Despite a barrage of big tech layoffs, the labor market remains tight as the country teeters toward what some economists have dubbed a ‘full employment recession.’ According to the latest job’s report, unemployment still hovers near all-time lows while better-than-expected job growth thwarts the Fed’s best efforts to cool the economy.
When hiring is tough, employers tend to loosen hiring requirements for the most in-demand roles. And with good reason, talk of skills-based hiring is once again on the rise.
Virginia has become the latest state pledging to pare back degree requirements in their job postings, joining a handful of states, including Maryland, Colorado, Alaska, Pennsylvania and Utah. One of the few, if only, Trump administration executive orders left in place by the Biden Administration shifts the focus from degrees to skills in federal hiring. And a recent report from The Burning Glass Institute found that a growing number of companies have begun to change their hiring requirements. Although surveys still suggest the pace of elimination of degree requirements among private companies is slow, the skills-based glacier may finally be melting.
Why is this happening now? Today’s talent market has all the hallmarks of a broken market. Fewer Americans are taking the traditional college-going route, and the majority of American adults do not have a college degree. And yet job openings still remain well above pre-pandemic levels that still largely use the degree as a proxy for skills and knowledge. After a decade of labor market tightening, those degree requirements distort market forces and exacerbate talent gaps.
When employers cut degree requirements, they open up a much larger and more diverse talent pool. Research has shown that skills-based hiring can also reduce onboarding and training expenses, increase employee retention, and create equitable opportunities for workers from historically underrepresented backgrounds. According to a recent report from the National Bureau of Economic Research, there are millions of Americans who don’t have degrees but still succeed in higher-wage roles.
That might seem like heresy coming from a college leader.
But the shift from a reliance on degrees as a proxy toward a focus on whether a prospective employee actually has the knowledge and ability to thrive in a job, is not something higher education should be afraid of. Rather than undermining the relevance and value of their product, it embraces the opportunity to extoll the labor market virtues of their graduates.
So if removing degree requirements for jobs that don’t need them is good for employees and companies, why have we stuck with them for so long?
The problem is that it’s extremely difficult to change business behavior at scale. Companies tend to hold tight to what they know, and onerous compliance and risk-management practices reinforce that mentality. New ideas, including skills-based hiring, are often considered quite risky without a clear proof of concept. But there are encouraging examples of where such widespread change has occurred.
Consider the case of cloud computing, which was for decades laughed out of corporate boardrooms. That all changed in the late 1990s when companies such as Salesforce showed what could be done with off-premises computing now known as the cloud.
The key to cloud computing’s rise was its initial focus on addressing a known pain point for a very specific market segment: managing sales and customer data in middle-market companies. Salesforce, as its name suggests, leaned into a specific use case for a very specific customer segment. In doing so, it revolutionized the way organizations managed once fragmented reams of data on their sales prospects.
Today, cloud computing is standard operating procedure. The speed at which once reluctant chief information officers have adopted cloud computing has frankly been astounding.
So which industry might be ripe for a skills-based revolution?
U.S. companies are short nearly 760,000 qualified, skilled cybersecurity workers; worldwide the cybersecurity talent gap is estimated at more than 3.4 million. And entry-level cybersecurity jobs and IT roles that can lead to cybersecurity careers don’t always require a four-year college degree.
An entire cottage industry of certifications and credentials has sprung up because cybersecurity lacks a formal credentialing process. If hiring managers take the next step and lean into non-college credentials, in-house training and on-the-job experience to develop their workforce, they could revolutionize the industry.
Just as chief information officers, executive teams and corporate boards reassessed their entire outlook on computing based on a single, well executed idea that proved to be scalable, chief human resource officers may soon change their minds on skills-based hiring. All they need is a good reason. And with a labor market that shows no signs of untightening, and a persistent cyber skills gap, they may have two.
Tom Monahan is President of DeVry University