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Employers Are Downgrading Their Hiring Criteria In This Tight Labor Market

Topics: Growth
Many employers today are facing pressure to re-evaluate their target hire. Here's why they're doing so, and why you may want to do the same.

A few months ago, The Wall Street Journal ran an article with this headline: “Employers Eager to Hire Try a New Policy: ‘No Experience Necessary.’” The article highlighted the trend known as “downskilling” — the fact that employers relax their hiring criteria when the demand for labor (jobs) exceeds the supply (workers).

This article cited research done by labor-market research firm Burning Glass Technologies: In the first half of 2018, the share of job postings requesting a college degree fell to 30 percent from 32 percent in 2017, based on Burning Glass’s analysis of 15 million ads on job sites like Indeed and Craiglist. The same study found that minimum qualifications have been declining since 2012, when companies sought college graduates for 34 percent of those positions.

Northeastern University economist Alicia Modestino provided a useful explanation for “downskilling”:

When people are looking for work, companies can afford to inflate job requirements to find the best fit — and did so as unemployment spiked in 2018. As highly qualified (college graduates and mid career professionals) raised their hands for jobs such as hotel managers and bookkeepers after the recession, hires with more qualifications took a larger share of positions normally filled by the U.S. workers who lack a college degree.

But since 2012, unemployment rate has been declining, and the number of job openings are climbing steadily (and in fact, the number of job openings now exceeds the number of unemployed Americans). In today’s environment, employers are facing pressure to increase salary or re-evaluate their target hire.

In our latest Compensation Best Practices Report, we confirmed that organizations in 2019 are quite likely to hire candidates without formal college degrees, as well as those who took extended breaks from the labor force.

In the Compensation Best Practices survey fielded in December 2018, we asked respondents “Are you more likely to hire non-traditional candidates at this time than before?”

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Fifty percent of respondents said that they’re hiring more employees with no formal college education. Forty-three percent said that they’re hiring more employees who took extended breaks from the labor force. Fourteen percent said they’re hiring employees who were previously incarcerated.

Additionally, 69 percent of all respondents said they their organization prioritizes skills over formal education/degrees when hiring new employees.

[Our newest edition of the Compensation Best Practices Report will be released in early February. Meanwhile, check out the 2018 edition on our website.]

How Organizations Are Relaxing Hiring Targets

Whether you decide to use job-credential requirements or not is a decision only you and your leaders are able to make. With that said, here are some ways that organizations have relaxed or made drastic changes to their recruiting process:

  • Removing preferences for a college degree or high school diploma for entry level jobs (e.g. call center specialist, hotel manager).
  • Some are even going as far as creating job openings that say “no experience necessary,” making occupations such as e-commerce, analyst, purchasing assistant and preschool teacher available to those without a degree.
  • Splitting jobs previously designated for business-school graduates with MBAs into multiple lower-level positions, each involving more routine activities supporting higher-level staff in the division.
  • Accepting technical programs, such as coding bootcamps as relevant experience.

As organizations relax their target qualifications, they’re also thinking more intently about the skills they need to hire and ways to screen candidates for the skills they need.

Shifting Compensation to Align With New Hiring Targets

As you discuss changes in your hiring targets, it’s important to also determine how to align compensation with your staffing needs. For example, if you want to stop using certain minimal qualifications such as a college education as the basis for setting job level and compensation, what else will you use to anchor pay decisions upon?

Here at PayScale, we’re seeing some organizations starting to explore whether they can utilize skills as the new anchor for setting pay. They’re looking to see how skills are showing up in the market value of pay and how they could fairly and accurately assess employees’ skills.

Part of this move is driven by the fact that there are now a diversity of ways for workers to gain the skills employers want (e.g. through coding bootcamps, online courses, certificate programs, apprenticeships, volunteer gigs, etc.). Credentials earned through traditional schools are becoming less relevant.

The other key driver is employees themselves. At this time, employees increasingly understand that they have a set of skills to offer and there is a marketplace for their skills. Also, the vast majority of younger workers expect their employers to train them and help them improve their skills on the job.

The last driver of change is data availability. For example, PayScale’s crowd-sourced dataset can provide employers with details on how various technical skills and proficiency with certain tools and programming languages are impacting pay for different job titles and industries.

Whether you’re making small tweaks to your hiring targets or drastic changes, ensuring that you are dialing in on the skills you need and tracking the market value of those positions will serve you well, as you hire in this market.

Tell Us What You Think

Has your organization recently changed your hiring target as a result of the tight labor market? If so, tell us what you’re changing, and how it’s working out.

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