Why Starbucks Is Offering to Pay Employees' College Tuition

If you are the least bit sentient you had to admit something was up when in the same week Starbucks announced a generous tuition reimbursement plan for its employees, its CEO was quoted saying that an increase in the minimum wage would cost the US a lot of jobs.

Um, so you're willing to provide one benefit from which the company might not reap the eventual upside (employees who receive tuition reimbursement are not required to stay with Starbucks after they graduate), but you can not imagine paying a living wage?

This is not quite as schizo or hypocritical as it seems. Starbucks spends approximately $3,000 per employee on training. But turnover in the food service industry is 150 to 400%...annually. Starbucks turnover ration is 65% thanks to that training and, probably, because it offers flexible hours and a pretty good vibe as such jobs go.

By offering tuition reimbursement, the company gets a lot of positive public relations, may reduce its turnover even further, enjoy better customer satisfaction from happier employees - and it will cost almost nothing. Why? Because as the following article explains, very few employees take advantage of tuition reimbursement - only 3.9% in retail. So offering to pay tuition is a lot less expensive than having to pay someone's salary. JL

Vicki Elmer reports in Quartz:

This is a savvy PR move. Many companies offer tuition reimbursement as a way to recruit and retain staff. But the benefits are used, on an average, by fewer than one in 10 workers: only 3.9% of retailers’ staffs.

It’s never been easier to work as a barista and pay your way through college. A new Starbucks plan offers full tuition reimbursement for juniors and seniors working toward undergraduate degrees at Arizona State University (ASU), a move the company promoted as helping its staff complete college. The company estimated that 70% of its 135,000 US workers are either current or aspiring college students.
But as some have noted, this also is a savvy PR move. Many companies offer tuition reimbursement as a way to recruit and retain staff. But the benefits are used, on an average, by fewer than one in 10 workers: only 3.9% of retailers’ staffs, the sector that includes Starbucks, take advantage of tuition reimbursement, the lowest of any sector tracked by EdLink, a leading supplier of employer tuition reimbursement programs.

By comparison, 6.1% of Fortune 500 companies workers took a class on the company, 8.0% of health care workers—and in a few individual companies, one in five workers took classes that their bosses underwrote. Even at the best organizations for staff development, chosen by Training magazine, only 8% of eligible workers took college courses paid by the company.

Finding time for classes can be difficult, especially for full-time workers, and the expected academic work load for Starbucks employees taking one three-hour course is 18 hours a week, according to ASU. Starbucks’ tuition program, unlike most others, also covers part-time workers, who may have more time to dedicate to their studies. The coffee shop chain, however, will only reimburse students after they complete 21 credit hours—a policy some criticized, since companies that pre-pay tuition see higher usage (an average of 6.9% of staff in the classroom, compared to 4.1% for those that reimburse afterward, according to EdLink’s report).

To encourage staff to earn a degree, Starbucks said it will offer a variety of tools and resources through ASU, including academic advisers and “a personal success coach,” a spokeswoman said. Starbucks CEO Howard Schultz estimated the benefit equals about $30,000 per employee—but that’s likely to be spread over three or more years. That’s above than the typical college costs of employers with tuition reimbursements, which spend an average of $4,308 per worker per year, though companies with more than 50,000 workers spent $7,776 for each participants. Retailers on average spent less—$3,061, EdLink reported.

Tuition reimbursement plans are among the benefits employers use to retain high performing staff and middle managers, according to a survey by OI Global Partners . More than a third of employers say they’re also using it to keep front-line workers happy. Starbucks did acknowledge it’s giving the college try partly as a recruitment and retention tool. But it also mentioned the initiative as part of rebuilding the American Dream. “I feel so strongly this is the right thing to do and Starbucks as a company is going to benefit in ways that probably we can not identify today,” Schultz told CNN.