Is ‘Degree Inflation’ Driving Inequality in the US?

Is ‘Degree Inflation’ Driving Inequality in the US?

Most of the new jobs created in the US in the wake of the Great Recession have gone to workers with college degrees, and the wage premium Americans gain from holding a bachelor’s degree rather than just a high school diploma is higher than it has been in 40 years. Partly due to the higher number of college-educated candidates on the market, a bachelor’s degree has become a baseline requirement for most middle-class jobs. The decline of good jobs for less educated and lower-skilled workers is commonly understood to be a driver of inequality and social stratification in the US today.

A new report published on Tuesday by Harvard Business School, Accenture, and Grads of Life underlines the extent to which “degree inflation”—jobs for which a college degree was once optional and is now a requirement—is compounding this problem. According to the report, 6 million American jobs are at risk of degree inflation, as employers have “defaulted to using college degrees as a proxy for a candidate’s range and depth of skills.”

Axios’ Christopher Matthews discusses the report’s implications with one of its authors:

“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.” …

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

The report notes that 90 percent of companies already use screening software to filter out applications from candidates who don’t meet their education requirements, meaning that even if a candidate has in skills and experience what they lack in credentials, they won’t even get looked at by a hiring manager. This trend harms communities with relatively low college graduation rates, such as black and Hispanic Americans.

Fuller and his colleagues recommend that governments make student loan and grant programs applicable to a wider range of vocational and technical skills development programs, rather than just traditional college, and that universities be held to closer scrutiny regarding the employment and income prospects of their graduates in various fields. Employers also have a role to play in solving this problem; Peter Coy highlights that part of the report at Bloomberg Businessweek:

The study says that at Wal-Mart Stores Inc., 75 percent of store managers joined as entry-level employees, and the company has trained more than 225,000 associates through its Wal-Mart Academies. A January article by Bloomberg BNA quotes David Scott, the company’s senior vice president for talent and organizational effectiveness, as saying store managers can earn $170,000 a year without a college degree. “I started out at Wal-Mart as a stock boy myself,” Scott said.

The report also cites Swiss Post International Holding AG, JPMorgan Chase & Co., Barclays Plc, CVS Health Corp., Expeditors International of Washington Inc., Hasbro Inc., State Street Corp., LifePoint Health Inc., and Chipotle Mexican Grill Inc., among others, for recognizing the value of applicants who lack a four-year degree.

This rethinking of degree requirements has already been underway for a few years in the UK, where companies such as publishers and advertising agencies have begun reaching out to non-degree holders in an effort to hire a more socioeconomically diverse pool of employees. Employers are also increasingly realizing that the digital skills they so desperately need can be found outside the ranks of college graduates: IBM CEO Ginni Rometty announced at the end of last year that her company was investing $1 billion in training and development to fill thousands of what she called “new collar” roles: i.e., technologically skilled occupations that are in demand and pay well, but don’t necessarily require four years of college.