Depending on whom you ask, degrees are either increasing in value or about to disappear into the dustbin of history. A new report by The Brookings Institution shows that the bachelor’s degree premium remains as high as ever. Meanwhile, Goldman Sachs says the return on college is falling: “In 2010, students could expect to break even within eight years of finishing school. Since then, that has increased to nine years. And if this trend continues, students who start college in 2030 without scholarships or grants... may not see a return on investment until age 37.”
It's equally confusing when we’re told that employers are greedily demanding more degrees while simultaneously saying degrees don’t matter. With regard to the former, a new survey from CareerBuilder of over 2,300 hiring and HR managers revealed that 32 percent of employers are asking for more higher education than they were a few years ago:
27 percent of employers are now demanding master’s degrees for jobs that used to only require bachelor’s.
37 percent of employers are demanding bachelor’s degrees for jobs that used to be open to high school graduates.
Meanwhile, employers including Ernst & Young, PricewaterhouseCoopers and Penguin Random House are either saying degrees don’t matter, or proactively masking from hiring managers whether or not candidates have degrees because the companies have ascertained that “degree bias” tends to result in false positives and false negatives—hiring the wrong person or not hiring the right person.
Google is the company that’s probably most invested in disrupting the degree. In addition to partnering with both Udacity and Coursera on nanodegrees and specializations, Google’s Senior VP of People Operations has gone on record saying that grades in degree programs are “worthless as a criteria for hiring.” As a result, Google also requires candidates to take assessments, which are much more predictive of success on the job.
Both sides can’t be right, can they? It turns out they can, and the explanation provides some context for the primary “return on college” dilemma.
What we’re seeing from employers—the ultimate consumers of higher education—is the result of dissatisfaction with the current level of talent being produced by colleges and universities. Employers are dissatisfied and are flailing about for answers. For many employers, this means credential inflation—requiring certain degrees for jobs that previously didn’t require them. An equally logical response for others is openness to alternative credentials.
Our most capable employers are having their cake and eating it, too. A recent survey by Burning Glass revealed that 75 percent of software developer job postings by Silicon Valley firms specified a bachelor’s degree requirement. These are jobs for which Google and most other high-flying new economy employers are looking at candidates’ code in GitHub. But 75 percent are also demanding a degree, presumably as a filter for soft skills, although as Burning Glass CEO Matt Sigelman noted in a recent post, “a degree is only a rough proxy at best—an imprecise tool for a high-tech industry.”
What’s perhaps most remarkable is that Google and its Silicon Valley brethren, Ernst & Young, PricewaterhouseCoopers and Penguin Random House are among our most prominent and attractive employers. If they can’t attract the talent they need via the current degree-based system, what hope do less prominent S&P 500 companies like Air Products or Hormel have, let alone the small and mid-sized enterprises that employ the other 85 percent of American workers?
Just because we’re not hearing complaints from Hormel (e.g., “talent shortage impeding Spam production”) doesn’t mean the company is happy. According to the Gallup-Lumina survey, only 11 percent of employers think graduating students have the skills that their businesses need. It’s not as though degree holders are only falling short on job or even industry-specific skills; an AACU survey released last year reported 75 percent of employers believe recent graduates are not well prepared in critical thinking and analytic reasoning, written and oral communication, complex problem solving, innovation and creativity, and applying knowledge and skills to real-world settings.
One of the major challenges in thinking about the issues facing higher education is myopia: mistaking the elite university for the typical school, and the elite student experience for that of the typical student. (Ben Casselman stated this argument concisely in March on Fivethirtyeight.com: “Shut Up About Harvard.”) In the same way, the question of how employers view degrees is obscured by our myopia on brand-name, high-profile employers—those most likely to attract the most talented students. So when high-profile employers begin sounding off, it’s a fair bet that discontent amongst unsung employers is an order of magnitude higher.
In 2013, the Gallup-Lumina survey asked employers whether they’d considering hiring a candidate without a degree over someone with one—71 percent said they would. At the end of Q1, LinkedIn subsidiary Lynda.com announced that it had launched more than 50 “Learning Paths”—packages of courses preparing candidates for specific jobs. Learning Paths will begin preparing Lynda.com subscribers for jobs as varied as digital marketers, bookkeepers and front-end web developers. Whether or not Lynda Learning Paths do anything to address critical thinking and analytic reasoning, it appears employers are primed and ready to take a hard look at alternatives to degrees—especially the non-brand-name employers that really matter.
Newly minted bachelor’s degree grads are already competing in the job market with graduates of coding bootcamps like Galvanize. Soon they’ll be competing with graduates of Udacity Nanodegrees, Coursera Specializations and Lynda Learning Paths. And while many of these alternative credential holders will have previously earned bachelor’s degrees, an increasing percentage won’t. Colleges and universities need to prepare for greater competition, which is bound to have a negative impact on returns to plain vanilla bachelor’s degrees.
Ryan Craig (@ryancraiguv) is managing director of University Ventures, a fund focused on innovation from within higher education.