Recouping Returns Through Increased Retention: An Explanation for Why Firms Offer Tuition Reimbursement
31 Pages Posted: 2 Feb 2010
Date Written: January 15, 2010
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: Suggested Citation