Education Requirements for Employment on the Rise

Firms hiring more college grads for jobs primarily held by high school grads

For many companies, an associate or bachelor’s degree is increasingly becoming the new high school diploma. According to a new CareerBuilder survey, 27% of employers say their educational requirements for employment have increased over the last five years and 30% are hiring more college-educated workers for positions that were previously held by high school graduates.

Looking only at a subset of companies hiring STEM (science, technology, engineering, and math) workers in 2014, those figures rise to 46% and 43%, respectively.

The national survey was conducted online by Harris Poll on behalf of CareerBuilder from Nov. 6 to Dec. 2, 2013, and included a representative sample of 2,201 hiring managers and human resources professionals across industries and company sizes.

Advanced Degrees

The rising bar is even extending beyond the bachelor’s degree in some cases. One in five employers are now targeting Master’s degree holders for positions primarily held by those with four-year degrees. A third of employers are sending current employees back to school for an advanced degree, and a majority of that group (81%) is at least offering partial funding.

“The economic value of a college education for workers has long been known, but as occupations evolve and as companies rely more heavily on professionals with strong interpersonal and technical skill sets, workers can’t afford to stop their education at high-school,” says Matt Ferguson, CEO of CareerBuilder and co-author of The Talent Equation. “The trend toward higher-educated labor is already paying off for companies. We see that both in our surveys and data analytics research.”

Ferguson notes, however, that higher-education institutions and policymakers must do more to control and bring down the costs of attaining a degree. Businesses, on the other hand, should continue to invest in training and development, he says.

Value of Hiring College-Educated Labor

A large majority of employers hiring college-educated workers for occupations previously held by high-school graduates are seeing positive results. Eighty-six percent cite at least one positive impact, including revenue:

• Higher-quality work: 56%
• Productivity: 45%
• Innovation/Idea generation: 41%
• Communication: 41%
• Employee retention: 27%
• Revenue: 19%
• Customer loyalty/retention: 17%
• None: 16%

Big Data Research Supports Survey Findings

Research published in The Talent Equation by Ferguson and co-authors Lorin Hitt (professor, Wharton School, UPenn) and Prasanna Tambe (assistant professor, Stern School, NYU) suggests that for some occupations, rising education requirements pays off for businesses. The authors analyzed the career histories of more than 20 million resumes, connecting these workers to the bottom lines of thousands of employers. The regression-based analysis specifically linked the firms’ workforce education levels to changes in company performance.

For some job functions, particularly in areas that don’t traditionally require a college education, hiring more workers with college degrees appears to significantly affect a company’s bottom line.

• Customer service workers: A company that increases its number of customer service workers with bachelor’s degrees by 10% is associated with about $26,000 higher value added* per employee.
• Sales workers: A 10% increase in sales workers with college degrees is associated with about$31,000 higher value added per employee.
• Management workers: A 10% increase in management workers with college degrees is associated with about $63,000 value added per employee.

*Value added is defined as (totalcost of materials) divided by number of employees.

For large firms, this amounts to a significant return for a relatively modest increase. However, these positive associations, the analysis discovered, do not exist for all occupations.

For example, the correlation disappeared for information technology workers. Workers’ skills and other intangible assets like development programs and workflow structure, the author’s found, depreciate almost as fast as a company’s physical assets, e.g. computer software and hardware. This lends credence to the view that hiring for degrees alone cannot ensure a successful workforce, especially in tech-related occupations.

Reasons for Hiring More Degree Holders

Employers are essentially split on the reasons for why they are hiring more college-educated workers for traditionally high-school level work:

• 58% said they’re able to get degree holders “because of the tight labor market.”
• 55% said “skills for my positions have evolved, requiring higher-educated labor.”

For more information about the author’s research, visit www.talentequationbook.com