What Employers Want: The Battle Between Skills and Degrees

What employers are looking for and what employees can provide may be two different things. Skills obtained through work or school and skills obtained through a degree that formally attests to your skills may be valued differently in an increasingly complicated labor market.

Jobs for the Future asked more than 2,000 students and employers for Degrees of Risk: What Gen Z and Employers Think About Education-to-Career Pathways… and How Those Views are Changing

The EvoLLLution (Evo): What are some key takeaways of the 1,500 students and 600 employers you surveyed for your report?

Joel Vargas (JV): We surveyed employers and young adults from Generation Z, and the results show that, while there’s a desire to break away from traditional career pathways, there’s still hesitancy and lack of clarity on how to make it happen. Employers and young people are both open to exploring different pathways that veer from the traditional “high school to bachelor’s degree” pathway, including apprenticeships, pre-apprenticeships and accelerated pathways to post-secondary credentials that may not form a degree but have value in the labor market. Employers expressed a willingness to look at graduates with this kind of training and experience, beyond a bachelor’s degree, as a signal of a person’s ability to do the job.

But the survey responses also suggest that when push comes to shove, it remains unclear whether employers and young people will actually act on these alternative pathways. When we asked employers if they would hire someone without a bachelor’s, many said, “Well, that’s a little above my pay grade. It would depend. It’s hard to sort out the outcomes of these other programs and what people know. So, we’re probably likelier to go with someone with a bachelor’s degree.”

It’s no mystery why young people are even a little bit more reluctant and circumspect. They think that when employers choose between a graduate of one of these programs and a graduate of a four-year college or university, they’re going to go with the person with a bachelor’s degree. Students think there’s a risk associated with doing something nontraditional. The findings suggest that we’re at a pivotal point in shifting employers’ mindset, so they’re willing to hire based on skills, not degrees. Degrees are fine, but they have become a signal for job-readiness, when they are highly imperfect. Employers are interested in what else is out there, but they cannot quite commit to saying those alternative pathways signal what a degree signals now. There’s a parallel set of findings for young people. They could be persuaded to take some alternative routes, but without understanding them, they’re going to default and gravitate to the status quo.

Evo: As many as 80% of employers say they are prioritizing skills over degrees, but Gen Z is more focused on degrees. How do you shift an entire generation’s thinking around credentialing?

JV: It’s a big question. Like a lot of things, it’s about showing examples of how to achieve an outcome that young people want, which for the purposes of this conversation is a path to a good career. That can come down to citing the dollars and cents. Much survey data, which ours complement, show that young people are increasingly questioning the return on investment of the traditional bachelor’s degree. With increasingly high tuition and student loans maintaining an uncertain connection to a career, they have a preference for the degree because it’s the safe pathway, even if it’s increasingly becoming filled with risk.

Part of the solution is showing concrete examples of the relative return on investment for the best of these pathways. We must understand what quality looks like. Young people must understand what quality looks like. Employers must understand what quality looks like. This will have a bearing, of course, on the return on investment—for example, leading to a good job with good wages and career advancement prospects. Showing the ROI is probably a slow route, but comparing these new approaches with the ROI and the risk involved in the traditional path is part of what will shake up the status quo.

Evo: Why are most employers hiring based on degrees when they don’t necessarily believe that the degree tells the whole story?

JV: This showed up in our survey data. Philosophically, they know that a bachelor’s degree is an imperfect signal of skills, but they don’t know how to interpret all the alternatives because it forces them to do a little bit of analysis and deciphering. They don’t have much time for that at the end of the day, or they don’t think they do. So, it’s much easier to lean on the signal they think they understand, however imperfect it is. We hear employers say all the time that a graduate didn’t know how to do certain things that they assumed they did. So, what does a bachelor’s degree mean? But on the other hand, they don’t know how to interpret the other programs and credentials, so they go with what they know. It’s an unfortunate state of inertia. Until you see some concrete, alternative ways of doing things and other peer employers who have had success with those approaches, it’s hard to change.

Evo: Is this something that e-portfolios or similar technologies would be able to assist with?

JV: Some technological advances and innovations can help with this because it requires a standard and quick way of analyzing complex information. But we’re a long way off from that. One takeaway from the report was a real need to define quality in ways that map to career outcomes, which are longitudinal. But if you can back-map those and are able to describe program features that achieve strong long-term outcomes, people get quick, understandable and credible ways to sort through good opportunities that will produce the kind of employees they need from others that might be fly-by-night. We want high-quality programs that lead to good outcomes for both young people and employers.

Evo: What kind of alternative paths could students take to potentially make themselves more appealing to employers?

JV: There are many different kinds of approaches out there, but some of the ones we promote support students in gaining experience on the job while they’re learning. They could be taking academic classes in high school while doing a paid internship or an apprenticeship at a local manufacturing firm or as an IT specialist. They’re also earning academic credit for that experience. It translates into credit at the high school level, which could be applied toward a bachelor’s degree if they want to keep pursuing their education.

The sweet spot for these kinds of programs is when they integrate learning and work as well as secondary and post-secondary education. They all go together, so it doesn’t require you to take a four-year timeout before you qualify to go into a career. That is not suited to the reality of so many young people and workers in our country. We need a better system. We’re planning in October to publish a market scan of an array of these kinds of approaches. It’s a follow-up to this white paper about the survey results. It asks what the landscape looks like around some of the more promising approaches.

Evo: College enrollments are continuing to slow down, so where will the Gen Z students who still favor a traditional degree go?

JV: Some signs point to this being a temporary slowdown caused by the pandemic. But many good entry-level jobs are now raising wages, and there is a lot of demand for younger people to enter into these entry-level jobs. That runs the risk of distracting young people from the kinds of training and education that they’re going to ultimately need to advance their careers. The short-term gain makes sense on a number of levels, especially if you’re responsible for meeting your family’s basic needs, which shows why it’s imperative to come up with new approaches to education and training that integrate learning and work, so young people don’t have to make a choice. Instead, they could be working, learning and getting a leg up in the economy. This approach gives them the potential to continue to grow because what they’re learning can be applied and transferred later to new opportunities. Many Gen Zers are entering the labor market by necessity right now, and that will be a long-term risk to our economy and their prosperity.

Evo: What can institutions do to make themselves more appealing to young people who are deciding whether to pursue education or join the workforce?

JV: Pay attention to the economics at both the front and back ends. Put it at a reasonable and easy-to-translate price point without hidden surprises. Our financial aid system and the way many higher ed institutions communicate with young people about cost is opaque. College costs are really high, and they’re full of unpleasant surprises. Colleges also should assure students they will have support to improve their chances of completing college. Too many students just don’t complete college, and it becomes a real burden for them when they don’t have a credential that can arm them to pay back the debt once they’re in the labor market. Finally, colleges can make themselves more appealing by showing how academic programs connect to careers and work opportunities. Visible employer partnerships and pathways to different work experiences or careers would hold appeal, especially in this economy and especially if they’re paid work-based learning experiences.

This interview was edited for length and clarity.