In Tight Labor Market, Chipotle to Pay College Tuition for Employees

On October 15, Chipotle announced that it will pay college tuition fees for all employees who have worked at the company for four months or more.

The company’s policy is part of a growing trend among employers, especially those whose employees typically work for low wages. Low unemployment rates have empowered workers to be choosy about where they spend their time, and employers are responding with a range of benefits.

Chipotle says it will cover 100% of tuition costs for 75 business and technology degrees from schools like the University of Arizona, Bellevue University, Brandman University, Southern New Hampshire University, and Wilmington University. The policy is an expansion of Chipotle's existing program: The company already offers up to $5,250 a year in tuition reimbursement as well as other education assistance programs.

“Chipotle recognizes that financial barriers can be one of the biggest obstacles that impede our employees from achieving their fullest potential,” said Marissa Andrada, chief people officer at Chipotle. “We are proud to launch this opportunity for debt-free degrees by providing free tuition to help our employees excel in all areas in their lives, both in and out of Chipotle.”

The expanded program is run in partnership with Guild Education, a tuition reimbursement and education platform that has also partnered with big companies like Disney and Walmart, which recently announced similar employee benefit plans.

Walmart said in June that it is partnering with Guild Education to give its 1.4 million employees the opportunity to earn an associate's or bachelor’s degree in business or chain management - while also paying for SAT prep courses to help students qualify for college admissions.

Disney made a similar move in August 2018 when it launched its Disney Aspire program, offering more than 90,000 US-based hourly workers a 100% tuition-free education at 11 universities. After a single year, more than 40% of the eligible employees have signed up, and more than 8,000 have enrolled. That same month, McDonalds tripled its tuition fund for employees to $150 million over five years.

But all of that is but the tip of the iceberg.

Faced with record-low unemployment nationwide, which recently fell down to 3.5%, companies that lean primarily on the younger demographic for hiring are being forced to increase incentives or face becoming short-handed. A wide selection of available jobs is therefore creating better worker conditions and alleviating the student debt problems that plague young employees, sometimes for life.

Chipotle’s Marissa Andrada did not try and shy away from the fact that the new program benefits not only employees, but also helps the company’s bottom line.

“It’s not only the right thing to do, to take care of people, but it also makes good business sense,” said Andrada, citing statistics that link advanced degree attainment with increased lifetime earnings. Chipotle’s internal figures also reflect 90% higher retention among Chipotle employees who participate in the education benefits program.

Daniel Zhao, a senior economist at Glassdoor, confirmed that there has been a noticeable uptick in education benefits as desirable among job seekers, though healthcare and retirement plans remain the top choices.

“Anecdotally, we’ve certainly heard more companies advertising these kinds of benefits and pushing them,” Zhao said. “It’s consistent with the state of the labor market right now. These new benefits show that employers are feeling the pressure of a tight labor market and are expanding benefits and experimenting with new ways to attract workers.”

He also noted that education benefits help companies grow a more skilled workforce.

“Initiatives like tuition benefits help companies build up a workforce that can then take on other jobs at the company that might require more advanced skills like technical jobs, engineering jobs,” said Zhao. “By developing that pipeline, not only are you expanding the set of candidates that you can hire, you’re also instilling some amount of loyalty in your workforce.”

The shift toward tuition-free programs comes amid calls for increasing the minimum wage. Chipotle’s Andrada said that simply raising wages does not accomplish as much as providing education benefits does.

“At the end of the day, we have 2,600-plus restaurants, and they’ve all got to run really well. And at the core of it is people. I don’t think a higher wage will buy you that,” she said. “People do want a fair wage and we know we’re paying that. They want to work for a manager and companies that invest in their growth and development. And I think that’s different than ‘I’m just going to pay you a dollar more.’”

It’s not clear that employees prefer education benefits to higher wages, but even unions, which have traditionally advocated for higher wages, are now increasingly negotiated for improved benefits and retirement plans rather than wholesale pay increases.

“I think that are a healthy sign that employers are experimenting,” Zhao said. “But we just don’t yet know which ones workers will end up loving and which ones might end up being as important in the future as some of the core benefits like 401(k)s.”