Learning & Development

Employers Increase Educational Requirements for New Hires

At many companies, an associate or bachelor’s degree is increasingly becoming the new high school diploma, according to a new CareerBuilder® survey, with about a third (30 percent) of responding companies saying they are hiring college-educated workers for jobs primarily held by high school grads.
And 27 percent of employers say their educational requirements for employment have increased over the last 5 years. Looking only at a subset of companies hiring STEM (science, technology, engineering, mathematics) workers in 2014, those figures rise to 46 and 43 percent, respectively.
The rising bar is even extending beyond the bachelor’s degree in some cases. One in five employers (20 percent) are now targeting master’s degree holders for positions primarily held by those with 4-year degrees. And a third (33 percent) of employers are sending current employees back to school for an advanced degree, and the majority of that group (81 percent) 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,” said Matt Ferguson, CEO of CareerBuilder and coauthor 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.”

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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, and 86 percent cite at least one positive impact, including revenue:

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

Big data research supports survey findings Research published in The Talent Equation by Ferguson and coauthors Lorin Hitt (professor, Wharton School, UPenn) and Prasanna Tambe (assistant professor, Stern School, NYU) suggest that for some occupations, rising education requirements pays off for businesses.
The authors analyzed the career histories of more than 20 million résumés, 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.

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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 percent is associated with about $26,000 higher value added* per employee.
  • Sales workers: A 10 percent increase in sales workers with college degrees is associated with about $31,000 higher value added per employee.
  • Management workers: A 10 percent increase in management workers with college degrees is associated with about $63,000 value added per employee.

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

For more information about the author’s research, visit www.talentequationbook.com.
*Value added is defined as (total cost of materials) divided by number of employees.