General Human Capital and Employee Mobility: How Tuition Reimbursement Increases Retention through Sorting and Participation

Abstract

Using administrative data from a large establishment that implemented a tuition reimbursement program, the author examines the relative importance of two channels by which these employer-sponsored general training programs 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 due to employees participating in the program. In this setting, the author finds that 80% of the program's overall effect on retention comes through sorting. The author also exploits information on degree major to evaluate potential mechanisms outside standard human capital theory for how participation in general training increases retention.