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Skills Wanted: Skills acquisition shown to be just as valuable as a bachelor’s degree

I recently wrote about Elon Musk’s prioritization of skills over a certain type of degree when it comes to identifying top candidates for hire. The growing demand for skilled workers is not being matched by a supply of skilled workers, and this misalignment is causing more and more companies to take matters into their own hands—hiring workers because of what they can do (or what they think they can teach them) instead of basing the job offer on the piece of paper they hold.

The Center’s Great Jobs project has written extensively on the overlooked value of skills obtained through associate degrees, one-year certificates, and apprenticeships, to name a few, and the importance these alternative pathways play in addressing the skills gap. A new flypaper by the Fordham Institute’s Amber Northern confirms this is true, referencing an NBER study that “explores the idea that on-the-job skills acquisition could be just as valuable as a bachelor’s degree in filling the skills gap.”

Analysts identify workers without bachelor’s degrees who are potentially skilled for higher-wage work through work experience. They use data on the skill requirements of jobs in the O*NET database, a comprehensive collection of occupational information, to compute the “skill distance” between a worker’s current occupation and higher-wage occupations with similar skill requirements in their local labor market.

They also use the Current Population Survey (CPS) to sample the worker population, since it is a monthly household survey that provides loads of labor force and economic statistics. For each worker in the CPS under a declared occupation—which totals roughly 68 million workers—they match the O*NET skill requirements for that same occupation to the worker. Then based on the skills of the current population, they estimate the degree of similarity or relatedness between the skills needed for the worker’s current job and those needed for one or more higher-wage jobs; the distance between those two points is the skills gap.

The key finding is that skills developed on the job by many lower-wage workers are compatible with the requirements of higher-paid jobs. By their calculations, thirty-three million workers without bachelor’s degrees have skills compatible with jobs paying wages that are higher by $7 per hour, and another thirty million have skills compatible with jobs paying $11 per hour more.

The skills gap does vary by occupational category, Northern continues.

For example, roughly 40 percent of jobs held in the Personal Care/Service category—which has the lowest national median income—impart on-the-job skills that only prepare workers for jobs within that same low-paying category. Thus, there’s substantially less room for wage increases. Yet 20 percent of Personal Care/Service jobs prepare workers for positions in other, higher-paying categories, such as Educational Instruction or Office and Administrative Support.

Many young people head into a four-year program by default. But data show that jobs on the rise are most in need of social, fundamental and analytical skills—and young people can be confident of strong demand in these industries going forward.

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