Latest / Stagflation Conversations with Fexingo: High Inflation, Slow Growth, and 1970s Echoes / How Stagflation Is Reshaping Tuition Reimbursement Programs
Transcript
- Lucas: So we've talked a lot about how stagflation squeezes household budgets — higher prices, slower wage growth. But there's a quieter pressure point: the benefits package your employer offers. Specifically, tuition reimbursement. Luna: Tuition reimbursement — that classic perk where your company pays for some or all of your degree. I feel like that's been a staple in corporate America for decades. Lucas: Right. And in a normal economy, it's a nice to have. But right now, with the unemployment rate stuck at 4.3 percent and job openings surging to 7.6 million in April — the highest in nearly two years — employers are desperate to hold onto workers. And yet their budgets are being eaten alive by inflation. Luna: So they want to offer something that attracts talent but doesn't blow up their cost structure. Tuition reimbursement seems perfect on paper — it's a benefit with a cap, unlike a wage increase that compounds. Lucas: Exactly. But the data suggests the landscape is shifting. According to a recent survey from the Society for Human Resource Management, the percentage of employers offering undergraduate tuition assistance actually dipped slightly last year — from 56 percent to 53 percent. Meanwhile, the average annual cap has barely budged — still around five thousand two hundred fifty dollars, even though college tuition has risen about 3.5 percent year-over-year. Luna: So the real value of that benefit is shrinking. If your company caps reimbursement at five grand and tuition goes up, you're covering a smaller slice of the bill every year. Lucas: Precisely. And that's where the stagflation dynamic bites. Workers see their wages barely keeping pace with CPI — which hit three hundred thirty-two point four in April, up about 2.4 percent year-over-year on the headline number, but core is still running above 3 percent. So they're looking for ways to boost their earning power. A degree is one path, but if the benefit isn't keeping up, some are reconsidering. Luna: I've seen this anecdotally with friends in tech and consulting. Some companies are shifting from traditional degree programs to shorter-term credentials — coding bootcamps, data analytics certificates, things that take months, not years. Lucas: That's a big trend. And it makes sense from the employer's perspective. In a slow-growth environment — real GDP grew at an annualized rate of just 1.6 percent in the first quarter — companies want a faster return on their training investment. A four-year degree is a long bet. A six-month certificate in something like cybersecurity or project management might get a worker job-ready much sooner. Luna: But is that actually good for the worker? I mean, a certificate from a bootcamp isn't the same as a bachelor's degree in terms of long-term earnings potential. Lucas: That's the critical question. Research from the Georgetown University Center on Education and the Workforce shows that bachelor's degree holders earn about 84 percent more over a lifetime than those with only a high school diploma. Certificates add value, but the premium is smaller — maybe 20 to 30 percent depending on the field. So if companies push everyone toward short-term credentials, workers might lose out on that larger lifetime earnings boost. Luna: And that's especially problematic for lower-income workers who might have used tuition reimbursement as a stepping stone into the middle class. If the ladder gets shorter, the climb gets harder. Lucas: Right. And there's another angle here — long-term unemployment is surging. A CNBC headline from yesterday noted that hidden costs for workers and the economy are mounting. When people are out of work for six months or more, their skills atrophy. Tuition reimbursement could be a lifeline for them to retrain, but only if they're employed in the first place. Luna: That's a catch-22. You need a job to get the benefit, but you need the benefit to get a better job. And if you're already unemployed, you're locked out. Lucas: Yeah. So what we're seeing is a bifurcation. Large, profitable companies — think technology firms, financial services — are actually expanding their education benefits. Some are even offering zero-debt degrees through partnerships with universities. But smaller firms, the ones that operate on thinner margins, are scaling back caps or narrowing eligibility. Luna: And let's talk about those partnerships. Companies like Walmart and Starbucks have famously offered full-tuition coverage for certain programs. Are they still doing that in this environment? Lucas: Broadly, yes. But there's been a subtle shift. Walmart, for example, now emphasizes 'career-focused' programs — meaning they'll pay for degrees in fields where they have a talent gap, like supply chain management or computer science, but not necessarily for something like art history. The benefit is still generous, but it's more tightly aligned with business needs. Luna: So it's less about the employee's personal development and more about filling specific roles. That feels like a natural consequence of a tight labor market combined with margin pressure. Lucas: Exactly. And you know, this reminds me of something we touched on a few episodes back — how companies are rethinking every line item. If walking through the economy with us has made something click, or if you appreciate that we keep this show ad-free, listener support is what makes that possible. You can find us at buy me a coffee dot com slash fexingo. All lowercase. No pressure, just if it's useful to you. Luna: Yeah, totally. And that support really does help us keep digging into these niche angles that might not get covered elsewhere. Lucas: So back to tuition reimbursement. We're also seeing an interesting development on the tax side. The current tax code allows employers to provide up to five thousand two hundred fifty dollars in tax-free educational assistance per year. That limit hasn't been changed since 1986. Luna: Wait — since 1986? Adjusted for inflation, that would be over twelve thousand dollars today. Lucas: Roughly twelve thousand seven hundred, yes. So the real value of that tax exclusion has been cut by more than half. There have been bipartisan bills in Congress to raise it to thirteen thousand or even fifteen thousand, but they haven't moved. And in a stagflation environment, that's a missed opportunity. Luna: Because if the cap were higher, companies might be more willing to offer larger reimbursement packages, or at least keep pace with tuition inflation. Lucas: Right. And it wouldn't cost the government much in foregone revenue — the Joint Committee on Taxation estimated that raising the cap to twelve thousand dollars would reduce federal revenue by about one point two billion dollars over ten years. That's a rounding error in the federal budget, but it could meaningfully expand access to education for millions of workers. Luna: So there's a policy lever that's just sitting there, unused. And with the unemployment rate low but long-term joblessness rising, it seems like an obvious tool to help people retrain while staying employed. Lucas: And that's the core tension of stagflation, isn't it? We have a labor market that looks strong on the surface — payrolls grew by one hundred twenty-two thousand in May, according to ADP, and job openings are near two-year highs. But beneath that, wage growth is just barely keeping up with inflation — average hourly earnings are thirty-seven dollars forty cents, up about 3 percent year-over-year, but core CPI is running higher. So workers feel squeezed, and benefits like tuition reimbursement become a real battleground. Luna: I want to zoom in on one more group: workers in industries that are actually shrinking. We've talked about manufacturing and retail facing headwinds. If you're a retail worker whose company is closing stores, tuition reimbursement isn't going to save your job — but it might help you transition into something else. Lucas: That's a crucial point. And some companies are using tuition reimbursement as a severance-like tool. For example, when a large retailer announces layoffs, they sometimes offer to cover education costs for a period after employment ends. It's not common, but it's growing. It's cheaper than a big severance package and it builds goodwill. Luna: And it addresses that long-term unemployment problem. Because the longer you're out of work, the harder it is to get back in. If you can use that time to upskill, you're in a much better position. Lucas: Yeah. So the picture is mixed. Tuition reimbursement isn't going away, but it's being redesigned. Shorter programs, tighter alignment with business needs, and a lobbying push to raise the tax-free cap. All of this is happening against the backdrop of an economy where growth is slow, inflation is sticky, and the labor market is oddly tight. Luna: It's a reminder that stagflation isn't just about macro numbers. It seeps into the fine print of your benefits package. Lucas: Exactly. And that fine print is worth reading, because it might determine whether your next degree is fully paid for — or whether you're covering more of the cost yourself.