It is telling that no matter how weak the economy gets, many companies always offer tuition reimbursement or similar benefits as a way to find and retain the best workers, writes Linda Nazareth.
By Linda Nazareth, August 27, 2018
So enter tuition reimbursement. It is a benefit, like any other, designed to attract and keep workers. As with free or subsidized dental care or a pension plan, it can make one company stand out from others. In weaker economic times, maybe you do not have to offer any of those things and still get to pick and choose workers, while in better times you have to do more to compete.
Happily-ever-after in a castle is one thing, but what if Cinderella wants to get an education? No problem, just as long as she is a Disney employee. The Walt Disney Company this week joined a growing list of employers that are offering free tuition to their workers. It’s a savvy move in a world where unemployment rates are low and there is a battle on to get, and keep, the best talent. More than that, it is also a positive step toward business getting increasingly involved in training the broader labour force.
In both Canada and the United States, labour is scarce. As of this July, the U.S. unemployment rate was a tiny 3.9 per cent, while the rate in Canada was 5.8 per cent (and would have been 4.8 per cent had we used the same methodology to calculate the rate as the United States). Arguably, in North America we are something close to “full employment,” the point at which everyone who wants a job has one. That is why the Bank of Canada talks about the “output gap” closing, and why interest rates are rising in both countries. The idea is that the economy is hot, maybe too hot, and it is time to slow things down.
For employers, that means there is a lot of demand for available workers. That is especially true for a company such as Disney, which typically relies on relatively young, relatively low-paid workers. The rapidly aging populations in both Canada and the United States means that those employers are at an increasing disadvantage. As of 2017, the median age of the population was 38.1 in the United States, up from about 28 in 1970, while in Canada we had a median age of 42.2, up from 26.0.
So enter tuition reimbursement. It is a benefit, like any other, designed to attract and keep workers. As with free or subsidized dental care or a pension plan, it can make one company stand out from others. In weaker economic times, maybe you do not have to offer any of those things and still get to pick and choose workers, while in better times you have to do more to compete.
Still, it is telling that no matter how weak the economy gets, many companies always offer such benefits as a way to find and retain the best workers.
A study of a tuition reimbursement program offered by health-services company Cigna shows just how effective such a program can be. Lumina Foundation (an independent foundation focused on education attainment) looked at data from a program that Cigna implemented in the United States between 2012 and 2014. By Lumina’s calculations, employees who participated in the program were 10 per cent more likely to get promoted, 7 per cent more likely to get transferred and 8 per cent more likely to be retained. They even put numbers to it, figuring that for every US$1 spent by the company on tuition, they got back $1 in productivity while also saving $1.29 in the “talent management costs” that typically go along with hiring new workers.
There are broader benefits to companies offering tuition assistance as well. Technology may never get to the point when we have a robotic Cinderella thrilling visitors at Disney World (chances are) but scores of other jobs are likely to be threatened in the years ahead. All things being equal, getting more education is a buffer against job loss for this reason. As well, building up a more educated and skilled labour force gives companies a better pool from which to promote, but also improves the broader work force.
Indeed, it is telling that earlier this year tech-giant Google announced it would be offering 10,000 scholarships for people to use its internal IT training program (which they were converting to an online course). Some of the graduates would hopefully be hired by the company, but it also accepted that some would not. Either way, they would contribute to training more skilled workers for Silicon Valley, which was the end goal.
Disney is only the latest company to jump on the tuition bandwagon. Starbucks and Walmart have also made splashy announcements recently, and in Canada, Air Canada partner Air Georgian has come out with a plan that assists with tuition and includes educational leaves. And over at a new Amazon warehouse in Milton, Ont., wages are not much above minimum wage, but workers should take note that benefits, including tuition reimbursement, will start on Day One. As labour gets tighter, presumably tuition plans will grow in number, and hopefully in use as well.
The offers to employees may be self-serving to business for now, but they potentially have a much wider reach. Today’s Cinderella could be tomorrow’s Disney executive and maybe move on from that, too. Giving her and her colleagues more options can have far-reaching benefits that stretch well beyond the castle or the park.
Linda Nazareth is the principal of Relentless Economics and senior fellow for economics and population change at the Macdonald-Laurier Institute.
