Recouping Returns Through Increased Retention: An Explanation for Why Firms Offer Tuition Reimbursement

31 Pages Posted: 2 Feb 2010

Date Written: January 15, 2010

Abstract

Using administrative data from a large establishment, this paper examines two channels by which tuition reimbursement programs, a type of employer-sponsored general training program, increase employee retention. The first channel operates through the type of workers that sort into firms with tuition reimbursement programs versus firms without a program. The second channel is the direct effect on retention through participation of employees in the program. I find that 80 percent of the program’s overall effect on retention comes from worker sorting and that the cost-savings from reduced turnover more than covers the cost of the program. Furthermore, this paper exploits information on degree ma jor to evaluate potential mechanisms outside of standard human capital for how general training directly increases retention.

Keywords: Human Capital, Turnover, General Skills

JEL Classification: M53, J24, J63

Suggested Citation

Manchester, Colleen Flaherty, Recouping Returns Through Increased Retention: An Explanation for Why Firms Offer Tuition Reimbursement (January 15, 2010). Available at SSRN: https://ssrn.com/abstract=1546064 or http://dx.doi.org/10.2139/ssrn.1546064

Colleen Flaherty Manchester (Contact Author)

University of Minnesota ( email )

3-300R CarlSMgmt
Minneapolis, MN 55455
United States
612 625-9667 (Phone)

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