Skills-Based Hiring Is the Future for Successful Employers

Posted by Josh Budway on July 24, 2020

Middle-skilled workers are among the 44 million Americans who struggle to find work, and as the world has settled into a new world of work amidst the COVID-19 pandemic, that challenge is becoming more difficult. Additionally, hiring practices rooted in a degree-first approach may be exacerbating the disparity between open positions and those qualified to fill them. As the United States unemployment rate hits 11.1% - that’s 17.75 million Americans out of work - employers in some of the hardest hit industries can’t afford to quibble over degrees and inflated credentials when it comes to hiring. In order to stem the tide of a devastating skills gap and attempt to address a growing recession, employers need to change how they define qualified applicants.

According to research from Burning Glass and Harvard Business School, employers now require college degrees in millions of job postings that historically didn’t ask for them. For example, 70% of postings for supervisors of office workers ask for a four-year degree, but only 34% of those who currently hold that position have this credential. This artificially limits the talent pool -- and has left many employers, particularly those in the skilled trades, allied health, and technology industries, reporting that they are struggling to find employees to fill open positions.

The irony is that for most employers, the college degree does not translate to a significant improvement in productivity. The same Burning Glass research found that “non-graduates with experience perform nearly or equally well on critical dimensions like time to reach full productivity, time to promotion, level of productivity, or amount of oversight required.” And despite their similar performance, non-graduates typically command salaries as much as 30% lower than their peers with degrees.

Simply put, many employers are leaving critical roles unfilled based on a false premise about the value of a college degree in the workplace.

This phenomenon suggests that employers may not be facing a dearth of skills but rather proxies for skills that are enshrined in outmoded hiring criteria and job posting. Closing skills gaps starts with re-thinking the all-or-nothing approach to hiring. It demands that we decouple our conception of skills from credentials. Changing the rules of the game can not only close skills gaps, but expand opportunity for individuals who may have the skills to succeed, but lack the paperwork.

Traditionally, a college degree has been lauded as the only means of accurately assessing someone’s capabilities to perform many entry-level tasks in several industries. Just having a degree from a recognized four-year college can place one prospective hire over another - even if the applicant with no degree has more industry experience. But as employers are struggling to fill in-demand frontline positions in retail, manufacturing, and healthcare, the outdated demand for degreed applicants can deter otherwise qualified workers from applying. Shifting focus to a skills-based hiring methodology can, however, open the door for more applicants, providing a larger pool of workers to hire from.

A skills-based hiring model isn’t a novel concept; leading employers like Google, Apple, IBM, Bank of America, and Starbucks have revaluated their hiring practices and no longer require a degree for competitive roles. They’re hiring based on what prospective workers can do, rather than where they went to school. These big brands are emblematic of a shift away from the all-or-nothing paradigm of hiring.

But while the potential of skills-based hiring is often linked to in-demand tech or white-collar roles, its effects could be most profound for so-called middle-skilled jobs -- which now make up the majority of the U.S. labor market. These jobs encompass a broad range of careers, from positions in manufacturing and transportation to those in healthcare and financial services. And demand is high, outpacing low-skilled jobs by 300% and high-skilled jobs by about 175%. According to the Georgetown Center for Education and the Workforce, there are now as many as 16 million open positions with an annual salary of $56,000 or more for workers trained to the middle-skill level.

As employers like Google and Apple have discovered, hiring based on skills does more than widen the pool of potential candidates. Employees hired with a skills-based process often stay with the company longer. In addition, removing the degree barrier also helps recruit a more diverse workforce. Companies find themselves able to hire people from demographic groups that are traditionally less likely to hold a college degree.