In 2015, Seattle-based coffee house Starbucks made waves in the restaurant industry when they announced that they would be partnering with Arizona State University to fully fund tuition for their workers to pursue college degrees. What possible business sense could it make for a coffee company to pay for their associates to get an education that will ultimately encourage them to quit for a better job?
While it may look strange from the outside, the Starbucks partnership with ASU has been a groundbreaking win-win for both the organization and its employees. The food service industry has some of the highest rates of employee turnover in the workforce. By creating this program Starbucks not only attracts its ideal workforce (young, intelligent, and upwardly mobile), but it retains them for far longer than they might otherwise, maximizing investments in onboarding and training.
For associates, the benefit is a well-designed solution for some of the barriers that typically prevent frontline workers from taking advantage of tuition reimbursement programs. Starbucks not only provides funding, but they don’t require associates to front the money, as is typical in reimbursement programs. Leveraging a combination of coaches, who help individuals navigate the financial aid system to apply for Pell grants and other types of scholarships, and direct payments to the college rather than a reimbursement structure, Starbucks minimizes the out-of-pocket costs that students need to pay.
While Starbucks was one of the first companies to put a robust education program in place, it didn’t take long for other organizations to see the value. McDonald's recently announced that they are tripling their education funding for full- and part-time employees, increasing the annual contribution from $700 to $2,500 per year for associates, and $3,000 per year for managers.
Both Taco Bell and Chipotle offer even higher levels of support, up to $5,250 per year. For a worker who, at minimum wage might make less than $20,000 per year, this aid represents a substantial investment in a credential that will likely be used by the employee to secure a job in a different field entirely. But these organizations also know that a degree can be a long time coming, especially if the employee is attending school part-time. If funding tuition keeps those workers on the job for multiple years while they pursue that degree, the benefit to the company is well worth the investment.
With the rising cost of college, programs like this have become more attractive to young workers. In 1979, a student could expect to work full-time in the summer and be able to pay for their tuition in full. Today it requires over 3,000 hours at minimum wage to pay for a year of college tuition. That’s a year and a half of full-time work for every year of tuition. If, instead, a working student can go to school part-time, and work part-time, they have the opportunity to graduate, albeit in more than the traditional four-year model, debt-free. This is significant in an era where the average student graduates with over $37,000 in debt.
It may seem counter-intuitive for colleges to be investing significantly in college tuition for frontline workers, but the strategy is clearly paying dividends. In 2017, Starbucks doubled down on their College Achievement Plan, providing tutoring in addition to tuition assistance, and launching additional programs for associates who don’t qualify for the full tuition program.
Whether it’s a partnership with a specific university, or a more broad-based program, it’s clear that investing in the education, and future opportunities of frontline workers is paying dividends to both the companies and their workers.