Most Education Benefits Go Unused. Why?
November 22, 2022
In March 2022 Amazon announced that it would increase funding for employee education benefits to $1.2 billion. The funds will “upskill more than 300,000 workers by 2025,” according to an Amazon press release. With these funds, Amazon will pay full tuition for employees to attend partner schools, offering education ranging from GED prep and English language instruction to bachelor’s degrees.
Amazon is not alone. Other companies, like Walmart and Macy’s, have made similar commitments, ostensibly to attract, retain, and upskill employees in a tight labor market. McKinsey & Company has also found that companies have increased upskilling and reskilling efforts since the start of the pandemic.
Despite increasing popularity, education benefits have had mixed results. Education benefits have always been thought to increase company profits and provide employees with pathways to career advancement. But they often go underused. Now, some companies and researchers are beginning to understand why and what can be done.
Uneven dispersal of education benefits
Education benefits are known to be good investments. In two studies, the Lumina Foundation found that, for every dollar spent on education reimbursement, two companies—Cigna Corporation and Discover Financial Services— received $1.29 and $1.44 in savings. Education benefits may bring such returns on investment by increasing productivity and reducing turnover.
Advantages for employer and employee alike notwithstanding, many education benefits go unused, especially by low-wage and entry-level workers.
A survey conducted by The Society for Human Resource Management found that education benefits were used by only 3% to 5% of employees at most organizations. Moreover, The Graduate! Network, a think tank focused on adult education, reports that 52% of employer-sponsored education benefits go unused.
Those who do access education benefits tend to be paid better and have more education already. A survey of employers, conducted by researchers at The Graduate! Network, found that entry-level employees are less likely than mid-level employees to use education benefits. Fifty-three percent of employers reported that mid-level employees were most likely to use educational benefits at their company, compared to 20% of employers who reported that entry-level employees were most likely to do so.
Employers also spend more on education benefits for employees with, than those without, a bachelor’s degree, according to Natalie McCollough and Lorraine Stomski, writing in Harvard Business Review. McCollough and Stromski report that in 2020 U.S. employers spent 58% of education funds on employees who have bachelor’s degrees. In comparison, employers spent only 17% of funds on employees with a high school diploma or less, though this population makes up the largest share of the U.S. population, at 38%.
Why education benefits go unused
Among employees surveyed by The Graduate! Network, the most common reason cited for not using education benefits was time: 59% of survey respondents believe “employees are too busy or otherwise committed to pursue learning or education.”
But the survey also reveals other causes of unused funds too. Many employees (48%) say they lack knowledge about educational benefits offered by their employer. Employees identify poor promotion (36%), lack of incentives (32%), and lack of employer interest (22%) as causes too.
McCollough and Stromski, however, find that most employees do not use education benefits because, ironically, they can be prohibitively expensive to access. Even when employers fund education, they most often disperse funds as reimbursements, according to McCollough and Stromski. Employers also often require the employee to shoulder some of the expenses, in the belief that if employees are financially invested too, they will be more likely to complete an education program.
“Not surprisingly,” McCollough and Stromski write, “the total financial burden associated with enrolling in an education program remains the number one barrier to enrollment and the primary reason for dropping out.”
Reasons for not accessing benefits may vary by age too. Interviews conducted by researchers at the think tank New America found that older and younger workers face different obstacles to returning to college. Compared to young adults, mid-career and older adults expressed less interest in returning to school. Older adults were also more likely to prefer on-the-job training.
Older adults “described being consumed with the pressures of work and family,” write Molly Kinder and Amanda Lenhart, authors of the study. Older adults felt constrained by limited time and finances. Many too had the “perception that additional training is for the benefit of their employer and not for them.”
In contrast, younger adults expressed more interest in returning to school, but faced several challenges. Among them were financial difficulties, previous struggles with school, and lack of career direction.
Ways to increase use of education benefits
One solution is for employers to pay, rather than reimburse, education costs in full and up front.
Evidence suggests this funding model increases enrollment among employees with lower incomes. McCollough and Stromski report that, in one study, programs that were fully funded up front, compared to “skin in the game programs,” enrolled 23% more employees who lived in low-income zip codes—where the median per capita income was less than $30,000.
Such programs also increased participants’ wages, likelihood of promotion, and retention within the company. In studies examined by McCollough and Stromski, participants earned wages on average 2.4x more than non-participating peers within a year, were 80% more likely to be promoted, and had 2.5x lower turnover rates.
More generally, employees may be more likely to use education benefits when they feel supported in their learning. Employees may benefit from guidance on career goals and educational pathways, while having the autonomy to choose an education program. Employees may benefit too from seeing how upskilling can lead to career advancement. Some companies support employees by regularly setting aside time for professional development during the workday.
Many education benefits programs have met with success and might serve as models. Compiled is a list published by The Aspen Institute. Education benefits are known to be effective for talent recruitment and retention. Now, the challenge is to ensure greater access for entry-level and low-wage workers, to create a more equitable and inclusive workplace.
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