As employees quit their jobs at record rates, companies like Target and Walmart are offering better benefits to retain them.
In an ideal world, every college student in America could graduate without debt. The reality, as we know, is much different: Collectively, Americans owe nearly $1.6 trillion in student loans in 2020, an amount so large that it’s regarded almost as an abstraction. That’s part of the reason why Logan, a graduate of Arizona State, was dead set against taking on any debt for his bachelor’s degree. Instead of loans, he turned to his employer: Starbucks. “It was crucial that I graduate without debt, even if that meant living with my parents,” said Logan, who asked to withhold his name for privacy reasons. “I have friends who owe $30,000 at 23. That just didn’t seem worth it to me.”
As college becomes an essential precursor for long-term employment, corporations are stepping in where the government has yet to take action. Decades ago, employers weren’t fixated on hiring college-educated workers. As technology began automating more jobs at the turn of the century, employers started seeking out — and prioritizing — college graduates. Many current job listings require applicants to have at least an associate’s degree, despite a majority of American adults lacking that level of education.
Target and Walmart, two of America’s largest retail chains, recently announced free college initiatives for employees that will come into effect this fall. Eligible workers will be able to enroll in an online undergraduate program from a pre-selected list of schools and degrees at no cost.
These education benefits are not solely altruistic; they’re part of a greater corporate effort to attract and retain workers, who have left their jobs at record rates this year. Many are leaving customer-facing roles that require them to manage unruly, aggressive customers while enforcing pandemic safety guidelines, and are migrating to industries that might offer better conditions, hours, and perks. To coax workers back, major employers have promised to increase wages and improve benefits, promising pay bonuses, retirement plans, and, in the case of companies like Target and Walmart, the opportunity to receive a free college or vocational degree.
These higher education initiatives, while beneficial, are not entirely new. Starbucks began its partnership with Arizona State University in 2014, offering to fully cover employees’ tuition for online undergraduate courses. Walmart’s program is an update to its existing “$1 a day” college benefit first launched in 2018. At the time, employees could pursue a degree in business or supply chain management at one of three institutions: University of Florida, Brandman University, or Bellevue University.
It’s also not uncommon for companies to provide tuition reimbursement or discount benefits to eligible workers. Many have a policy of reimbursing part- and full-time workers for tuition, usually up to $5,250 (the tax-free limit) every year. In recent years, though, some companies have taken it one step further. Disney, Discover, and Chipotle, to name a few, have partnered with Guild Education, a private company, to offer a number of pre-selected online degrees from both public and private institutions for employees at no cost.
The popularity of these corporate benefits coincides with a greater legislative push for college affordability, as more Democrats and progressives rally for free college and student debt cancellation. A majority of Americans support measures to reform student debt and college costs, but until fairly recently, the federal government has done little to offset these growing problems.
“The private sector is increasingly encroaching on the government’s space because the government is leaving so much space to begin with,” wrote Vox’s Emily Stewart in a recent article on corporate social responsibility. “Corporations are swooping in with solutions because the solutions coming from public officials and entities aren’t working or are nonexistent.” In this case, the solution is to offer working adults the chance to attend college for free, with a few caveats.
According to Paul Freedman, the president of the learning marketplace at Guild Education, the company sought to invert the traditional tuition reimbursement model, which typically benefits older, senior-level employees with time and money to spare. Guild Education serves as a middleman between employers and learning institutions, in addition to providing services on its platform, like one-on-one coaching, for student-workers.
“If you’re requiring employees to pay out of pocket costs upfront, that’s a very restrictive policy,” he told Vox. “We’re helping employers figure out which institutions best serve working adult learners, and with our platform, we try to eliminate any friction that comes with the college application process.”
While the option is convenient, most employers select degrees from institutions that align with their own internal careers, which might not always serve the personal interests of all employees. In some cases, workers may have more limited options and have to pay out of pocket if they choose to pursue an in-person program (although they can apply for reimbursement). The online degrees offered are typically in fields vetted by the employer for specific internal career paths, generally related to business, science, or technology.
“Education is a hard thing to judge the value of,” said Joshua Goodman, an associate professor of education and economics at Boston University. “Some of these employers are partnering with public institutions, which is a good thing since there might be more forms of accountability, but it’s still not a guarantee that what they’re going to produce is valuable for students and will help them in the labor market.”
While the pandemic has made virtual learning — and by extension, online college programs — more popular than ever, prospective employers still don’t appear to value online degrees much, Goodman said. An online degree could be grounds for promotion within a specific company. The reality of the larger labor market, however, is much more complex.
“Research has shown that employers are less likely to call you back, compared to a candidate who graduated from a brick-and-mortar institution,” Goodman told Vox. Still, these factors are dependent on the program, and whether students are receiving a degree that’s distinguished as online.
It’s too early to tell how beneficial these corporate-sponsored programs might be. The initiatives are fairly new and managed by private companies, so there is limited data available for researchers to establish concrete conclusions. They do, however, appear to benefit low-income students and adult workers without existing undergraduate degrees, who don’t have the money or time to attend school while working full-time. For them, finishing college without debt could be life-changing.
“Most students want to graduate debt-free, but the reality is, it’s pretty rare to get a full-ride scholarship if you’re not an outstanding student or athlete,” Logan, the former Starbucks employee, told Vox. In his two-and-a-half years at the company, he enrolled in online classes at Arizona State to get a degree in organizational leadership. Logan initially put down $5,000 to enroll, an amount that was later reimbursed through his paycheck every semester until he graduated.
The program’s benefits kept Logan at Starbucks until he graduated, but when Logan began his job search, there were limited, low-paying opportunities to climb the corporate ladder, at least from his position as a shift supervisor. He was offered the role of assistant store manager when he announced his departure, but he didn’t think about staying, since the starting salary was so low. Ultimately, Logan stayed at Starbucks for the duration of his classes, but not for very long afterward.
With turnover rates in food service and retail at an all-time high, employee retention is crucial. It saves money and time involved in hiring, onboarding, and training new workers. By extending an employee’s work-span at a company, these education programs end up helping employers as much as the workers who take advantage of them, from the positive publicity to the tax deductions that benefit companies’ bottom line. Research has backed this up: Employees who take advantage of education benefits are more productive and likelier to stay longer with their employers than those who don’t.
In late July, Target said it will commit $50 million a year to education initiatives until 2025. Dan Price, an entrepreneur and CEO of an online credit card processing company, pointed out that, when calculating the cost per worker, Target isn’t actually breaking the bank: An online degree only costs about $147 per worker per year. Not every worker seeks out these benefits, or is even eligible for them. For every success story like Logan’s, there are many untold experiences from those who failed to qualify or are struggling to balance work and school, including those not enrolled in corporate-sponsored online programs.
Target got glowing stories for offering workers 'free tuition'
— Dan Price (@DanPriceSeattle) August 4, 2021
Fine print: It's spending $50M/year - $147 per worker. The free offer applies to Target-friendly degrees.
Target last year
*Added $15B in revenue
*Gave CEO $56M raise
*Paid median worker $24khttps://t.co/gRQ5nZepBb
Kenneth Kane, a 22-year-old former Chipotle employee, put in a year’s worth of work at the company in the hopes of receiving the company’s tuition reimbursement benefit. To qualify, according to Chipotle’s current standards, workers have to be employed for at least four months and put in an average of 15 hours a week before they could apply, and work an additional six months before any reimbursement is cashed out. Kane told Vox he had submitted most of his paperwork, and was initially approved for the benefit. Later on, Kane learned that he didn’t qualify for the reimbursement because he hadn’t worked enough hours.
“I hadn’t worked enough hours in the last however-many weeks when they evaluated my work schedule,” Kane told Vox. “Although you have to work an average of 15 hours a week, which is pretty doable, I wasn’t informed that this average would be determined within a certain period of time.”
For employees attending college in-person, these requirements can be challenging to meet, especially since students’ schedules are subject to extended breaks. “It really isn’t ideal for a regular college student, especially if you’re from out of town,” Kane added. “You have to plan to start work before the semester you qualify for and stay for a certain period after the semester ends.” Plus, when the turnover rate is high, fewer people end up qualifying for the benefits. “It’s food service,” he said. “It’s not a fun place to work, especially when you’re a student.”
The reality of retail and food service work is still bleak. When an employee is hired, they are, first and foremost, expected to work. College benefits are only benefits, after all — something that’s expected to concern workers after hours, not while they’re on shift. Some employees are on the brink of quitting, but stay on the job to reap the college benefits. On public forums like Reddit, student-employees have complained about the struggle to balance work and in-person school, when managers are scheduling them for shifts they haven’t requested, adding in extra hours, or acting exasperated when they request time off for exams and breaks. In one anonymous post on the Walmart subreddit, a part-time employee claimed that they felt pressured by their manager to switch into full-time due to staffing shortages, despite attending college.
It’s uncertain whether the promise of a free college degree will keep workers at a low-paying, labor-intensive job for very long. It boils down to an individual’s circumstance. The concept of debt-free college is theoretically more available to working Americans than ever, but the terms and conditions — of who can access higher education and what type of degree a student can earn — can too often be decided by private corporations.
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