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Chronicle of Higher Education
Can Starbucks Save the Middle Class? No. But It Might Ruin Higher Education.
By Geoffrey M. Cox
August 1, 2019
A number of large employers have garnered praise recently for creating
higher-education benefits for their employees in partnership with one
or more universities. For example, Starbucks has established a program
through Arizona State University; Walmart has partnered with several
institutions, including the University of Florida, Brandman University,
and Bellevue University; and Peet’s Coffee has an arrangement through
Oregon State University. Arizona State is planning to create a
for-profit subsidiary to broker employer-university partnerships on an
even larger scale.
These programs have generally been seen as both innovative and
enlightened; they provide evidence that employers are willing to invest
in their workers — many of whom are at entry-level, low-skill jobs —
and that universities are developing new ways to expand access and
respond to the needs of the work force. At first glance, arrangements
such as these appear to deliver benefits to everyone concerned.
Employers gain from more stable and better-educated workers; employees
gain access to educational programs they might not otherwise have; and
universities hungry for revenue gain a new wholesale business model to
supplement the traditional retail approach.
While it is easy to appreciate both the good intentions and the
opportunities represented by these arrangements, we should be concerned
if they become the new standard pathway to college. Doing so could
replicate the problems created decades ago when access to health care
became linked to employment.
Employer-sponsored health-care plans became prevalent during World War
II as a way for companies to skirt federal wage freezes. Employers
realized that offering fringe benefits such as health insurance would
increase worker compensation without adding to cash income. These
programs gained momentum when, in 1943, the IRS ruled that health
benefits are exempt from taxation. The practice quickly spread, and as
health-care costs rose, employer-sponsored health insurance became the
only way most people could afford even basic medical care. The U.S.
health "system," such as it is, arose more by accident than from
thoughtful policy making.
The unintended consequences of this model have haunted us ever since.
We have developed the most unequal and expensive system of health care
in the world. While important corrections to the system were made
through the Affordable Care Act, millions of people still remain
uninsured or underinsured, and access to health care remains
problematic for many who most need it. Furthermore, health-care rights
are vulnerable to the dysfunctions of both our political system and our
economy. The system reduces job mobility (because it is risky to leave
a job with good benefits); and it has created powerful vested interests
that consistently stand in the way of reform. The link between
employment and health insurance also effectively privatizes an
important public-policy issue and has allowed the federal government to
avoid addressing it adequately for decades. It is not difficult to
imagine a similar fate for higher education. If employment becomes a
precondition for most people to gain a college degree, it will freeze
many people out of the system.
Instead of viewing barista jobs as entry-level, high-turnover
positions, there will be increased competition for them, and incumbents
will stay in them longer. Indeed, making lattes or stocking shelves
could become the new way most students pay for tuition — even those who
could finance their education in other ways. This would be fine if
everyone had access to these jobs, but this is unlikely to be the case.
As total compensation (salary plus tuition and other benefits) from
these jobs rises, those who already have difficulty competing in the
job market are likely to get crowded out.
Furthermore, if the benchmark cost of education becomes a matter of
private negotiation between companies and universities, the experience
from health care suggests that it will skyrocket even more so than it
has in recent years. Colleges, as rational economic actors, may limit
or reduce their commitments to financial aid, preferring instead to
attract students who are subsidized by their employers.
Finally, and perhaps most importantly, the pressure on states and the
federal government to support higher education will erode even further.
Indeed, it will become increasingly difficult to claim that higher
education is a public good that deserves sustained support if it is
dominated by private arrangements among firms and universities.
The history of American higher education has been marked by many
efforts to expand access. Some of these efforts, such as the
establishment of land-grant universities and community colleges, have
undoubtedly created opportunities for students who might otherwise have
been excluded.
Other initiatives have arisen from the same democratizing spirit, but
have had at best mixed results. Standardized admissions tests were
meant to mitigate ethnic and class-based bias, but in practice they
have tended to amplify the effects of privilege. Portable federal loan
programs put power in the hands of student consumers, but may also have
inflationary effects on tuition and create perverse incentives which
are seen most clearly (but not exclusively) in the for-profit side of
higher education. Well-intended innovations often have unintended
consequences, particularly in the absence of a coherent policy
framework supporting clear purposes and goals — a state of affairs that
characterizes both higher education and health care in the United
States.
Public education has been radically defunded by state governments in
recent years, and new ways must be found to maintain access to good
quality institutions at reasonable cost to students. But those who most
need education also most need jobs and frequently cannot get them.
Linking access more closely to employment could well exacerbate a
vicious cycle that is already unacceptable.
Tying health care to employment was arguably one of the greatest
failures of public policy in U.S. history. We should learn from this
experience rather than replicate it.
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