal productivity of labor.” That firms garner the gains might ease fears that trainees, after being trained, will leave for higher pay or demand it.
While the study provides useful information about soft skills training in general, it also sheds light on soft skills training both in low-income countries and for women. In particular, the study, along with other published evidence, suggests that “greater concentration on active labor market interventions focused on women workers may yield higher returns.”
The study raises interesting questions about when and why a soft-skills training program can increase productivity: Do these results extend more broadly to other industries and workers, beyond garment manufacturing in India? Which aspects of soft-skills training programs are responsible for higher productivity? And could a shorter soft-skills training program (shorter than PACE’s 80-hour requirement) be just as effective?
Future research in other industries might reveal surprising conclusions.
“We started in the least likely place to find these things, like factories,” said one of the studies coauthors, Anant Nyshadham, in a recent Managing the Future of Work podcast. And even there, we “have only found it to be more and more important–these kinds of communication skills and soft skills.”
Michael Dedek is a frequent contributor to the Global Opportunity Forum. 