Why Do Retail Giants Like Walmart Offer Tuition Assistance?

The nation’s largest employer has embraced the concept of free college.

Beginning August 16, Walmart will pay 100% of college tuition and books for employees through its Live Better U program. The retail giant is extending the benefit to all 1.5 million part-time and full-time workers in the U.S. and will invest nearly $1 billion over the next five years in the effort.

Tuition assistance programs promise educational attainment and social mobility, but do they deliver on those promises? Or do they exist primarily to advance the corporate bottom line?

Supporting college attendance is nothing new for Walmart. The company established Live Better U in 2018, charging employees $1 a day to participate. Since then, more than 52,000 associates (Walmart’s term for employees) have taken advantage of the benefit, and some 8,000 have earned degrees.

The revised program not only eliminates the fee but also features several new academic partners: Johnson & Wales University, the University of Arizona, the University of Denver, and Pathstream, which collaborates with colleges and tech companies to offer certificates.

Existing partners include Purdue University Global, Southern New Hampshire University, Wilmington University, and Brandman University, along with for-profit Penn Foster College and Voxy EnGen, an English language learning platform.

Employees can earn bachelor’s degrees, career diplomas, and certificates in such disciplines as business administration, cybersecurity, human resources, and supply chain management and pursue trades as electricians, plumbers, and pharmacy techs. Live Better U also covers high school completion and ESL programs and helps students prepare for SAT and ACT exams.

“We are creating a path of opportunity for our associates to grow their careers at Walmart so they can continue to build better lives for themselves and their families,” said Lorraine Stomski, Walmart’s senior vice president of learning and leadership.

“This investment is another way we can support our associates to pursue their passion and purpose while removing the barriers that too often keep adult working learners from obtaining degrees.”

Walmart’s announcement comes as major retailers nationwide struggle to attract and retain workers. According to the Department of Labor, 649,000 retail workers gave notice to leave their jobs last April — the largest one-month figure since the agency began tracking such data more than 20 years ago. Rebecca Givan, a professor of labor studies at Rutgers University, said low pay and inconsistent hours are partly to blame.

In March, Walmart raised its minimum wage to $13 per hour for 425,000 U.S. employees and bumped starting rates to $13-$19 per hour based on location and market. The company said the move would elevate its average hourly wage to $15 per hour.

All told, about half of Walmart employees — roughly 730,000 — would earn at least $15 after the change, but the company kept its overall minimum hourly wage at $11.

Yet two main competitors, Target and Amazon, already set $15 per hour as their base rate for all employees. Amazon established that baseline in 2018, and Target followed suit in 2020.

Earlier this year, President Biden’s stimulus package included a proposal to raise the federal minimum wage to $15 by 2025. It’s been $7.25 since 2009.

Walmart CEO Doug McMillon said a companywide minimum threshold of $15 per hour was “an important target” but one that “should be paced in a way that’s good for the U.S. economy.”

Senator Bernie Sanders believes that pace is too slow.

“It is a moral outrage that the wealthiest family in America, the Walton family, still refuses to pay workers at Walmart at least $15 an hour,” the Vermont senator tweeted in February. “Over the past 3 years, the Walton family became $84 billion richer, while Walmart’s minimum wage has remained stuck at $11. Unacceptable.”

With this context in mind, it’s open to debate whether Walmart’s Live Better U expansion is an attempt to substitute further minimum wage increases with a cheaper alternative.

Walmart’s competitors, however, have found a way to both raise wages and offer tuition benefits.

The nation’s second-largest private employer after Walmart, Amazon covers up to 95% of tuition and fees up to a yearly maximum amount through its Career Choice program. The benefit is capped at $12,000 over four years, and employees have to work for the company full-time for three consecutive years to become eligible.

Those aren’t the only limitations, though. Amazon covers education in well-paying, high-demand fields such as aircraft mechanics, computer-aided design, machine tool technology, medical laboratory science, dental hygiene, and nursing. Only vocational training programs and associate degrees — not bachelor’s or master’s degrees — are funded.

The company says more than 10,000 Amazon employees have participated in the program.

The sixth-largest private employer in the U.S., Target offers a more inclusive approach through Target Forward. The company offers debt-free programs through Guild Education to all part-time and full-time employees, who are eligible to participate upon hiring.

Employees can choose among high school completion and ESL programs, certificates, bootcamps, and undergraduate degrees across more than 40 schools — with no out-of-pocket costs.

Participating institutions include the University of Arizona, Oregon State University, University of Denver, Morehouse College, Paul Quinn College, and eCornell.

Employees choosing “out-of-network” options can receive up to $5,250 annually for programs below the master’s degree level and up to $10,000 for master’s degrees. Books and fees are included in those expenses.

Target calls its program “the most comprehensive debt-free education assistance program available in the retail industry.”

Starbucks, the eighth-largest private employer in the U.S., collaborates exclusively with Arizona State University’s (ASU) online program for its tuition assistance program. Starbucks covers 100% of tuition for part-time and full-time employees working toward a bachelor’s degree in any field.

For those who do not initially qualify for admission, Starbucks and ASU provide a program whereby employees can take up to 10 free college courses to help them become qualified. About 20% of students follow this remedial path.

In spring 2019, roughly 12,000 Starbucks employees were enrolled at ASU, constituting 27% of the school’s online population that semester. The university awards employees scholarships equal to 42% of tuition and, in return, benefits from a steady flow of students and reduced marketing costs.

“When a prospective student from Starbucks contacts us, the likelihood of enrollment is higher than an unaffiliated prospect that may be considering a number of schools,” said Karen Smith, chief financial officer for EdPlus, ASU’s digital learning division.

These corporate-funded college programs have two essential goals in mind. One is to drive employee recruitment and retention, which seems to be working.

Walmart’s Stomski said participants in the Live Better U program are twice as likely to be promoted and are retained at a significantly higher rate. At Starbucks, one-fifth of job applicants cite the ASU opportunity as a primary motivation for pursuing employment there. Program participants remain with Starbucks 50% longer than other employees and are promoted at three times the rate of their non-ASU counterparts.

The other main goal is to foster a diverse and inclusive workforce and to provide social mobility through educational opportunity. On this count, the jury’s still out.

A report from The Century Foundation notes that Black and Hispanic workers disproportionately hold food service and warehouse jobs and are heavily represented at entry-level positions within Walmart, Amazon, and Starbucks.

Yet while these companies “have presented their education assistance programs as a corporate solution to increasing educational attainment among Black, Hispanic, and low-income populations,” the report claims, “these programs are limited in their ability to meaningfully increase college access and completion, and, at worst, they can create additional barriers for employees seeking to obtain high-quality, meaningful credentials.”

Cost remains a problem for some. The study cites Starbucks’ tuition reimbursement policy, which shifts up-front costs from employers to employees and “presents a high-risk situation” to employees, who might have to take out student loans — assuming they enroll in enough credit hours to qualify for federal financial aid.

Instead, the author of the study favors a “last-dollar” model in which employers cover the remaining tuition and fees after all financial aid is accounted for, eliminating the need for loans. Walmart operates on that model, as does Amazon, though Amazon’s Career Choice program leaves 5% for the employee to cover, which could be just enough to become a financial burden.

Another issue with these programs involves institution and course restrictions. With Starbucks, the exclusive partnership with ASU limits choice and presents roadblocks for the 20% who don’t meet the university’s entrance standards.

In Amazon’s case, requiring employees to pursue “high-paying, in-demand careers” most often leads them to vocational or applied associate degree programs. Such options, while quick paths to employment, don’t prepare students well for transfer to bachelor’s degree programs because many courses won’t apply. Earning a bachelor’s degree could end up taking longer and costing more, and Amazon’s benefit doesn’t extend to baccalaureate programs.

The Century Foundation study cited similar restrictions embedded in Walmart’s program, though the recent Live Better U expansion should address these concerns.

So while these educational benefits do help to advance the corporate bottom line, they may not deliver the social impact they promise.

“What is not clear is whether or not all employees, especially low-income minorities, will benefit from these programs. The contradiction lies between the companies’ public statements of being motivated to provide educational opportunities to their employees and their limited impact in addressing financial barriers,” the study concludes.

“These programs present limited solutions that ultimately do not go far enough in remedying college attainment gaps.”

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