More employers now say they’re willing to hire workers without a college degree. But is that playing out?

By Jeanne Sahadi, CNN

New York (CNN) — For decades, not having a college degree has often been a barrier for workers seeking a higher-level, better-paying job. But more employers are now saying they’re willing to hire them.

College degrees were used by companies as a proxy for skills and competence when evaluating potential hires — making it very difficult for lower-wage, non-degreed workers even to be considered.

A majority of US workers have had to contend with that barrier. Only 37.7% of Americans ages 25 and up had a bachelor’s degree in 2022, according to the US Census Bureau.

But employers are now — at least publicly — becoming more open to the idea of skills-based hiring, which focuses on a job candidates’ competencies and capacity to learn new skills rather than on their educational background.

Why the change of heart? There are several factors. But lurking over all of them is a demographic reality: The falling US birth rate will produce fewer workers in the years ahead to replace the number of workers retiring.

Additionally, employers are increasingly aware that the skills needed to do many jobs don’t necessarily require a four-year degree, and that competent workers can be trained in needed skills as they arise.

President Joe Biden, in his State of the Union speech Thursday night, acknowledged the need for skills-based hiring more than once, noting that “private companies are now investing billions of dollars to build new chip factories here in America — creating tens of thousands of jobs, many of them paying over $100,000 a year, and don’t require a college degree.” He also said he is “connecting businesses and high schools so students get hands-on experience and a path to a good-paying job, whether or not they go to college.”

At a Fortune conference in October last year, Ken Frazier, the former CEO of Merck, noted that roughly three-quarters of Black adults do not have college degrees, yet the vast majority of openings at leading US companies required college degrees “for almost any job.”

What’s more, since George Floyd’s murder in 2020, there has been a push to improve diversity and equity in company workforces. That means the lack of college degrees can’t be ignored, since Blacks and Hispanics are least likely to have a bachelor’s degree. In 2022, only 27.6% of Black adults and 20.9% of Hispanics had one, compared to nearly 41.8% of non-Hispanic White population, according to Census data.

After Floyd’s murder, Frazier co-founded the group OneTen. Its goal is to help non-degreed Black workers find better jobs with family-sustaining pay, as defined by the MIT Living Wage Calculator. OneTen’s mission has since grown to include all workers without four-year degrees, and the group has pulled together a coalition of more than 70 leading US corporations from Accenture to Yum! Brands and talent development firms that support OneTen’s mission of closing the opportunity gap for those without degrees.

So far, the group has played a matchmaking role for employers in the hiring and promotion of 108,000 non-degreed workers, said OneTen CEO Debbie Dyson at the same Fortune event. She also noted its career marketplace platform has 23,000 profiles of non-degreed job seekers and those seeking training, which is a talent pool that employers can search.

Talk of skills-based hiring still more virtue signaling than actual hiring

OneTen’s hand in more than 100,000 job advancements is notable, but it is still well below the group’s goal of 1 million hires and promotions of non-degreed workers within 10 years.

That may reflect what one recent study found: Not all employers who talk about skills-based hiring and remove degree requirements from job ads are actually hiring candidates without degrees.

“[F]or all its fanfare, the increased opportunity promised by skills-based hiring has borne out in not even 1 in 700 hires last year,” wrote the authors of a report from Harvard Business School and the Burning Glass Institute.

Directionally, however, the signs are encouraging. The report’s authors note that the 37% of companies in its sample that did follow through on their skills-based hiring commitment are already seeing benefits.

“[D]espite the limited progress to date, our analysis shows that, for those who embrace it, skills-based hiring … yields tangible, measurable value. Skills-based hiring boosts retention among non-degreed workers hired into roles that formerly asked for degrees,” they said.

Candidates hired into those roles received a 25% pay increase on average, the researchers added.

“If the arc of corporate practice bends toward profitability, the win-win that skills-based hiring represents is an opportunity firms are remiss to ignore,” the authors wrote.

This tool points low-wage workers to more prosperous careers

In the meantime, the Federal Reserve banks of Philadelphia and Cleveland created an interactive tool called the Occupational Mobility Explorer that was released at the end of 2020.

The tool is aimed at lower-wage workers without college degrees. It helps them identify better-paying occupations that have overlap with the skills required in their current positions.

For example: A cashier in the Cincinnati metro area might consider a job first as a customer service representative, then move on to the role of police or fire station dispatcher and later transition to becoming a human resource specialist or legal assistant. The strong skills overlap between cashiers and customer service reps include customer service, communication skills and retail industry knowledge. From there, the skills commonly required of customer service reps and dispatchers include customer service, communication and problem solving. And so on. With each move, the former cashier’s pay could increase considerably. (The pay data in the tool still reflects 2020 pay levels, but it will be updated later this year, according to a spokesperson for the Philadelphia Fed.)

The tool can be an eye-opener not just for job seekers but also employers when it comes to seeing what skills non-degreed workers from various occupations bring to the table.

“It’s a good illustration of how skills gained in prior jobs can be used to move up the career ladder,” said Keith Wardrip, senior community development research adviser at the Federal Reserve Bank of Philadelphia.

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