Workforce Education

In 2014, a worker making the national average minimum wage would have to work full time for 49 weeks to afford the average in-state tuition and fees at a public university.  In a year, that leaves only three weeks of full time study for course work.  While the budget of the federal Pell grant program is higher than it’s ever been, even receiving the maximum award will still require a low-wage worker to contribute 30 weeks of full-time pay to tuition.  It is no wonder that low-wager earners face an enormous challenge when trying to afford a college education.

That challenge appeared to get marginally less difficult last week for individuals employed by Starbucks; the company announced that they would pay for an online bachelor’s degree for all of their workers at Arizona State University.  A number of other private companies offer substantial tuition assistance to their employees but this is clearly the most generous offer yet.  Employees can choose from 40 different courses that do not need to be related to their work. The only requirement to receive the funding is that they complete the degree.  Remaining at Starbucks once the degree is finished is not necessary.

While the program is undeniably generous and while it will almost certainly help many of Starbucks’s employees, a number of commentators have pointed out that the program is actually less generous than it appears.  The tuition payments come primarily in the form of a significant initial discount (or scholarship) from ASU. Starbucks has commented publicly that they are relying on their workers qualifying for, and receiving, federal Pell grants. Starbucks will then cover the difference in tuition after the ASU discount and federal aid are applied.

It is worth highlighting that even with this program much of the cost is covered by federal aid not to besmirch what is still a very generous move by Starbucks but to emphasize that education is still a classic public good.  Yes, some private companies may offer to help students pay for tuition or, in this case, pay for most of it.  But none are offering to fully pay for a bachelor’s degree with no strings attached (the worker must study something work related or stay with the company after they earn their degree), or without relying heavily on federal or other scholarships (as is the case with Starbucks).  There is no incentive for companies to take on the full cost of educating their employees even though study after study has shown that a more educated workforce is broadly good for the economy.  This is because benefits exist that go beyond the company; all of the gains made by a more educated workforce do not go directly back into the company but rather have broader effects.  This is the textbook definition of a public good and the reason why federal funding for education is so important.  Unlike companies, the federal government would reap the more general benefits that come with having a more educated population.

So while Starbucks’s program is commendable, it is in no way a replacement for a robust system of federal student aid.  In a way, Starbucks is highlighting the limitations of the very approach it is taking: even if every Starbucks employee took advantage of this opportunity, they would only fund degrees for just over 150,000 students.  Compare that to the more than 17 million 18-24 year olds in the U.S. who do not have a college degree.  No organization aside from the federal government has the scale to be able to aid in the education of that many students.

This argument should not denigrate the offer Starbucks has made to its employees. Hopefully other companies are inspired by Starbucks and make similar commitments to educating their staff. Paying for a college degree is difficult for anyone and it is nearly impossible for low-wage workers.  Any kind of aid to make this process easier will improve lives and, ultimately, the overall health of the economy.  But do not mistake private generosity as a replacement for government action in the provision of a classic public good.  In the realm of education, the federal government is the only organization capable of bringing a college education into the hands of those reaching for it.


Image Credit: Grid Engine via Wikimedia Commons


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