Leigh Parise: Policymakers talk about solutions, but which ones really work? Welcome to Evidence First, a podcast from MDRC that explores the best evidence available on what works to improve the lives of people with low incomes. I’m your host, Leigh Parise.

As the cost of higher education climbs, skills-based hiring has gained traction. It’s a labor market trend where employers hire [based] on skills, with the understanding that degrees are not the only way to acquire competencies.

Some estimates suggest that as many as 30 million individuals would be eligible for higher-wage work if degree requirements were lifted. At last count, the governors of 10 states have pledged their commitment to skills-based hiring for state positions. Skills-based hiring is also on the rise in IT fields in which the attainment of certain credentials can prepare students for lucrative positions in cybersecurity, cloud computing, and more.

Skills-based hiring has the potential to increase equity in the hiring process, providing avenues to socioeconomic mobility for historically marginalized populations. However, there are also questions about whether the movement could demotivate students from pursuing two- or four-year degrees that may be richer or more transferable to other jobs.

Given our long history of work focused on education, workforce training, and economic mobility, MDRC is interested in learning more about skills-based hiring across education and workforce training domains.

To learn more about skills-based hiring, we’re joined by Matt Sigelman, president of the Burning Glass Institute, which advances data-driven research and practice on the future of work and workers.

Matt, welcome to Evidence First. I’m really excited for this conversation.

Matt Sigelman: Very much likewise. Thanks for having me.

Leigh Parise: All right. So Matt, why don’t you start by talking to us briefly about what Burning Glass Institute does. That feels like a great place to start.

Matt Sigelman: The Burning Glass Institute is a nonprofit research center that focuses on advancing data-driven research and solutions at the intersection of the future of work and the future of learning. This grows out of work that I’ve spent the last couple of decades doing, trying to bring new and more powerful and more granular and more timely data sets to how we understand the landscape of opportunity for workers, how we track people’s careers.

Leigh Parise: Do you want to give a couple of examples of the types of projects that you’re working on or the types of questions that you’re exploring?

Matt Sigelman: For sure. One of the things that we’ve been working on recently is a set of measures of worker outcomes. We recently launched—together with the Schultz Family Foundation and the Harvard Business School—something called the American Opportunity Index, which is our attempt to actually evaluate how much opportunity America’s largest companies are creating for their workers. We tracked the careers of five million people working in America’s 400 biggest companies in jobs that are open to people without college degrees, and we looked at what happened to them over the course of five years.

What’s really cool about this work is that we can look at this not based on what people say, but what actually is bearing out. In the past, if you wanted to understand who’s the top employer or if we wanted to have a conversation about job quality or employer quality, we can only look at the inputs. We’d say, “Who’s offering what kind of benefits? Who’s got what kind of policies?” And instead, we can actually look at real people’s careers and see what bears out, who’s moving ahead, who gets stuck, what companies are giving people opportunities, which companies aren’t.

Leigh Parise: That’s really exciting. Thank you. The data nerd in me needs to know: What data are you using to be able to answer some of these questions and explore these topics?

Matt Sigelman: We’re using a bunch of different data sources. At the center of that work—which we’re also leveraging in our understanding of skills-based hiring—is a database that we’ve accrued of 65 million U.S. workers’ career histories. Now, 65 million is a big number, but I just want to put that in context: That means 40 percent of the U.S. workforce.

Interestingly, while it certainly has a heavy representation of people in professional work, it includes, for example, 240,000 people who have worked in frontline roles at Starbucks. It includes hundreds of thousands of career histories of people who have worked in Amazon warehouses and so forth. And so it means that we can actually see—based on resumes that you can find online, LinkedIn profiles, and a bunch of other sources—how people progress from job to job. We integrate these sources and create complex models that help us understand what’s going on in the market and how people move through it. It’s kind of like tracking the cow paths that move through people’s careers.

Leigh Parise: All right, thank you for sharing that. That feels like really useful context, partly because I will turn us now to the topic that we are here to talk about, which is skills-based hiring. It’s useful to hear you talk a little bit about how you’re able to track how people progress from job to job. We’re going to come back to that in a minute because that’ll all be really relevant here. But why don’t we first start with: What is skills-based hiring? What do we actually mean by that?

Matt Sigelman: Skills-based hiring is a movement [that] has emerged to counter a long-term, multi-decade trend toward what’s sometimes been referred to as degree inflation.

In a lot of fields you saw, through the middle of last decade, degree-based requirements become more and more prevalent. Jobs that used to be open to people without a degree, suddenly you needed a degree to have [them]. And you wound up seeing these really big disjoints between the level of educational attainment of workers who were already in the workforce in various kinds of occupations and what employers were looking for in their future workforce.

We’ve now come to realize that that has significant consequences—of course it has significant consequences for people in their careers. Over 60 percent of Americans don’t have a college degree, and so it meant that they were being closed off from opportunity. So I think what we started to see over the last several years is employers pull back from some of those degree-based requirements.

Now, some of that has been based on a recognition of the equity implications. Some of that has been pure, unadulterated business interest, and I think that’s good. If you are cutting out two-thirds of your potential talent pool at a time when you’re really struggling to fill jobs, you’re tripping on your own shoelaces and there’s no reason for it.

The reason why I said, by the way, that I’m delighted by that confluence of a growing recognition of the equity imperative that companies have and their unadulterated business interest is that I think, while the former drives a lot of sincerity and sense of purpose, the latter drives a lot of sustainability.

Leigh Parise: I imagine [it] makes the case much easier within companies that have boards or companies that have to justify particular policies. Probably both of those things certainly help to make that argument when they come together.

You’ve got all of this data that you’re able to look at. I’m curious, to what extent do we actually see a big uptick in skills-based hiring where it’s not just “Matt, Leigh, do you have this particular degree?” but, rather, “What is your experience, what are your skills?” How much has that actually changed in the labor market?

Matt Sigelman: I think we need to distinguish between what employers are saying and what employers are doing. We’re seeing good traction on the saying. We’re seeing, as one might expect, a lot less traction on the doing. If you look at the percentage of job postings today [that] reference a degree requirement, it’s down considerably from what you saw at the peak of the market. And that’s an important first step because even if it doesn’t actually bear out in changes of patterns, it at minimum signals to applicants that jobs are more open. It sends an important message about openness to talent communities who have been historically excluded.

But what we’ve been doing recently—and we’ll be publishing on this early next year—we’ve been looking at the percentage of actual hires that are happening of people without degrees into those jobs that are removing degree requirements. And while there’s been some progress, it’s pretty small.

Leigh Parise: Are there particular fields where you see it more than others or just across the board the changes are fairly minimal?

Matt Sigelman: It’s across the board. There are obviously some fields—we’ll be sharing this next year—with some sectors, some occupations where we’re seeing more progress. Ultimately, to be successful at skills-based hiring, what this says is that you’ve got to be intentional not just about your commitment, but intentional about the steps you’re going to take to act on that commitment.

We saw the same thing—a little while earlier in our conversation, I was mentioning the American Opportunity Index and one of the measures that we introduced this year was a measure of parity. [It’s] not just “Are companies moving people up?” but “Are they moving everyone up equally?” And we found something very similar there. We found that while it’s not universally true, the companies that are most likely to move people up equally are the companies that are just generally good at moving people up. To me, what that says is that the companies that develop good mechanisms for talent management—just as the companies that develop good mechanisms for hiring—are the companies that are then able to do this well across the board because they’ve created a good underlying engine for mobility. They’ve created a good underlying engine for considering talent from a broad array of backgrounds, including those who don’t have degrees.

Leigh Parise: Have you found, in your experience with some of the companies doing it well,  they say that they had to make some shifts in, for example, the kinds of supports that they’re providing to people or the way that they are helping people get connected with others on the job? Or is it more that they just felt, like, “We already had the right sets of supports in place and this is a pretty good place to work. And so once people come here, we kind of got it under control”? To what extent did the people doing it well have to change how they thought about support provided or the way that they work with their employees?

Matt Sigelman: Doing anything well takes intention. I think the companies that have been most successful at changing this have, first of all, recognized that changing requirements is a start, but not a be-all and end-all. They have recognized that, ultimately, hiring happens with hiring managers, not with broad company policy. And they’ve recognized that there are core processes and cultures of how you evaluate candidates.

For example, one of the practices that I’ve seen be very successful is putting more emphasis in a hiring process on some kind of work sample—asking people to undertake some kind of exercise—and then evaluating the exercises in a way that’s distinct from the name and the resume. If you are looking at the plan that somebody put together (or whatever it is), and you aren’t associating that with the resume, you’re forced to evaluate that piece of work and put aside some of the assumptions that you might have.

One of the other things that companies that do this successfully do is they continue to be analytical about this and to use the kind of data that are available. A couple of years ago, we looked at [the] extent companies were embracing change in their job postings. We had a special focus on the tech sector because the tech sector has been very declarative about how they don’t care if you have a degree, they just care if you can code. We wanted to see if that was true. We found, in fact, that for the most part it wasn’t true. That, in fact, even for tech jobs, tech companies were more likely than others to require degrees. But it certainly wasn’t universally true.

I want to use the example of IBM. IBM went from requiring degrees in something like 70 or 80 percent of their jobs to about 20 percent. And the reason why I’m going to call them out is not just for their success in stripping degrees from so many of their job requirements, but to me, one of the most impressive things I saw about IBM was after having gone down from, let’s say, 70 percent to something like 20 percent, in our analysis they went back up to about 30-some-odd percent.

So why did that impress me? That impressed me because, after having taken the degree requirements out in a whole bunch of jobs, they realized that it actually wasn’t warranted. There were jobs where having the degree really mattered. I think it’s okay to say that there are jobs where it does matter to have a degree. But it shouldn’t be that we are picking those jobs because it’s someone’s impression, because that’s where you introduce bias into a process, but because having taken the degree requirement out, they found there were some jobs where the people who were successful in those roles were more likely to have a degree.

Leigh Parise: One question, just for people listening who might be struggling a little bit [and] think, “Okay, so in practice, what does this actually look like? I’m applying for a job; I don’t have a degree.” How are employers actually measuring skills? What does that process look like?

Matt Sigelman: Leigh, I’m so glad you brought this up because I think this is one of the biggest impediments to wide-scale embrace of skills-based hiring. So far, this sounds really appealing. It sounds fairly straightforward. I just need to stop paying attention to whether someone has a degree and the world will be fine. And, look, there’s a reason why employers pay attention to degrees. That’s because we actually, for the most part, don’t have really good measures of skill. So employers are looking to degrees as proxies.

Now, it may be a really inefficient proxy; it may be an ineffective proxy. But for employers, it gives them some basis for believing that somebody is more or less likely to have a set of skills that they feel that they’re going to need. And so taking degree requirements out raises a significant challenge because it says, “Okay, well, if we’re not going to have that proxy anymore, what can we use to assess whether or not somebody has a set of skills?”

Now, America doesn’t suffer from a problem of too few assessments. The U.S. Chamber of Commerce’s Credential Engine project tracks something like 1.2 million credentials. To put that in perspective, I think there’s something like 114,000 words in the Oxford English Dictionary. So there are literally about 10 times more credentials out there than there are words in the OED.

Leigh Parise: Makes a lot of sense. Yep.

Matt Sigelman: But what that means is that, fundamentally, employers are still left without any effective signal. And so there are actually very, very few credentials that have any currency with employers. Of jobs that ask for some kind of non-degree credential—which is about 15 percent of jobs—90 percent ask for one of the top 200. So that means that there’s a whole universe of skills out there for which we have no widely accepted assessment. Until that happens, it’s going to be very hard for employers to make significant progress.

Leigh Parise: Yeah, it seems like a real, true struggle. How, I wonder…so there’s all these states, right? There’s at least 10 different states where the governors have made some commitment to skills-based hiring for state positions. Are there some models out there that companies can look to, to say, “Okay, I see this is how IBM did it, or this is how this particular state did it.” Or do you feel like that’s a way off still?

Matt Sigelman: I think, for the most part, most organizations are still learning, including ones that have been very public in their pronouncements. My advice, for what it’s worth—and it’s probably worth what people are paying for it, among your listeners—but my advice to companies is perhaps not to start with skills-based hiring. That sounds a little weird, but I think skills-based hiring is asking employers to commit an unnatural act.

Hiring is always a risk management exercise. I’m evaluating a set of people whom I don’t know from Adam. They all look good on paper, or at least some percentage of them look good on paper. We can flatter ourselves and say, "Well, we’re good at interviewing them." All the research shows that most people aren’t. So if you’re really honest with yourself, success at hiring is probably not much different from a batting average. If you’re hitting a .300, you’re probably doing super well.

And so if you’re a hiring manager and you’ve got two candidates—one of them has a degree and the other one doesn’t—even if you’ve read all the studies that tell you that the person without the degree is going to be more loyal, often will perform at a higher level because they’re more committed to the job, hey, here’s somebody who went to Harvard and here’s somebody who went to a local community college. From a risk management perspective, it’s just so easy to put your vote in column A.

Now, let’s think about a different risk management calculus. I can hire the person from Harvard whom I still don’t know from Adam, and [it’s] still, at best, a crapshoot whether they’re actually going to be good. Or here’s Maria in the accounting department whom everyone knows is fabulous. That’s not a hard decision, actually. And so I think if we start by building our sea legs on skills-based promotion, we might actually come to be more successful at skills-based hiring.

Leigh Parise: That’s a really interesting perspective. I’ll be honest, I felt like you were going to end us on a positive note when you set out--“Let me think about what my advice would be.” And I wasn’t sure how we were going to get there, but we did.

Matt Sigelman: I think that’s still positive.

Leigh Parise: Yeah, no, I agree. That’s what I’m saying. I appreciate that that’s where we landed, and I think that that is really good food for thought for companies who are maybe saying, “This is a thing that we want to get serious about.” You gave them a way to begin to get there as they’re beginning some initial planning. I think that’s great.

Matt Sigelman: There’s talent that lies within any organization. A lot of people working on the frontline in any organization are people who don’t have degrees and are doing a fantastic job for you every day. And if you can find that talent and build that talent and make sure that people inside your organization without degrees can move ahead, then picking people who don’t have degrees is going to be in, of course.

Leigh Parise: Right. And while that may not help you solve this societal problem—How do you help people who are not working right now get into some career paths that are going to lead to higher wages?—it does help you think about who the people are who might be at an entry level in a company and might not otherwise go back to school to get some additional degrees or otherwise have ways that they’re going to be able to get into some higher-wage careers. But you are starting to address that particular problem, so that’s a good thing to think about, I think.

This confluence of factors is making companies really be thoughtful about this right now. I do wonder, is that something that you think is temporary or will this focus on skills-based hiring potentially go away when the labor market cools? Or is your prediction that this is something that might stick around for a while and that companies are going to continue to focus on it and have some kind of commitment to it?

Matt Sigelman: Two quick thoughts on that. One, momentum matters. If we can use this moment—a moment of significant talent shortage on the one side and growing recognition of an equity imperative on the other—to build momentum for skills-based hiring, then I think that train’s going to keep rolling once it leaves the station.

Second, our analysis suggests that talent shortages are here to stay. There’s a growing demographic drought. We’re seeing historically low birth rates, historically low labor market participation. Even though there’s been a fair amount of people returning from the sidelines of the market in the red-hot post-pandemic labor market, nonetheless, we’re going to continue to see labor shortage as an ongoing feature of our economy—especially given the fact that it seems the likelihood of bipartisan consensus on anything, let alone immigration reform, is vanishingly unlikely. And so, in that context, I don’t think the talent shortage is something that actually goes away even in a recession.

Leigh Parise: Great. Thank you. I appreciate that. I appreciate you sharing that very much. Matt, thank you so much for joining me. This has been a really great discussion.

Matt Sigelman: Leigh, I so enjoyed this. Thank you.

Leigh Parise: Thanks so much to Matt for joining me. This was a really great discussion. And stay tuned for another episode on skills-based hiring coming in the near future.

To learn more about MDRC’s Center for Effective Career and Technical Education, visit mdrc.org.

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