Walmart’s New College Tuition Perk Gives It a Competitive Edge

Walmart (NYSE: WMT) is in the vanguard of companies that understand the next battle for retailers will be on the labor front. It just announced that it is offering all of its employees the chance to get a college education for as little as $1 a day, whether they’re salaried employees or full- or part-time hourly workers.

By getting in front of the problem of attracting workers, Walmart will give itself a competitive edge over its rivals, though we may soon see others join the retail behemoth in paying for their workers’ education.

Walmart will give all 1.4 million of its employees the opportunity to pursue a college education for $1 a day. Image source: Getty Images.

Workers are getting harder to find

The unemployment rate fell to 3.8% in May, a level not seen in 18 years, making attracting employees to staff stores increasingly difficult, particularly as the labor force ages. Offering workers a cheap college degree could help attract job applicants.

While a college education is seen by many as the path to advancement, the debt burden that is attached to it is staggering. The average college graduate last year left school owing $39,400. Overall the Federal Reserve says student loan debt exceeds $1.5 trillion, and is growing at a 7% compounded rate annually.

Walmart’s education benefit gives its employees a chance to earn a college degree without incurring any student loan debt. Working with education benefits platform Guild One, Walmart will pay for an employee’s tuition, fees, and books beyond the “$1 a day” the student has to kick in.

Education is the new bargaining chip

Employees get to choose from one of three universities Walmart has partnered with — the University of Florida, Brandman University in California, and Bellevue University in Nebraska — and they’ll be able to pursue either an associate or bachelor’s degree in business or supply chain management. Each institution offers online courses for working adults. Walmart expects 68,000 employees to take advantage of the benefit over the first five years.

Coming on top of raising its minimum starting pay to $11 per hour and giving workers bonuses up to $1,000 as a result of the recent tax reform bill, Walmart is distinguishing itself from its rivals.

To be sure, Walmart isn’t the first company to pay for its employees’ education. Starbucks was reportedly the first U.S. company to offer to pay the full tuition costs for its 140,000 or so employees, and pharmaceutical giant Novartis also offers 100% reimbursement for eligible tuition expenses up to an annual maximum. Numerous companies offer partial reimbursement for education expenses to their employees, a benefit worth several thousand dollars a year.

Kroger, for example, launched a tuition assistance program in April that offers its 440,000 workers an education benefit of up to $3,500 a year — or $21,000 over the course of their employment — toward education and development opportunities.

What separates Walmart from these other companies is the sheer breadth of the offering in that it’s open to all 1.4 million employees regardless of status in the company. After you’ve been with Walmart for three months you’re eligible to receive the tuition assistance. Employees will also have access to a coach at Guild One who will help them decide on an appropriate program and guide them through the application process.

Benefiting the bottom line

The benefit to Walmart is that it gets a perk to attract employees and they might stick with the company after getting a degree in something the company can put to use. Moreover, raising the wages of a worker can cause a retailer to take a hit to its bottom line, something a low-margin operation like Walmart would like to avoid. Education benefits, on the other hand, can be tax-deductible for the company.

Just as employers began using health insurance benefits to attract workers during the 1940s, education benefits may be the new benefit that companies use to make themselves more competitive.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool has a disclosure policy.

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