The inflation problem nobody is talking about

Voters rank inflation as their top concern as prices continue to rise at the fastest pace in 40 years. And although the inflation conversation tends to center on consumer goods and energy, something else has become much more expensive than before: job qualifications, especially for work in the public sector. Rolling back an overreliance on college degrees can help.

Employers increasingly equate college degrees with job readiness, even for jobs that do not require that investment. When employers require degrees for low- or middle-skill positions, the resulting phenomenon is called “degree inflation.” These positions have not required college degrees in the past and have not seen an increase in job responsibilities. Instead, possession of a college degree has simply become the primary box to check.

It should be no surprise, then, that public sector employment has failed to return to pre-pandemic levels. While barely one-third of the US workforce possesses at least a four-year degree, over 60% of state government jobs require one. Considering college tuition has risen nearly five times faster than other consumer goods over the past 50 years, degree inflation causes increased vacancies for employers and traps strong, qualified candidates beneath a “paper ceiling.”

To combat degree inflation, Maryland Gov. Larry Hogan removed college degree requirements from over half of the state’s positions, expanding work eligibility to more than a million workers in the state. These newly eligible candidates, called STARs (skilled through alternative routes), are active in the labor force, have on-the-job training, and are competitive candidates. They simply lack a college degree.

Maryland expanded work eligibility for jobs apt to draw from the STAR labor pool. Most of the positions are in IT, administration, and customer service, fields for which STAR candidates likely have the requisite experience.

The problem of degree inflation extends beyond the public sector. There are 71 million STARs in the nation, more than half of whom are overqualified for their current positions, according to Opportunity@Work, a nonprofit group that aims to remove barriers in the labor market. With over 11 million current job openings in the United States, allowing the consideration of STAR candidates alongside traditional college graduates could triple an employer’s pool of eligible applicants.

The private sector is increasingly taking notice of this untapped labor pool. Over 50% of IBM’s US job openings do not require a four-year degree. CVS stated that requiring a college degree would close down “a stream of potential candidates that are well qualified.” And McKinsey found that increasing diversity through hiring non-traditional candidates leads to increased profits and innovation.

Opening more jobs to qualified non-degree holders could also combat the $1.7 trillion student debt crisis. Low-income and first-generation college students count on degrees for enhanced economic mobility, yet studies show they are likely to end up owing more in debt and making less than half the lifetime income of their wealthier, college-educated peers.

Qualified candidates should be able to leverage their past work experience to access the professional labor market and earn a more competitive salary. In fact, Stellarworx estimates that nearly 10% of STAR candidates currently earn at least $77,000 a year — matching the average master’s salary, but without education expenses. More economic progress can be made by further deemphasizing the necessity of a college degree in the job market.

State governments can lead the charge to boost economic mobility for their residents, with Maryland’s model serving as an example. Several states have contacted Hogan’s office to gain insight as they push similar projects. Even the federal government has enacted similar policies by eliminating degree requirements for certain jobs.

We shouldn’t punish two-thirds of America’s workforce for avoiding college debt and gaining real-world experience. Removing college degree requirements for jobs in which they aren’t necessary, especially in the public sector, will allow critical job positions to be filled and increase opportunities for millions of people.

While state governments may struggle to fight inflation in other sectors, Maryland is a shining example of how to tackle high inflation. Other states should replicate this dynamism or be left behind, with their labor forces ossified by arbitrary requirements.

Jakob Dupuis is a summer fellow at the Cicero Institute.

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