$1 A Day Buys Walmart Associates A College Degree

May 31, 2018

$1 A Day Buys Walmart Associates A College Degree

Walmart execs estimate up to 68,000 Walmart associates will participate in their new education benefit program that they will fund; it would give Walmart the most scalable approach to helping America’s workforce go to college.

Originally published in Forbes.com.

Walmart announced this morning, the same day its Annual Formal Business Meeting for Shareholders begins, a new education benefit for all full-time, part-time and salaried Walmart and Sam’s Club store, supply chain and home office associates that covers the cost for associate and bachelor's degrees in Business or Supply Chain Management. On the conference call that announced the program to the media yesterday, Julie Murphy EVP of People at Walmart said that this program was key to “win the future of retail.”

In a statement released by Walmart, Greg Foran, CEO of Walmart US said, “Investing in the personal and professional success of our associates is vital to Walmart’s future success. We know training and learning opportunities empower associates to deliver for customers while growing and advancing in their careers.”

If this program is as successful as Walmart execs hope (they estimate up to 68,000 Walmart associates will participate), it would give Walmart the most scalable approach to helping America’s workforce go to college. Starbucks College Achievement Plan, currently the nation’s largest has enrolled about 7,000 according to Rachel Carlson, CEO and cofounder of Guild Education, which helped Walmart develop the program, and also covers the cost full tuition coverage for part-time and full time employees to earn a bachelor’s degree online at Arizona State University.

The Lumina Foundation, who has agreed to research and measure the impact of Walmart’s program through an independent evaluation, reports that approximately 40% of Americans have a college degree—a far lower rate than for citizens of South Korea, Japan, Canada, Ireland and the U.K. to name a few, where degree are issued to over 55% for those aged 25 to 34.

The program was designed, according to Walmart, to give their associates more confidence, improve their lives and help them with their careers; whether they continue their careers at the retailer or move on. The only requirement to participate is that you have to be working at Walmart over 90 days to register for the program. There is no requirement to stay with the company after graduation. The chain says its objectives for the program are to increase associate retention, improve engagement with associates, improve customer service and to increase the number of applications for people to work at the company.

Walmart says they want to make college accessible and relevant to all their associates and these programs are designed to attend around their work schedules: at night and on the weekends. Walmart associates can choose to do their college work either through distance learning or if local to the locations of the universities attend in-person if they offer part-time courses that work within their schedule.

The program kicks off today with two curriculums, Business or Supply Chain Management for associate and bachelor's degrees with additional curriculums to follow at three non-profit universities: University of Florida which is ranked #17 in the nation for its business school by U.S. News and World Report, Brandman University and Bellevue University. The five-year long program will include what Carlson calls “having a personal coach for education” from the application process up through graduation.

These three universities were selected, out of over 300 that they reviewed, based on each school’s experience in serving working adult students and having a higher than average student graduation rate. As example, Brandman University is an Hispanic-serving institution that has a graduation rate of 82%, as compared to the national average of 55%.

The program also continues to cover the cost for associates and eligible family members to earn a high school degree or GED, which was already a Walmart associate benefit.

Walmart would not disclose how much they have budgeted for this program, but estimate that up to 68,000 of their 1.4 million associates would have interest in participating, based on discussions they have already had with associates. That 68,000 includes associates enrolled in the college degree programs, high school and GED programs as well as those enrolled in existing Walmart Academies where associates can earn college credits. The total costs of the program, they point out, is difficult to estimate until they know what degree programs are signed up for, and from which universities.

In order to see just how much of an impact this would have on Walmart’s bottom line, we took a calculator to the Bachelor Degree in Business at the University of Florida. The published per-credit-hour charge for part-time undergraduate studies at University of Florida (UF) is $552.62 per credit for non-Florida residents. Walmart may or may not have negotiated a lower cost per credit based on the volume of students they expect to enroll. One hundred and twenty credits are needed to graduate (with a minimum 2.0 GPA), which could bring Walmart’s cost to $66,314 per associate that graduates (less of course the $365 per year that the individual pays). According to the UF ONLINE rep that I spoke with over the phone, the typical part-time student takes two courses a semester, most courses are three credits, and they have three semesters a year.

If indeed just half of the 68,000 Walmart associates did register at UF ONLINE (and clearly the other two universities will attract students as well as some would opt for an associates degree instead) the cost to Walmart in one year for just tuition would be $338,203,440, less the $12.4 million that each student pays $1 a day for the year (Walmart is also picking up the cost of books and other fees). Significant, but just 0.07% of their reported estimated revenue of $485.9 billion in 2017.

The IRS, under section 127 of the tax code, allows employers to deduct up to $5,250 per year in paid educational expenses without the employee being taxed. If you were to take those two 3-credit courses a term for all three terms at UF, Walmart would have paid just under $10,000 in tuition plus the cost of books and fees. As the employer, Walmart may deduct the entire amount that they pay for the employee’s educational costs as business expense. However, only $5,250 is not considered wages and not subject to payroll taxes. Any amounts over that are subject to income and payroll taxes, Jia Zhou, senior manager at the Los Angeles based accounting firm Fineman West & Company told me in an email. According to Erica Jones, Walmart's senior manager of corporate communications, "a small number of our higher-earning, salaried associates could see some tax implications which they will be informed of at their time of enrollment."

Jewel-Osco (division of Albertsons) told Progressive Grocer magazine that what keeps him up at night is “finding and retaining enough good team members to handle growth," echoing similar concerns from many other retailers that I speak with. The Bureau of Labor Statistics projects that the change in the number of retail sales workers alone, from 2016 to 2026 will increase by just 1%, or by 87,300, while the number of job openings in that same period will increase by 1,423,100. Having the best employees compete to work at a retailer who offers you this kind of educational opportunity is certainly a step closer to winning in that future.

Walmart deserves credit for creating this $1-a-day educational program and should reap significant benefits from having a better-educated and more loyal workforce. We all will whether we shop at Walmart or not.