Starbucks will be funding on-line education

by on June 16, 2014 at 12:46 am in Economics, Education, Food and Drink | Permalink

Starbucks will provide a free online college education to thousands of its workers, without requiring that they remain with the company, through an unusual arrangement with Arizona State University, the company and the university will announce on Monday.

The program is open to any of the company’s 135,000 United States employees, provided they work at least 20 hours a week and have the grades and test scores to gain admission to Arizona State. For a barista with at least two years of college credit, the company will pay full tuition; for those with fewer credits it will pay part of the cost, but even for many of them, courses will be free, with government and university aid.

“Starbucks is going where no other major corporation has gone,” said Jamie P. Merisotis, president and chief executive of the Lumina Foundation, a group focused on education. “For many of these Starbucks employees, an online university education is the only reasonable way they’re going to get a bachelor’s degree.”

There is further information here.

Peter June 16, 2014 at 12:56 am

Excellent idea, though it would help to know what percentage of the employees work 20+ hours a week.

Adrian Ratnapala June 16, 2014 at 5:02 am

That might be just the kind of thing Starbucks wants to select on.

I guess the idea is to cheaply train people who might become managers. People who only work a handful of hours are probably planning to move on to another job.

BC June 16, 2014 at 7:00 pm

The fact that there is no requirement that employees work for Starbucks after completing their degree suggests that the program is a way for Starbucks to select (non-college graduate) baristas. The program is obviously more valuable to baristas that want, and can gain admission into, ASU’s online program than to baristas that have no intention to go to college. Even if the admission requirements are not very difficult to meet, at the very least, there is some self-selection of those that believe that they will be able to complete the program. Thus, Starbucks is essentially paying online college bound baristas more than non-college bound baristas without any explicit requirement that Starbucks receives any human capital benefit from the education itself. This would seem like an endorsement of the signalling model of college education.

To be fair though, Starbucks may believe that it can capture some of the human capital value by retaining some of the program graduates. Starbucks has an information advantage over other employers in knowing which program graduates are the best ones to retain since it knows which employees work the hardest, are most productive, etc.

Evan Harper June 16, 2014 at 1:19 am

Erik Loomis is going to lose his shit over this.

Chip June 16, 2014 at 1:26 am

With three kids heading to college in the next 12 years I’m desperate for someone to disrupt the current model of increasing costs and declining value.

Can Starbucks help lift the profile of online learning to the point at which brick and mortar start pruning the admin staff, groupthink ideology and courses in frivolity?

Probably not but I’m happier to order a grande than I’ve been in a long while.

ivar June 16, 2014 at 1:40 am

Probably not. This is pure speculation, but if enough schools go online or start shifting to mostly career enhancing roles, then useless groupthink courses will become even more valuable as elite markers for those rich enough to ignore “crass, material” considerations. More people will be able to receive good educations, but there will probably be more shibboleths that one must pronounce to work in desirable jobs in SWPL land. It’s the difference between doing accounting from a low tier school vs. taking Sociology or women’s studies at Harvard, then going on to Yale Law or top tier consulting.

Just Another MR Commentor June 16, 2014 at 4:03 am

It already is this way. Engineering, for example, has basically become a field dominated by foreigners from relatively wealthy families in relatively poor countries (China (although becoming less so), India, parts of the Middle East) who use the engineerng program as a way to get their foot in the door in the US or Canada. The really elite people don’t study stuff like that, it’s a huge waste of their time.

Axa June 16, 2014 at 6:55 am

Or make them apply to a university in Europe (not the UK). Another 1 or 2 languages and cheaper, if not negligible, tuition ;)

JWatts June 16, 2014 at 12:20 pm

“Or make them apply to a university in Europe (not the UK).”

My nephew tried that in France. The bureaucracy actively thwarted any attempt to get enrolled and to start taking classes. I’m not sure how much the issue was on his end, but he had a French girlfriend attending a French university, so he seemed pretty highly motivated. And he tried for the better part of a year to get into the system, but for numerous reasons that sounded from the outside as large obstructive, he was never accepted.

I suspect that France keeps it’s ‘free’ university system, reasonably affordable, by actively and unobtrusively rationing it.

W June 16, 2014 at 7:31 pm

That’s definitely not true. Beware of anecdotal evidence and prejudice. I know the French system very well, and it is ludicrously easy to get in. It is very difficult to get into a “Grande Ecole” but for reasons that have nothing to do with bureaucracy.

jerseycityjoan June 16, 2014 at 1:37 am

I do not see a reason to limit the offer to one school and to online courses — that is, if Starbucks sincerely wants high usage of this benefit by its employees and to wants to provide the maximum educational benefit and bang for the buck to its employees.

I am very unconvinced by the real-life usefulness of online bachelors degrees. It breaks my heart to think of the millions of people have wasted their time, used their government grants and took out loans for degrees that many companies won’t accept. And of course many never get a degree.

Starbucks isn’t in every town in America. I would think most of their employees live within an hour’s commute or less to at least one real school that has parttime degree programs. They’d be far better off there.

My opinion of Starbacks has really taken a nosedive with this.

msgkings June 16, 2014 at 4:42 pm

But Starbucks is offering this free. If the employee prefers your idea they can still do that.

How does that hurt one’s opinion of them, a free perk being offered?

jerseycityjoan June 20, 2014 at 12:54 am

I checked back for comments before but somehow I missed this.

I don’ t know who will read this in the future but already I feel vindicated by my initial objections.

There are only 40 majors offered.

Starbucks has been playing this for all the goodwill and free publicity they can get, which has been overwhelming. It turns out that US Secretary of Education attended the official announcement of this.

The head of the college has been speaking all over the place about it too. He dropped the bombshell that the majority of the savings will come from discounts provided by the university. Students in their junior and senior years will have to apply for government grants.

You are quite right that nobody has to participate. But the initial description vs. the large amount of limitations and fine print that puts costs back on students and the university have made me even more disgusted by the many pats on the back Starbucks received by many influential people and organizations that endorsed a program without investigating it.

prior_approval June 16, 2014 at 1:41 am

‘For students enrolled in a fully online degree program, ASU undergraduate tuition ranges from $480 to $543 per credit hour, regardless of residency status, with no additional program fees.’ http://asuonline.asu.edu/what-it-costs (And for anyone wanting a clear demonstration of just how money works in terms of universities, check out Starbucks’ ad at http://www.asu.edu/ )

It is reasonable to assume that Starbucks receives a discount for what it pays to have employees receive college credit. Especially since the real cost is not in educating the student, but in retaining the proper degree granting accreditation so as to convince people that the diploma is worth the cost – especially at whatever bulk discount Starbucks will be given. And one can assume that government aid will not be that difficult for many Starbucks’ employees to acquire – ‘Average Starbucks Barista salary is $9.’ http://www.glassdoor.com/Hourly-Pay/Starbucks-Barista-Hourly-Pay-E2202_D_KO10,17.htm (After all, it isn’t as if major corporations in the U.S. don’t already help their employees apply for government aid – Walmart comes to mind, though admittedly, that is for food aid.)

Thankfully, MRU is way ahead of the curve on this one – it doesn’t bother with accreditation, and being free to watch (inQbation’s Charlie Team – http://www.inqbation.com – did good work with that billed 1200+ project hours), need not worry about its value being undercut.

andrew' June 16, 2014 at 3:13 am

It is funny how I can scroll up from the bottom and read only one innocuous sentence “average…$9 an hour” and know it is you before I scroll up.

JWatts June 16, 2014 at 12:23 pm

I started using the killfile program several months ago, and haven’t seen a post from p_a in a while. Unfortunately, I’m using IE today, and it’s not supported. The quality of the comment posts seems definitely higher with killfile active. ;)

Vivian Darkbloom June 16, 2014 at 2:03 am

Clever deal all around and a lot of interesting questions.

ASU is charging about $500 per credit for its online undergraduate courses. How much of a quantity discount did Starbucks negotiate? Essentially, before a possible discount, ASU would get about $1,500 per course to grade tests and papers. The economies of scale are obvious.

Is employer-provided medical insurance going to be replaced by employer-provided education assistance?

Starbucks can annually give each employee $5,200 in tuition assistance without having to pay employer social security/medicare contributions on that amount. This should help them attract employees and keep taxable cash wage costs down. One dollar of tuition assistance is cheaper for them than $1 of cash wages.

The tuition assistance, up to $5,250 per year, is not taxable to the employee. Although very few Starbucks employees pay income tax, due to the social security and medicare tax savings to them this is a a tax efficient way for them to finance an on-line education.

The number of ASU granted BA’s should skyrocket because of this deal. Will that cheapen the brand? Are students smart to get credits from ASU that are transferable to another university that will grant the degree?

Rahul June 16, 2014 at 2:55 am

“For many of these Starbucks employees, an online university education is the only reasonable way they’re going to get a bachelor’s degree”

Yes, but that begs the question whether this online degree is as good as the offline one. Or is perceived to be as good.

Online degree shops have been an option for decades. Does a Barista need a degree to advance in his job? If he wants to switch to other jobs will an Online degree cut it?

andrew' June 16, 2014 at 3:18 am

Like I told my wife while discussing whether taking a two year old to the zoo will be a miracle or a disaster, it is a marketing question. We present, the market decides.

Doug June 16, 2014 at 3:26 am

Why should an online degree even be necessary. The purpose of the vast majority of college education is signaling intelligence, competence and self-discipline. I would wager that being a store manager of a Starbucks probably demonstrates these qualities to a greater degree then a generic business degree from a second-tier State U. Why are so many companies insistent on college graduates for entry to mid-level white collar jobs? Shouldn’t they be trying to skim the cream off the top of the service sector?

Adrian Ratnapala June 16, 2014 at 5:12 am

Even if the signaling theory of education is correct, that doesn’t mean it has no other value at all. And online courses might be a cheap way to tap that value.

Suppose you have a hard working, reliable barista. You want to promote her into a higher position, heck barista work is still a pretty narrow experience and you only really know that she is hard working, articulate and good with people. This might mean intelligent too, but she can demonstrate that by learning a little bit of accountancy, law, maths and whatever else.

JWatts June 16, 2014 at 12:32 pm

Both of you make good points here. And I’m not sure there is any way to quantify to what degree any of the following are true:

a) Starbuck’s gets a lot of good marketing to it’s customers and doesn’t care about the direct output,
b) it adds direct useable skills to existing employees,
c) it’s an effective signaling marker for employees regardless of the useable skills
d) it increases the quality of candidates that Starbucks hire’s from
e) it lowers turn over of high value employees.

Adrian Ratnapala June 16, 2014 at 5:18 am

I think this kind of thing will raise the prestige of on-line degrees. Imagine there is a whole generation of intelligent, hard working manager type people who proudly say “I worked in the real world for four years while I got my degree”. Only a fool would disrespect that.

That doesn’t mean the on-line degrees will be treated the same as on-site degrees. But it might suck out the poison we have where any kid who wants a decent job has to go to an institution designed for medieval clerics.

Rahul June 16, 2014 at 5:37 am

Wouldn’t it be better to move to a world where no one expects coffee shop managers to have degrees & they can still proudly say: “I work hard in the real world & I do my job well & no I don’t need a degree for that.”

Or say: “I never went to college but I got myself tested on Accounting concepts & rate higher than most college grads so hire me”

jerseycityjoan June 20, 2014 at 10:00 pm

I wouldn’t wish being a Starbucks manager while earning a Bachelor’s degree at the same time anybody. You’re on your feet all day, you don’t have a 9-5 day, you’re supposed to come home and read and study and really absorb the material? No thanks. Far better to push kids to go to college for four years and then work. Make that affordable again. That some people kill themselves to work and go to school at the same time doesn’t mean everybody can do or that people should have to kill themselves today to get what their parents or grandparents did NOT have to kill themselves to have.

Nathan W June 16, 2014 at 3:51 pm

Maybe not always, but at least if they need a classroom program, completing the online degree with help fulfill many requirements at a brick and mortar school. If they could partner with many local schools to give it more offline credibility then perhaps it could be more broadly perceived as useful?

andrew' June 16, 2014 at 3:10 am

What about a basic standardized 2-year degree focusing on exposure. Intro courses in econ, math, physics, biology(aka nursing), etc?

dearieme June 16, 2014 at 6:02 am

They should also offer a prize: the employee who does best gets sent for a year in Oxford, that sort of thing.

ummm June 16, 2014 at 6:27 am

Whoever makes coffee the fastest gets a 4-year scholarship to Harvard lol

Ray Lopez June 16, 2014 at 6:06 am

You get the ASU degree without the ASU party, lol. And why not a deal with the U of Phoenix? The whole thing strikes me as a publicity stunt, but I hope it works out.

JJ June 16, 2014 at 8:29 am

An online degree might actually be a more positive signal than going to the brick and mortar shop — at least online the focus is education.

Rahul June 16, 2014 at 6:54 am

…and have the grades and test scores to gain admission to Arizona State

Why does an online program even have a minimum entry requirement? It’s not like the unprepared students will drag down the whole class. Nor are seats limited.

Do Udacity / Coursera etc. also have minimum requirements?

JWatts June 16, 2014 at 12:34 pm

“Why does an online program even have a minimum entry requirement?”

On-line courses are, for better or worse, judge by how well their students do per seat. Particularly if the students receive any kind of Federal aid.

Bill June 16, 2014 at 7:39 am

If the credits transfer, this is a good thing.

Bill June 16, 2014 at 7:46 am

Very interesting labor pricing issue.

1, You start the course, you are unlikely to leave Starbucks unless you complete the course. If you leave while you are taking the course, do you pay for the pro rata price for the remainder of the course, and is it pro rata of what Starbucks pays for a group purchase, or what ASU charges regularly to out of state residents.

2. Attraction. You attract students who will want to get college credit. Therefore, you get a different labor pool.

3. Repulsion. After you get your degree, or most of it, you leave, making space for another YOUNG employee.

4. Reputation of the workers. Instead of the workers being viewed as losers, they are viewed as college students.

randomworker June 16, 2014 at 8:38 am

This approach makes a great deal of sense. We offer an education benefit. Relatively few employees take advantage of it, but it is very popular. The cost, however, is astonishingly high. We were going to eliminate it but the backlash was significant.

We are considering a similar approach as Starbucks with a single provider (in consortium with several other large employers to get the right scale) but we haven’t pulled the trigger on it yet.

Rahul June 16, 2014 at 10:08 am

How can it be both “very popular” & “relatively few employees take advantage of it”?

Aidan June 16, 2014 at 10:56 am

Quite easily.

Having a degree is nice. Knowing that someone will pay the tuition for your degree is nice. Actually studying for a degree while holding down a job and having a life is a lot of work.

Knowing that this plan would allow them to have a free education if they were to actually sign up for it will no doubt give a great deal of pleasure to the majority of Starbucks workers who will never actually avail of that the offer.

randomworker June 16, 2014 at 3:40 pm

Correct!

Rahul June 16, 2014 at 11:37 pm

So basically you are investing in a large expensive carrot that you know you couldn’t afford if people actually started eating.

John Mansfield June 16, 2014 at 9:06 am

Once as a graduate student employed as a research assistant by my department, as most full-time grad students were, something went funny with the accounting that my department hadn’t paid the university for that semester’s tuition. This was all straightened out quickly and easily, but the thing that stuck with me from the paperwork I walked over from my department to the registrar’s office was that though the sticker price for a semester’s education was something like $11,000, my department only owed the university about $2,000.

Employer-paid college would bring a power to control the price of college that individuals lack. If Starbucks is paying Arizona State for education of thousands of its employees, it has likely negotiated a steep price discount. As with health-care, entangling education with employment generate its own set of problems.

Granite26 June 16, 2014 at 11:58 am

Forget the labor relations side of this, I see this as entirely a marketing ploy on Starbucks’ side. For very little relative cost (given substitution effects and whatnot) They’ll be able to price out their entire workforce to ‘kids working their way through college’ without seeming at all prejudicial. Even better, they’ll be able to capitalize on their image of being a young, vibrant company, and a hip place to hang out.

Back to the labor relations side, they are pushing their young, vibrant workforce into a degree path that DOESN’T cause (as much) havoc with Starbucks’ resource scheduling.

In short, a genius move with a ton of benefits.

Rahul June 16, 2014 at 12:08 pm

Besides I bet they are paying a hugely discounted price to the Univ. anyways.

Granite26 June 16, 2014 at 11:59 am

*Is anyone familiar with the new minimum wage laws? Is there a waiver where something like this could be counted against the minimum wage?

sam June 16, 2014 at 12:18 pm

The benefit to Starbucks is enormous here. It’s an end-run around discrimination laws.

If Starbucks were to pay $12/hr, they would be legally obligated to choose a demographically representative sample of workers willing to work for $12/hr. Many of these workers are undesirable to a company that wants to present a SWPL profile.

If, on the other hand, they were to pay $10/hr and $2/hr in college tuition, their costs would be identical, but their applicant pool would now be those who are interested from college tuition. These applicants are going to be younger and more motivated than the population at large.

Starbucks has just managed to discriminate in favor of the young and motivated, without bringing the evil eye of the EEOC upon them.

JWatts June 16, 2014 at 1:21 pm

I would imagine the only part of the EEOC that would cause Starbuck’s heartache would be not getting rid of 40+ year old barista’s.

I’m not sure that this would be an issue with Starbuck’s, but I can see your point. 40+ year old barista’s probably don’t on average appeal to the Starbuck’s demographic the way 25 year old barista’s do. And it’s quite possible that the difference in preferences would allow for some subtle age discrimination. But on the other hand, I can’t imagine this is a very substantial factor.

sam June 16, 2014 at 1:55 pm

The discrimination here is not merely age, although that is important. It is mostly about socio-economic class and the cultural and visual elements that go along with that. Starbucks has a certain image with consumers, and it is distinct from that of the DMV.

mulp June 16, 2014 at 8:28 pm

“Starbucks is going where no other major corporation has gone,” …

At least since 1980 when such programs were pretty standard for all major corporations, before the war on workers began in earnst.

freethinker June 17, 2014 at 10:34 pm

Chip asks: “Can Starbucks help lift the profile of online learning to the point at which brick and mortar start pruning the admin staff, groupthink ideology and courses in frivolity?” As long as what matters are the skills imparted, the job market will not care whether the education was in an online or in a brick and mortar school .So chip’s wish may come true in future in America. But in some countries like mine, the government departments which control higher education brand some institutions as offering “recognized” degrees, with the government appointed committees deciding which college and which academic programme should be “recognized”. This restricts healthy competition. There is a vested interest under such a system to stall innovation permitted by information technology .

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