We need a supply-side education policy

Wednesday evening in a speech in Pennsylvania, Kamala Harris announced that if elected, she would “eliminate degree requirements” for hundreds of thousands of federal jobs. She also added that she would challenge “the private sector to make a similar commitment.”

These policies – often called “skills-based hiring” – are very popular with voters, which explains why Harris made a similar promise earlier this month. The Trump administration also tried to relax degree requirements for federal hiring through executive order, making it a rare policy that enjoys bipartisan support. (Not much seems to have come of this executive order, which was issued just before the 2020 election). Nearly 60 percent of adults ages 25 to 29 do not have a bachelor’s degree. If they have the skills to do a particular job, why should we deny them that opportunity simply because they lack somewhat arbitrary credentials?

Yet despite its popularity, skills-based hiring is a dead-end policy. If, starting tomorrow, every employer in America formally stopped requiring a four-year college degree for every available job, not much would change. Indeed, companies like Walmart, Apple, and many others proudly advertised the removal of degree requirements from job postings, but the ultimate impact on employment was very small. A recent Harvard Business School study found that when companies remove associate degree requirements, the percentage of workers with bachelor’s degrees drops by just two percentage points. Employers may not insist on a college degree, but they still prefer it.

So even if a degree isn’t formally required, candidates who have one will still usually beat out candidates who don’t, because employers need some way to tell them apart. In other words, the real problem is not the existence of degree requirements, but the lack of alternative ways for workers to prove their qualifications. If political leaders truly want to expand opportunities for Americans without a college degree, this is a problem they must solve. It’s not particularly complicated, but it will require the government to take a markedly different approach to higher education than it is used to.

Removal proposal degree requirements fit into a broader historical pattern of higher education and workforce development policy, particularly in the Democratic Party. Both the Obama and Biden administrations increased the generosity of the Pell Grant program for low-income students, forgave some student loans and increased transparency in reporting the outcomes of college graduates. The bipartisan Pell Workforce Act making its way through Congress would expand students’ ability to use federal financial aid for non-degree training programs. All of these policies are demand-side, meaning they aim to change incentives through prices, subsidies and regulation.

Kevin Carey: The problem with “popular” jobs

What we are missing supply side career and technical education policy. The United States spends a paltry 0.03 percent of GDP on job training, compared to an average of 0.11 percent in other advanced economies. The lack of credible non-degree pathways leads to a lack of interest in skilled trades among young people, which in turn causes shortages in essential professions such as plumbing. Adjusting the knobs on the demand side won’t work because what we really need doesn’t exist yet.

Why do employers hire college graduates for entry-level positions at all? Recent graduates typically don’t have much practical knowledge, but being accepted into college and completing a four-year degree program at least signals that the graduate has some talent and fortitude. This helps explain why the college premium starts small but grows quickly as workers gain experience. Companies employ unproven university graduates in the hope that their investment will pay off over time.

Most employers would prefer an employee who will be productive right away, which explains the theoretical appeal of skills-based hiring. The problem is that skills are difficult to verify. Companies know the capabilities of their employees, but they have no incentive to share this knowledge with rivals who would use it to steal good employees. (Harvard economist Amanda Pallais has shown that entry-level workers benefit from publicly sharing information about their opportunities with the labor market.) Bachelor’s degree credentials also unfortunately do not send a clear signal, as they vary widely and present a confusing patchwork of options for employers. Fixing this problem would expand opportunities for Americans without a college degree far more than eliminating the college degree requirement.

To give just one example, consider the credentials of cardiac technicians. For example, at Bunker Hill Community College in Boston, you can enroll in a two-year, full-time residency program to earn a degree in cardiac ultrasound. At Hudson Valley Community College in Troy, New York, you can earn a one-year certificate in cardiac ultrasound, but only after earning an associate’s degree in another health-related field or a bachelor’s degree in an unrelated discipline. Meanwhile, many other community colleges in both states don’t even offer specific cardiovascular technology programs, opting instead to provide general “allied health” degrees and leave specific training to employers.

Differences between universities mean employers don’t know what they’re getting. An HVCC-certified cardiac technician can get a job in Troy, where local employers understand her qualifications. However, if she wants to get a better job at a hospital in Boston, she has no way of proving that her certificate has any value. This limits her mobility and, therefore, her career prospects: changing employers is a key part of wage growth. The big advantage of a bachelor’s degree is that you can take it with you anywhere.

David Deming: The university’s reaction is too far-reaching

Vice President Harris spoke favorably of expanding apprenticeship programs that combine paid on-the-job training with classroom instruction. Apprenticeships are effective – a thorough evaluation of the federally funded Registered Apprenticeship program found that they result in significant earnings increases – but they are tailor-made and expensive. In 2021, the most recent year for which data was available, more than 25,000 active programs averaged fewer than 10 apprentices each.

A more scalable model is the FastForward program, which has funded career-focused training for nearly 45,000 students at 23 colleges and universities across Virginia. Under the program, the state’s community college system has created career maps in fields such as manufacturing and health sciences, with a common curriculum that allows people to obtain advanced credentials that build on each other, or “stack,” and open up door to a better-paid job. Early evaluation of the FastForward program found that students who received the industry-recognized certification saw their earnings increase by approximately $4,000 per year.

Congress could do something similar on a national scale by creating and funding a federal certification program for career pathways in fields with high job demand and good prospects for career advancement, such as advanced manufacturing and cardiovascular technology. Federal standards would create common quality standards and a common language about the skills required for career success in each field. This would make factories and hospitals across the country more willing to hire graduates from out-of-state programs because they would know what they are getting. It would also be easier to combine references in different sectors, which would provide employees with greater professional mobility.

Creating better career paths and technical education in the U.S. requires institution building, not market reforms – much like the Biden administration’s approach in areas such as infrastructure investments and clean energy. Cities and states should be able to tailor career and technical education to the strengths of the local economy, but only the federal government can provide nationwide credibility and funding to create more good jobs for the majority of Americans who do not have a four-year degree.