Skills-Based Hiring: What College Students Should Know

Hiring companies increasingly favor skills over credentials and degrees in job candidates. Learn about skills-based hiring and how you can prepare.

Published on May 22, 2024

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Fact-checked by Marley Rose

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Edited by

•

Fact-checked by Marley Rose

Published on May 22, 2024

Learn more about our editorial process

Image Credit: Olga Rolenko / Moment / Getty Images

Data Summary

From 2014-2023, 37% of companies removed degree requirements from their job postings.^{Note Reference [1]}
However, the shift to skills-based hiring did not lead to more hires of non-degreed workers: Less than 1 in 700 actual hires — or a mere 0.1%.^{Note Reference [1]}
Research has found that non-degreed workers have higher retention rates within companies than workers with degrees — up to 10 percentage points higher.^{Note Reference [1]}
Non-degreed employees also experienced a 25% increase in salary on average from 2014-2023.^{Note Reference [1]}
In 2021, less than 38% of people in the U.S. 25 years old and older had a bachelor's degree or higher.^{Note Reference [2]} By removing the degree requirement, employers can expand their talent pool.

Employers have shifted their preferences for job candidates in many ways. For example, companies no longer consider on-the-job training the norm and, in many cases, expect applicants to already have the skills needed for the role before being hired.

Skills-based hiring refers to an employer's focus on a candidate's skills rather than credentials, such as education level or degree. This might look like having a web design certificate and portfolio showcasing your skills in the field rather than a bachelor's degree in graphic design alone.

Students and other job seekers can keep up with this shift in hiring practices by collecting and demonstrating in-demand skills while getting their degrees.

Read our report to better understand skills-based hiring, and learn why more companies might shift their hiring practices.

How Common Is Skills-Based Hiring?

In a conversation between two consulting firm McKinsey & Company executives, partner Bryan Hancock noted, Look at a college degree: If it's not needed for a job, not having one shouldn't be a barrier to somebody getting the job.^{Note Reference [3]} In line with this logic, a large percentage of companies have started to drop their degree requirements in recent years.

Researchers at the Burning Glass Institute and Harvard Business School Managing the Future of Work Project analyzed the hiring practices of 11,300 large firms from 2014-2023. They found that nearly 40% of firms removed degree requirements during this period, leading to a 3.6% decrease in job postings that require a bachelor's degree.^{Note Reference [1]}

In actual numbers, however, this resulted in just 97,000 new skills-based job opportunities out of the 77 million annual hires — which is very little. In other words, the move to skills-based hiring practices produced less than 1 in 700 actual hires — or a change of just 0.1%.

45% of firms made no changes in actual hiring practices after removing degree requirements from job postings.
1 in 5 firms (20%) that dropped degree requirements actually hired a smaller percentage of workers without bachelor's degrees in the long run.

Why Are Companies Adopting Skills-Based Hiring?

Historically, companies have relied on traditional credentials like degrees when hiring. However, they may now turn to skills-based hiring practices to evaluate candidates based on their abilities as well. This has several benefits. For example, it cuts down the time and resources needed to train a new employee.

Research Findings on Skills-Based Hiring Practices

In one example from the McKinsey report, Boeing recruited college graduates from a computer science program but found that they needed step-by-step guidance on how to do their jobs.^{Note Reference [3]}

While the new hires understood cybersecurity conceptually, they didn't have any hands-on experience.

This is when Boeing created a cybersecurity apprenticeship program that didn't require candidates to have a four-year degree. By the end of the competitive program, participants were very capable in cybersecurity, even without a cybersecurity degree.^{Note Reference [3]}

Skills-Based Hiring Outcomes

Do skills-based hiring practices work? The study at the Burning Glass Institute found that non-degreed workers had a retention rate 10 percentage points higher than their degree-holding counterparts from 2014-2023.^{Note Reference [1]}

Additionally, non-degreed employees also experienced a 25% increase in salary on average during the same time period, suggesting that they do their jobs well.^{Note Reference [1]}

Pros of Skills-Based Hiring

Expand Talent Pool

In 2021, less than 38% of people in the U.S. 25 years old and older had a bachelor's degree.2 Employers can expand their talent pool by removing the degree requirement for certain jobs.

Improve Equity

People of color make up an overwhelming majority of the non-degree holder group. In 2022, just 28% of Black adults and 21% of Hispanic adults 25 years old and older held a bachelor's degree compared to 42% of white adults.^{Note Reference [4]}

Taking away educational requirements for jobs could help extend job opportunities to groups that have been historically underrepresented in those roles.

Help Employers Meet Their Hiring Needs

The year 2022 was characterized by a flood of people quitting their jobs — jokingly referred to as the Great Resignation. In fields with employee shortages, eliminating the degree requirement could help employers meet their hiring needs by expanding the candidate pool.

Jobs Best Suited for Skills-Based Hiring

Some jobs with worker shortages include human resources managers, industrial designers, and web designers.^{Note Reference [1]} Logisticians, who track and analyze a company's supply chain, faced the largest gap between job postings in their field that require a bachelor's degree and workers with actual bachelor's degrees — a 30% difference.

Jobs With Workforce Shortages
Job	Percentage of Postings Requiring a Bachelor's Degree	Percentage of Workers with a Bachelor's Degree	Percent Gap Between Need and Supply
Web Designer	91%	71%	-20%
Human Resources (HR) Managers	88%	72%	-16%
Industrial Designers	85%	72%	-13%
Insurance Underwriters	77%	61%	-16%
Logisticians	76%	46%	-30%
Facilities Managers	56%	39%	-17%

Source: Burning Glass Institute^{Note Reference [1]}

Next Steps: How to Prepare for Skills-Based Hiring

So, how can you prepare for a skills-based hiring market? The following approaches may help improve your employability.

Develop Skills That Match Market Needs

Take a second look at the table above (Jobs With Workforce Shortages). What kinds of skills are needed for those roles?

Consider getting a microcredential in an area that showcases your expertise in the field. For example, a Certified Supply Chain Professional (CSCP) certification might come in handy when applying for a logistician job.

Tailor Your Resume, Cover Letter, and Interviews to Highlight Skills

If you already have the skills required for the role, focus on enhancing your application materials to highlight these skills. For example, in your resume, detail which skills you used in past experiences. In interviews, discuss how you had to use the same set of skills for a previous role.

Show your hiring team that you can quickly onboard. Convince them that you have done the work before or at least have experience using the skills relevant to the future role.