Dropping your child off at college has long been a milestone for parents as well as their teens. But does getting a degree mean bell bottoms, cable TV, and calling someone on the phone?
With a strong economy and an excess of jobs with few workers to fill them, big companies like Google, IBM and Delta Air Lines have relaxed education requirements in an effort to find jobs based on skills and experience instead.
With a four-year degree perhaps not as crucial for Americans moving up the career ladder as it once was, young people might also be rethinking the need for a higher education.
“It’s a little [like] musical chairs right now,” says Alicia Modestino, associate professor and labor economist at Northeastern University. “We see a lot of people changing jobs, moving up in the job market. It’s awesome.”
However, she warns that with the Fed raising interest rates in an effort to rein in inflation, Americans should prepare for a slowdown in the labor market in the months ahead.
“Soon the music is going to stop – so you want to have a place to land that’s going to be good in the long run.”
Employers react to a tight labor market
The tech industry in particular has been struggling with a talent shortage since pre-pandemic times.
Google and 150 other companies are using the tech giant’s online college program to train and hire entry-level workers, reports the Wall Street Journal. And according to CNBC, IBM is not licensing half of its roles in the United States.
Bank of America also doesn’t require college degrees for most of its entry-level jobs, while Delta says degrees for pilot candidates 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 credentials.
This change comes during a booming labor market with low unemployment and high vacancies. And while there’s been talk of that coming to an end, the Labor Department’s latest jobs report said hiring only slowed slightly in November, with 263,000 jobs added last month, against 284,000 jobs in October.
Modestino adds that there is precedent for this approach. During the Great Recession, employers responded by focusing on skill requirements in addition to education requirements, as there were more college-educated workers available to them.
This may not be a real “culture change”
So, should parents stop putting money aside for their children’s school fees? Modestino is “pessimistic” about whether big employers relaxing their degree requirements is really part of a “culture shift.”
And with recent changes in the economy, she worries about the future of work.
“Looking at where we are in terms of the economic cycle and what the Fed is doing with interest rates, [there’s] the potential for us to overshoot and tip into a recession,” Modestino warns.
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The Fed raised its federal funds rate for the seventh time this year with more hikes expected to come in 2023. Experts like Modestino fear this could trigger a recession, which would mean slower hiring and possible job and salary cuts.
Modestino told his own son – who has a bachelor’s degree in criminal justice – that he needed to take advantage of the boiling job market and launch a career.
“We don’t know if there will be a soft landing in the job market over the next six months,” she says. “So I would certainly urge all young people…that now is the time to make those decisions. Because I fear the window is closing on those opportunities.
She predicts that when workers are plentiful again and employers have many applications to consider, many companies will “revert to the lowest common denominator” when hiring – a four-year college degree.
So, is earning a bachelor’s degree really worth it?
Parents may have long encouraged their children to pursue higher education, but Modestino points out that there are plenty of jobs that don’t require a four-year college degree. And therefore, the important decision to go to college should depend more on the career goals of the youngster.
For example, you don’t need a bachelor’s degree to become a phlebotomist, but it will likely require certification in phlebotomy. On the other hand, a doctorate is required to become a full university 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 plentiful and employers can afford to be demanding. .
In a recession or weaker job market, having a college degree in your name can often have a “sheepskin effect,” Modestino says — an economic phenomenon where employers pay graduate workers higher wages. .
A Georgetown University study found that bachelor’s degree holders earn 31% more than those with an associate’s degree and 84% more than those with a high school diploma. But higher education does not always mean higher incomes.
“When you’re in a job market like this, we’ve seen salaries go up faster at the bottom end because they need talent so badly. And so [employers are] actually trying to hire talent and reward talent, rather than just a degree,” says Modestino.
But keep in mind that students pay a price for this extra earning potential. With approximately 43 million borrowers in the United States owing more than $1.6 trillion in student debt, earning a degree isn’t always worth the financial burden. Parents who are pushing their kids to go to college just for the fun of it might want to have a larger conversation about what interests they prioritize.
“There’s been this message for at least the last two decades that college is the only way,” Modestino says.
“It did a disservice, I think, to some young people who would have been better off going to vocational technical school or taking a different path through training and workforce development.”
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