A study sought to determine how and why small businesses invest or do not invest in basic skills instruction for their workers. Data were gathered through a national mail and telephone survey of a random sampling of 11,000 small (50 or fewer employees) and medium-sized (51-400 employees) firms, a targeted mail survey of 4,317 manufacturers, a telephone survey of 1,535 junior college staff, and case studies of 72 small and medium-sized firms in 5 states. Key findings of the study included the following: (1) only 3-5 percent (15,000-25,000) of small firms have workplace education programs; (2) the number of small business program starts has increased dramatically in the last 3 years; (3) manufacturing firms have started more programs than have service firms; (4) medium-sized businesses are much more likely to have workplace education programs than are very small businesses; and (5) community colleges are the education partners of choice for most small companies. The study also determined that small business programs tend to be low intensity, quick-fix types; few offer lifelong learning. Employers who offer programs do so because of competition, a need to produce high quality products, and enlightened human resource policies. Although the median cost of programs was $5,000-$10,000, employee skills upgrading programs paid off in improved worker performance and bottom-line gains. The study concluded that much work is needed to overcome barriers to workplace training by small businesses. Recommendations include involving trade associations and unions, the states, and the Federal Government, and creating a Cooperative Extension model. (KC)