Degree Inflation is Hurting the Middle Class

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Over the last several years, millions of Americans who did not graduate with a four-year degree are finding it harder to start a fulfilling career. One major cause? Degree inflation.

“Degree inflation” describes the practice of an employer requiring a four-year degree for middle-skills jobs that previously did not require one. It’s not that these “middle-skills” jobs—often supervisors of entry-level administrative, construction, or sales workers—require specific skills taught only in a college classroom, but rather that companies are simply using the degree requirement as a proxy for skilled workers in order to narrow down the applicant pool.

Unfortunately, this screening process, usually performed automatically by algorithms, means that hiring managers may never see resumes of non-graduates, leaving even the most promising applicants without a chance to demonstrate their skills that may be directly relevant to the job. A recent report titled “Dismissed by Degrees” published by Accenture, Grads of Life, and Harvard Business School, estimates that degree inflation could affect more than 6 million jobs. The report measured millions of job postings from Burning Glass, a labor market analytics firm, and surveyed 600 business and human resource leaders to understand the drivers and effects behind degree inflation.

When asked why they added the college degree requirement, many employers said it was because of additional skill requirements in middle-skills jobs. Looking specifically at the hard skills that employers said were missing in applicants, at the top of the list were software and data analysis skills, including “knowledge of specialized and proprietary software” and “Excel, analytics, modeling tools.” But requiring a college degree for these jobs doesn’t necessarily result in more qualified applicants, as many college graduates do not have these skills, and many non-graduates can develop these digital skills through free or low-cost online options at edXUdemy, or similar websites.

Among missing soft skills, employers report being hard-pressed to find applicants with adequate presentation or reading and writing skills. But filtering out applicants without a four-year degree before they have a chance to demonstrate these skills in an in-person interview, or even a writing sample, means that companies may be missing out on a significant pool of talent without ever realizing it.

“Degree inflation hurts the average American’s ability to enter and stay in the workforce,” argue the report’s authors. “Many middle-skills jobs synonymous with middle-class lifestyles and upward mobility—such as supervisors, support specialists, sales representatives, inspectors and testers, clerks, and secretaries and administrative assistants—are now considered hard-to-fill jobs because employers prefer candidates who are college graduates.”

Melissa Korn of The Wall Street Journal, in a 2014 article titled “A Bit of College Can Be Worse Than None at All,” provided a glimpse into what happens to non-graduates when employers start requiring a college degree for middle-skills jobs. “More than half of employers now require a college credential for all jobs, and nearly one-third now hire college graduates for jobs that previously went to high-school graduates, according to a 2013 CareerBuilder survey of 2,600 hiring manages,” wrote Korn. “Few hiring managers say that college graduates are more qualified than non-grads for jobs in retail and warehouses, but as long as the job market is tight, employers say they can afford to be picky.”

The “Dismissed by Degrees” report finds a similar conclusion, with 69 percent of employers reporting that non-grads are equally or more likely to be productive as college graduates in middle-skills jobs. And yet, two-thirds of the U.S. workforce does not have a college degree, and these non-graduates are twice as likely to be unemployed as college graduates. Excluding them from consideration for the middle-skills workforce just “to be picky” could increase income inequality and deprive millions of Americans from the opportunity at a fulfilling career, simply because they did not take out loans and attend a four-year college.

This is not to say that college is inherently harmful.  On the contrary, the research on the benefits of a four-year degree is clear—college graduates have two times the median weekly earnings as non-graduates and are twice as likely to be employed. The New York Times reported on OECD data: “[A] college degree is worth $365,000 for the average American man after subtracting all its direct and indirect costs over a lifetime. For women—who still tend to earn less than men—it’s worth $185,000.” College, or education more generally, is a key factor in improving economic mobility.

But data on completion rates from the National Center for Education Statistics illuminates a dark side: 40 percent of first-time, full-time undergraduate students who began seeking a bachelor’s degree at a four-year degree-granting institution will not graduate within six years. (Dropout rates are even higher for racial minorities.) The average student loan debt owed by a dropout is more than $13,000, and almost half of these dropouts are in default on their debt.

“The purpose of our research is not to undervalue college degree attainment, but to point out the consequences of employers relying on degrees as a proxy for the competencies to succeed in today’s workplace,” said Harvard Business School Professor of Management Practice, Joseph B. Fuller, the primary author of the “Dismissed by Degrees” report. For students who drop out of college with thousands of dollars in debt, applying for jobs can be an intimidating and frustrating experience, especially when denied a chance to interview simply because they  do not hold a diploma.

More companies are realizing the consequences of degree inflation, but it can be hard to push back against the market trend. The report asked employers if they “reject some individuals who have the skills and experience to be successful in a middle-skills job because they don’t meet the requirement of having a four-year degree,” and 61 percent of respondents agreed or strongly agreed. As a result, companies that restrict hiring for middle-skills jobs to those with a four-year degree take a financial hit. According to the report, two-thirds of employers report paying a premium to college graduates of as much as 30 percent for the same job. A majority of employers agreed that adding the college degree requirement made a given job harder to fill, a conclusion supported by data on millions of job postings.

Expanding the applicant pool to include non-graduates could help retention metrics as well. In jobs currently performed by both graduates and non-graduates, 49 percent of employers reported that college graduates were more likely to leave to work for a competitor, whereas only 12 percent reported that non-graduates were more likely to leave.

All of these factors—lower salary, recruiting, and turnover costs—result in an improved bottom line for employers if they push back against degree inflation, especially when 69 percent believe that non-graduates would be equally as productive as graduates in middle-skills jobs. So why are we not seeing a change?

Changing the paradigm and focusing on competency, rather than credentials, requires leadership and buy-in at the highest levels of the organization. In order to reopen middle-skills jobs to a talent pipeline of hardworking non-graduates, companies need to invest in internal or external training programs for new hires and champion skills over diplomas in the application process. The report highlights several companies, such as Hasbro and CVS, leading the way in reevaluating their job descriptions and opening up jobs to non-graduates through specific training programs or partnerships with other organizations.

It also requires a mindset change—work should be treated as more than just a way to make money or a necessary evil required to sustain a lifestyle. Work can be a significant factor in life satisfaction and fulfillment. “Work has dignity because it is something that God does and because we do it in God’s place, as his representatives,” writes Tim Keller in “Every Good Endeavor.” That doesn’t just apply to jobs that require a college degree.

In a 2013 New York Times column, AEI’s president, Arthur Brooks, reinforces the philosophy of work as a key component in human dignity. “[A]ccording to the General Social Survey, nearly three-quarters of Americans wouldn’t quit their jobs even if a financial windfall enabled them to live in luxury for the rest of their lives,” said Brooks. “Those with the least education, the lowest incomes and the least prestigious jobs were actually most likely to say they would keep working, while elites were more likely to say they would take the money and run.”

There are millions of non-graduates looking for employment who are already qualified or could easily be qualified if we gave them a chance. If we open more middle-skills jobs to non-graduates, companies will save money and hire more workers, and additional non-graduates will be able to find employment and pay their bills. But most importantly, creating these additional career opportunities will allow millions of Americans to realize their potential and develop a life of flourishing and fulfillment.

Originally published at Values and Capitalism, a project of the American Enterprise Institute

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