Oct 25, 2017

"Degree inflation" may be pushing workers out of the middle class

A growing number of U.S. employers are requiring bachelor's degrees for jobs that have long been performed by workers without them, contributing to a rise in income inequality, according to a report published today.

Why it matters: The report, by Harvard Business School, Accenture, and Grads of Life estimates that 6 million American jobs are at risk of "degree inflation," a result of employers increasingly using a bachelor's degree "as a proxy for a candidate's range and depth of skills."

Data: Harvard Business School and Accenture analysis; Note: 2015 Burning Glass data, BLS' Occupational Employment Statistics, and American Community Survey data for 2010–2015; Chart: Andrew Witherspoon, Chris Canipe / Axios

"This phenomenon is a major driver of income inequality," Joe Fuller of Harvard Business School tells Axios. "We're hollowing out middle-class jobs and driving everyone to the extremes of the income spectrum."

The number of U.S. job openings has reached an all-time high, but more than 13 million Americans — the vast majority with less than a four-year college degree — are unemployed or working part-time when they want full-time positions.

When businesses require a college degree for jobs that have until now been filled by non-college graduates, it increases the salary by as much 30% and the length of time it takes to fill the position by an average 12 days, depending on the position, the report says. This means that employers are spending more money and time than they need to fill their empty positions.

  • Still, employers are struggling to find talent that have the "soft" social skills necessary to thrive in a modern, diverse work environment as well as workers who can adapt quickly to new technologies and processes.
  • J.J. McCormick of recruiting company Veredus tells the researchers, "For many companies, a bachelor's degree signals that the person has put themselves through four years of college, so they have certain life experiences, commitment levels, and organization levels."
  • But other H.R. officials said the inflated requirement simply reflects laziness. "It's just easy to slap on a B.A. requirement on a job posting," according to Pam Belcher, senior vice president of human resources at LifePoint Health.

The costs of the shift are "profound" for the two-thirds of American adults who lack a college degree, Fuller says.

  • 90% of companies use screening software to weed out applicants lacking the education requirement. That means, even with the right experience, an applicant won't even be considered by a human.
  • "This puts significant pressure for people with certain aspirations to get a degree even when it's not directly relevant to their career."
  • When the 6-year graduation rate for 4-year schools in America is just 59%, that means Americans lacking the aptitude to excel in college take on debt for degrees they'll never receive.
  • Hispanics and African Americans are disproportionately hurt by the phenomenon, because they have lower college graduation rates than the population at large.

What government can do: Fuller says that the federal government should change student loan and grant requirements so they can be used for a wider range of vocational programs. It should also force institutions of higher education to publish clear data on average reported compensation, employment rates, mean time to degree completion, average loans outstanding, and loan default rates.

  • If government policy encourages students to credential themselves with more efficient vocational programs, employers will take notice, Fuller says.
  • State government can direct money toward community colleges and apprenticeship programs that are designed in partnership with the private sector.

Bottom line: Most of the responsibility, and the rewards, for solving this problem will fall on the private sector. Fuller says that private companies don't measure the "all-in cost" of their role in degree inflation. By investing up front in training programs that identify and develop promising working-class talent, they can create a long-run competitive advantage.

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