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Wal-Mart is wise to invest in education

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By James McCusker
One of the more remarkable economic stories in recent weeks is Wal-Mart’s plan to encourage its workers to obtain college degrees. The company has entered into a partnership with American Public University to offer college-level, online courses at a discount to its employees.
Wal-Mart expects to spend $50 million over the next three years on this program and others that provide tuition assistance to its workers. The company has more than 1.4 million employees, so the potential impact is substantial.
Support for employee education has always been limited by economics in the sense that only successful firms can afford it. Beyond affordability, programs like this are generally found only in larger firms — and the reason for this reveals the underlying economic problem with business subsidies for employee education.
The traditional explanation is straightforward enough: to gain the most benefit from subsidizing higher education, a firm has to have jobs available in its own organization that require this education and pay accordingly. Without that, a firm would be simply paying to educate someone for their next job ... with another company.
There is still some truth, and sound economics, in the traditional view. Higher education adds to worker mobility, and a tuition subsidy program carries a skedaddle risk for your workers. This is especially true if you have a workplace filled with dead-end jobs — or, in consultant-speak, a work force matched and balanced to tasks not requiring skill sets associated with higher education.
The workplace is changing, though, and the requirements placed on workers today — for perspective and flexibility as well as technical skills — are going up while the educational standards are going down. This has raised the need for post-hire education and training in many workplaces, even those of traditional retailers.
Unfortunately, this increased need came at a time when the costs of higher education are accelerating, apparently out of control. That undoubtedly shaped the new Wal-Mart program, since online education is our last best hope for any relief from the higher education cost-spiral.
Because of the increased level of workplace skills needed in general, Wal-Mart will have no trouble absorbing the increased aggregate level of education of its work force resulting from the program. And, if their assessment of the effectiveness of increased education is correct, the firm will have no trouble recovering its costs, and more, from the increased productivity that will result.
Wal-Mart’s higher education program very likely will have the effect of increasing the bond between the workers and the company — not an easy thing to achieve with a work force of 1.4 million. It will also end up reinforcing the teamwork aspect of the workplace since it changes the nature of higher education from something that only the “suits” have to something that clock-punchers, shift workers — the “vests” — can aspire to and achieve.
Some extra bonding wouldn’t hurt. Nine years ago, seven female employees filed a workplace discrimination lawsuit against the company, claiming unequal treatment for women in pay and promotions. When that suit was granted class-action status, it instantly became the largest workplace discrimination case in history.
How will it come out? The nature of the case makes some things likely. If Wal-Mart is successful in getting the lawsuit’s class-action status reversed, the case will probably end up settled rather than tried in open court.
If it proceeds as a class-action suit, the promotions side will drive the case. There is apparently scant evidence of pay discrimination, but the issue of who gets selected for promotion can be much more difficult to defend.
Of course, it is equally as difficult to sort out damages in an issue that spans decades and involves millions of individuals. This case could easily remain in litigation for another nine years — perhaps even long enough for age discrimination charges to be added.
Whatever the merits of the lawsuit are, its very existence as “the largest in history” makes it repeatedly newsworthy and it is bound to be supplying some level of negative energy to Wal-Mart’s work force. It also provides some level of encouragement to organized labor, which is naturally attracted to the largest non-unionized, single-employer work force in the nation.
Wal-Mart’s decision to link its educational plan to an online university run by a publicly traded for-profit corporation is undoubtedly reflects cost considerations, but, more importantly, the Internet-based system offers equal opportunity to all workers, irrespective of their location or work schedule. The flexibility of Internet-based learning has a lot to offer workers who otherwise could not adjust their work and family commitments to a traditional school’s schedule.
It remains to be seen whether the new Wal-Mart program will provide the educational answers the company, and many of us, are looking for. But, as they say, it can’t hurt.
James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.
Story tags » Economy, Business & FinanceWal-Mart



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