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A Slow Start for Skills-Based Hiring


February 22, 2024

Growing second-thoughts on bachelors’ degrees and labor market pressures have caused employers to move toward more inclusive recruitment practices through “skills-based hiring.” This approach prioritizes the specific abilities and competencies relevant to a job over traditional educational credentials, including college degrees, based on the theory that degrees often have little to no connection to ability. Skills-based hiring emphasizes alternative ways of measuring ability through credentials, examinations, recommendations, and interviews.

In a new report, Matt Sigelman and Alex Martin of the Burning Glass Institute and AEI’s Joseph Fuller of Harvard Business School dive deep into the state of skills-based hiring. From 2014 to 2023, they find, there has been an almost fourfold increase in the number of job roles shedding degree requirements, a testament to the momentum of the skills-based hiring movement. However, a critical question arises: Does the removal of degree stipulations from job listings translate to a meaningful increase in the hiring of non-degreed candidates? 

The answer, so far, seems to be: “not so much.” Analyzing a sample of 11,300 roles that eliminated degree requirements, the researchers found only a modest uptick—3.5 percentage points—in hiring for non-degree holders. This finding underscores a sobering truth: The promise of skills-based hiring has yet to materialize on a significant scale, affecting less than one in 700 hires last year. The minimal overall impact—a mere 0.14 percent increase in the hiring of non-degree holders—highlights the need for a more profound transformation in hiring practices. It’s possible skills-based hiring will snowball but right now its effect is almost invisible, a fact that needs to be communicated clearly to students and workers as they map their education and employment strategies. 

The report categorizes employers into three distinct groups based on their commitment to skills-based hiring: Skills-Based Hiring Leaders, who genuinely integrate skills-based hiring into their recruitment processes; those whose commitment to skills-based hiring is “In Name Only,” failing to translate words into practice; and Backsliders, who revert to traditional hiring criteria after initial attempts at reform. 

Too many firms, if they even attempt to shift to skills-based hiring, are plagued by inertia. Somewhat reflexively, hiring managers continue to lean on degrees as a lead criterion for evaluating candidates’ capabilities, even in the absence of formal requirements. As seen in the chart below, many professions do not require degrees, yet they are often populated by degree-holders.

What the researchers call degree inflation has contributed to this pattern. As more Americans graduate college, there are more degree-holders in the labor market. A college degree, while valuable in many other ways, is simply not necessary for many, perhaps most, jobs. The silver lining of degree inflation is that the proliferation of degrees has somewhat blunted their value as a signal in the labor market. As a result, firms may increasingly find themselves looking for ways to distinguish between candidates with degrees—and so turn their focus to skills. The challenge is getting employers to focus on skills as a substitute for a college degree. Convincing companies and hiring managers to do this requires at least as much a culture change as a policy one. This shift is further complicated by employment law, which tends to discourage less objective considerations (e.g., interview performance) as a way of steering around charges of discrimination.

Skills-based hiring has generated considerable buzz but tangible outcomes remain limited. The true measure of success lies not in altering job postings but in creating pathways for non-degree holders to secure meaningful and stable employment. The rewards of solving the puzzle may be considerable. As the authors note, the benefits of skills-based hiring are not confined to workers. Employers also benefit significantly, as hires without a bachelor’s degree are significantly more likely to stick around, an increasingly valuable worker characteristic for companies trying to cope with tight labor markets.