Dropping your kid off at college has long been a milestone for parents just as much as their teens. But is getting a degree going the way of bell bottoms, cable television and calling someone on the phone?
With a strong economy and an excess of jobs with few workers to take them, big companies like Google, IBM and Delta Air Lines have eased up on educational requirements in an effort to find hires based on skills and experience instead.
With a four-year degree perhaps seemingly not as crucial for Americans climbing the career ladder as it once was — young people might be rethinking the need for higher education as well.
“It's a bit [like] musical chairs right now,” says Alicia Modestino, an associate professor and labor economist at Northeastern University. “We're seeing a lot of people shift jobs, move up in the labor market. That’s great.”
However, she warns that with the Fed raising interest rates in an effort to quell inflation, Americans need to be prepared for the job market to slow in the coming months.
“Pretty soon the music's going to stop — so you want to have someplace to land that's going to be good for the long term.”
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Employers responding to tight labor market
The tech industry in particular has been struggling with a talent shortage since pre-pandemic times.
Google and 150 other companies use the tech giant’s online college-alternative program to train and hire entry-level workers, reports The Wall Street Journal. And according to CNBC, IBM doesn’t ask for a bachelor’s degree for half of its U.S. roles.
Bank of America also doesn’t request college degrees for most of its entry-level jobs, while Delta says degrees for pilot applicants are “preferred” but not required.
And applicants for thousands of government jobs in the state of Maryland no longer need a bachelor’s degree — instead, they can submit any relevant work experience, military training or other educational certificates.
This shift arrives during a thriving labor market with low unemployment and high job vacancies. And although there’s been talk of that coming to an end, the Labor Department’s latest jobs report indicated that hiring slowed only slightly in November, with 263,000 jobs added last month, compared to 284,000 jobs in October.
Modestino adds there’s precedent for this approach. During the Great Recession, employers responded by focusing on skill requirements in addition to educational requirements since there were more college-educated workers available to them.
It may not be an actual ‘culture shift’
So should parents stop putting cash away for their kids’ college tuition? Modestino is “pessimistic” about whether big employers relaxing their educational credential requirements is truly part of a “culture shift.”
And with recent shifts in the economy, she has concerns about the future of work.
“Looking at where we are in terms of the business cycle and what the Fed’s doing with interest rates, [there’s] the potential for us to overshoot and tip into a recession,” Modestino warns.
The Fed raised its federal funds rate for the seventh time this year and more hikes are expected to arrive in 2023. Experts like Modestino worry this could trigger a recession, which would mean a slowdown in hiring and potential job and salary cuts.
Modestino advised her own son — who has a bachelor’s degree in criminal justice — that he needs to capitalize on the hot job market and get on a career path.
“We don't know if it’s going to be a soft landing in the labor market in the next six months,” she says. “So I would certainly urge any young people … that now's the time to make those decisions. Because I do worry that the window’s closing on those opportunities.”
She anticipates that when workers are plentiful again and employers have many applications to sift through, many companies will “revert back to the lowest common denominator” when they’re hiring — a four-year college degree.
So, is getting a bachelor’s degree actually worth it?
Parents may have long encouraged their kids to pursue higher education, but Modestino points out that there are many jobs that don’t require a four-year college degree. And so making that big decision about whether to go to college should depend more on the young person’s career goals.
For example, you don’t need a bachelor’s degree to become a phlebotomist, but it’ll likely require a certification in phlebotomy. On the other hand, a PhD is necessary to become a tenured college professor.
That said, having more credentials can look good on a resume and open doors for inexperienced workers — especially when job opportunities aren’t as abundant and employers can afford to be choosy.
In a recession or weaker labor market, having an academic credential to your name can often have a “sheepskin effect,” Modestino says — an economic phenomenon where employers pay higher wages to workers with degrees.
A study from Georgetown University found that bachelor’s degree holders earn 31% more than those with an associate’s degree and 84% more than someone with a high school diploma. But higher education doesn’t always equate to higher earnings.
“When you're in a labor market like this, we've seen wages actually rising faster at the bottom because they're so desperate for talent. And so [employers are] actually trying to hire on talent and reward on talent, rather than just a credential,” explains Modestino.
But keep in mind that students pay a price for that extra earning potential. With about 43 million borrowers in the U.S. who owe over $1.6 trillion in student debt, getting a degree isn’t always worth the financial burden. Parents pushing their kids to get higher education just for the sake of it might want to have a bigger conversation about whose interests they’re prioritizing.
“There's been this message for at least the last two decades that college is the only pathway,” says Modestino.
“That's been a disservice, I think, to some young people who would have been better off going to a vocational technical school or taking a different pathway through workforce training and development.”
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