Why some companies are dropping degree requirements in hiring

At many companies, having a college degree is simply the price of admission for landing a job. A Bureau of Labor Statistics report released in June 2017 found that occupations that typically require some type of post-secondary education made up nearly 37% of employment in May 2016. The most common requirement was a bachelor’s degree. But some labor experts say it’s time to toss degree requirements except in situations where they’re necessary.

“I think there are a couple of motivations to relax [degree requirements],” says Joseph B. Fuller, a professor of management practice at Harvard Business School. “They’ll have to revisit it because the combination of what they can afford to pay and the response to that from the market for labor is not going to be a good one,” he says. Plus, many of the degree requirements demanded simply aren’t necessary to do the job.

The degree inflation drag

Degree inflation–requiring a college degree as hiring criteria for a position that doesn’t require it–is making the U.S. labor market inefficient, Fuller and his co-authors argue in “Dismissed by Degrees: How degree inflation is undermining U.S. competitiveness and hurting America’s middle class.” Companies look at a bachelor’s degree as shorthand for a variety of soft skills such as written and verbal communication, problem-solving, and others. However, the increasingly tight labor market, where leaders are scrambling to find talent, may force them to take a more inclusive view, considering people who are trained through community college programs, formal and informal apprenticeships, career program partnerships with community groups, and other job-training programs.

Fuller’s report describes the degree gap–the difference between job postings requiring a college degree and people in that industry who have a degree–in a number of industries found in an analysis of more than 26 million job postings. “For example, in 2015, 67% of production supervisor job postings asked for a college degree, while only 16% of employed production supervisors had one. Our analysis indicates that more than 6 million jobs are currently at risk of degree inflation,” the report found.

Hiring “new collar” workers

While there isn’t exactly a race to drop degree requirements, some top companies are broadening their hiring criteria. At publishing house Penguin Random House U.S., it’s long been policy not to require college degrees, says Paige Mcinerny, vice president, human resources. The company has some job postings that state as a suggested requirement “college degree or equivalent work experience.” Except for specific jobs where a targeted, accredited degree is truly required–such as a certified public accountant or attorney–“we do not have a mandatory, companywide higher-education requirement for working at Penguin Random House U.S.,” she says.

While management consulting firm EY still requires bachelor’s degrees for most positions in the U.S., it dropped the requirement for its U.K. hires in 2015. “They did some research and they saw that the individual strengths and future potential rather than the academic performance of those they hired were a greater indicator of success in working at the firm,” says Larry Nash, EY’s U.S. director of recruiting. He says the U.S. division “is always looking at our recruiting strategy,” but there are no immediate plans to drop degree requirements from most positions.

About 18 months ago, IBM also began looking at the skills gap and looming hiring issues. Concerns about not being able to find enough workers led the tech giant to look at new sources of talent–without bachelor’s degrees. “We started to look at ways we could build new pipeline, whether that was through community colleges, boot camps, partnering with other companies who might be working on development, as well as what we could do internally around skill development, and that was when we launched our apprenticeship program as well,” says Kelli Jordan, IBM’s new collar HR lead. Roughly 15 percent of new hires come from these “new collar” programs.

A challenge for employers

Jeff Strohl, PhD, analyzes education and labor market outcomes at Georgetown University Center on Education and the Workforce. He believes the labor market is dealing with “spot shortages where the employer can identify a specific skill that they’re missing and the certificate and the certification is a sure, clean way to get a demonstrated skill set, and in particular the certification,” he says.

However, he has concerns that these programs are collectively considered a broad-brush solution when they vary in the foundation they give prospective employees. Just 42% of certificates offer the potential for reasonable earnings and upward mobility, he says. Some simply offer entrée into dead-end jobs. And he’d like to see more data on the long-term outcomes of hires from “new collar” programs.

Fuller says companies need to do more than just complain about the labor shortage. Ultimately, they are going to need to try new things. But there are still barriers. Job-training programs, formal apprenticeship programs, and co-ops programs like that at Northeastern University can be effective, but they require investment and a long-term commitment from employers. And employers are reluctant to take on that cost or obligation. However, maintaining the status quo has hidden costs, including turnover, higher salaries for unnecessary credentials, and difficulty filling key roles, to name a few, that many companies don’t acknowledge. Employers need to begin looking for talent in new areas.

“That means you don’t just kind of up-credential every job, assume that someone’s going to show up and take wages you can afford. You do the math, so you know whether it’s smarter to build your own,” Fuller says. When you do that, you know you’re getting skilled, capable workers who understand your culture, he adds. If you don’t? “You are leaving yourself at the mercy of market forces, which are often dictated by firms with higher brand recognition, who are viewed as more desirable and pay higher,” he says.