Ever wonder why employers demand advanced credentials for jobs that don’t seem to require them? So did Joseph Fuller, a professor of management practice at Harvard Business School. He co-led a study that found it’s “a substantive and widespread phenomenon that is making the U.S. labor market more inefficient.” To take one egregious example, two-thirds of job postings for production supervisors require a four-year college degree—even though only 1 in 6 people already doing the job has that credential.
Credentialism obviously harms job applicants. What’s less obvious is that employers suffer, too. They miss out on new hires who—the study found—work hard, cost less, are easier to hire, and are less likely to quit. In other words, companies are deliberately bypassing a deep pool of talent. At many human resources departments, “Everyone’s strategy is to row as close as they can to the other boats and fish there,” says Fuller.
What was excusable myopia in a time of high unemployment has become inexcusable at a time when the pool of college grads is severely overfished. The unemployment rate for people with bachelor’s degrees was just 2.3 percent in September, the lowest in nine years.
The study, released on Oct. 24 by Harvard Business School, Accenture, and Grads of Life, is called . Says the report: “Over time, employers defaulted to using college degrees as a proxy for a candidate’s range and depth of skills. That caused degree inflation to spread to more and more middle-skills jobs.” It adds: “Most employers incur substantial, often hidden, costs by inflating degree requirements, while enjoying few of the benefits they were seeking.”
The study is based on a survey of 600 business and HR executives, as well as 26 million job postings from 2015 parsed by Burning Glass Technologies, a job-market-analysis company that earlier published its own report on the topic. It found that 70 percent of postings for supervisors of office workers asked for a bachelor’s degree, even though only 34 percent of the people doing the job have one.
Some major employers have figured out that this doesn’t make sense now, if it ever did. The study says that at Wal-Mart Stores Inc., 75 percent of store managers joined as entry-level employees, and the company has trained more than 225,000 associates through its Wal-Mart Academies. A January article by Bloomberg BNA quotes David Scott, the company’s senior vice president for talent and organizational effectiveness, as saying store managers can earn $170,000 a year without a college degree. “I started out at Wal-Mart as a stock boy myself,” Scott said.
The report also cites Swiss Post International Holding AG, JPMorgan Chase & Co., Barclays Plc, CVS Health Corp., Expeditors International of Washington Inc., Hasbro Inc., State Street Corp., LifePoint Health Inc., and Chipotle Mexican Grill Inc., among others, for recognizing the value of applicants who lack a four-year degree.
A few governors have taken the lead in addressing the problem in their states, Fuller says in an interview, citing John Hickenlooper of Colorado, Bill Haslam of Tennessee, and former Governor Jack Markell of Delaware.
People without a bachelor’s degree may need more training before digging into the job, but the cost of training is quickly recovered, and the training period itself can be a useful tryout, Fuller says, if it’s in the form of a paid internship, apprenticeship, or work-study program. “Asking for a bachelor’s degree is kind of a lazy man’s way of stipulating what you’re looking for,” he says. “When I witness the person doing the work, I’m making a hiring decision based on seeing a person over time, vs. looking at a résumé. The leading cause of failed hires for this type of job is a soft-skills deficit. For that, observation is invaluable.”
Say what you want about American health care, but it’s ahead of many other sectors in suppressing credentialism. Nurse practitioners now perform many functions once reserved for physicians—including, in some states, writing prescriptions and even setting up their own practices. This is partly of necessity: There simply aren’t enough doctors to go around. But there’s nothing second-class about the care of a nurse practitioner. “I prefer being treated by them. Because they take their time. They might see me for 20 minutes, 30 minutes. If it’s something that’s complex, they’ll call in a physician,” says John Washlick, a Philadelphia lawyer who specializes in health care. His firm is Buchanan, Ingersoll & Rooney, based in Pittsburgh.
I also spoke with Gerald Chertavian, the founder and chief executive officer of Year Up, which trains urban young adults and places them in six-month internships that lead to jobs in finance and tech. Typical trainees go in earning $5,000 a year and come out earning $40,000 a year, Chertavian says. State Street alone has employed more than 500 of them. Employers find that hires from Year Up are staying three or four times as long as conventional hires out of four-year colleges—a major advantage given the high cost of recruiting and filling empty positions.
Chertavian says he came out of college with an economics major but no special skills. “I was a Chemical Bank trainee 30 years ago,” he says. “I benefited from at least eight to nine months of full-time classroom training that Chemical put into me.” Companies dropped a lot of their training programs to save money, but now the enlightened ones are reinstating them, he says.
Harvard’s Fuller is right to focus on the folly of credentialism, Chertavian says. “These young people have the engines in the wings. They come as fully intact planes. But they’ve never been afforded the luxury of a runway.”