The tight labor market has companies reconsidering whether a college degree is a must

With 8.1 million positions open in the U.S., the largest in recorded history, companies may need to turn to candidates they might not have considered in the past.

Already leading the way in considering job candidates without four-year degrees are technology companies that instead opt for so-called competency-based hiring.

Several Fortune 500 companies such as IBM, Microsoft, and Apple have focused on measuring skills through projects or tests for technology-related jobs.

Increasingly, candidates in the technology sector are also coming from coding boot camps, which serves as an alternative to the four-year computer science degree. These programs are training candidates directly for the roles they will fill, without the general education credits required at many universities.

One such coding boot camp is the Memphis-based nonprofit Code Crew. Founder Meka Egwuekwe, who has a bachelor’s and a master’s in computer science, started the program in 2015, focusing at first on younger students.

In 2018, Egwuekwe learned that a talented student from the youth class had to move to another state to join a coding boot camp. The student wanted to be a software engineer, but he couldn’t afford college, and Memphis didn’t offer adults the same opportunity to learn coding as did other cities.

This experience, along with the encouragement of Memphis employers, spurred Egwuekwe to create a six-month coding boot camp for adults that prepares candidates for entry-level software engineering positions.

Graduates of the program make $51,000 a year on average, Egwuekwe says, more than three times the $15,000 average salary of a student coming into the program. And yet, Egwuekwe says, some employers he has talked to still hesitate to hire a person who has the necessary job skills but no college degree.

Egwuekwe said this mindset needs to change.

“I think there’s a lot of benefit that coding boot camps like ours and others are bringing to employers if they would just recognize the mathematical reality that they’re not going to get their employee needs met,” Egwuekwe tells Fortune.

Dropping degree requirements could also improve the diversity of companies, as many of the candidates without college degrees are people of color.

From 2015 to 2019, 35.8% of white people had a college degree compared with 22.6% of Black people, 15% of Native Americans, and 16.4% of Hispanic or Latinx people, according to the U.S. Census Bureau.

At Code Crew, about 80% are Black, 10% are Latinx, and a little less than half are women, Egwuekwe notes.

Frequently companies filter out candidates who are upwardly mobile but may not have attended an elite college or secured a prestigious internship, says University of Virginia Darden School of Business professor Sean Martin.

Hiring managers are starting to realize that, along with college degrees, a lot of the “prior experience” requirements for jobs are unnecessary, Martin notes. Most of the tasks that candidates would have learned from prior experience can just as easily be learned on the job.

“That raises the question for them as to why are they posting and why are they excluding potentially great people based on a predictor of success that either is (a) not very predictive or (b) based in something you could easily learn,” Martin tells Fortune.

This filtering hurts companies, candidates, and society, Martin says.

“The companies themselves miss out on people that research suggests—including some of my own research—might be less entitled, more culturally savvy, more desirous of being there,” Martin tells Fortune.

Instead, companies should focus on identifying, through résumés and interviews, factors that signal motivation such as seeking training or getting promoted in other roles they have held.

Gauging a candidate’s aptitude for a job through a college degree is a relatively recent thing, says Northeastern University executive professor of educational policy Sean Gallagher.

Prior to World War II, a minority of Americans went to college, Gallagher says. Then, especially in the ’60s and ’70s, access to college expanded with federal policies such as the Higher Education Act, which provided financial assistance to students seeking a college degree. At the same time, companies required more knowledge workers as the economy evolved.

As time passed, companies increasingly latched on to the college degree as a guarantee that a job candidate had basic skills, Gallagher says.

Now, as nearly all industries are affected by a labor shortage, more companies are redefining how they analyze candidates.

“You’ve had many firms, certainly not all but many have said, ‘Look, we’re relying on college degrees blindly, and we need to consider people that haven’t earned a degree,’” Gallagher tells Fortune.

Still, that doesn’t mean the college degree is going away. When people can avoid large amounts of debt, college can be a great investment. According to Bureau of Labor Statistics data from 2019, someone with a bachelor’s degree makes $502 more in median usual weekly income than someone with a high school diploma.

“We believe, based on our research, that a big part of why educational qualifications have escalated over the years is because the nature of the job, and the skills required, has evolved,” says Gallagher. “It doesn’t mean that every company can prove that a certain degree is absolutely needed.”

Between 2005–09 and 2015–19 the number of Americans age 25 or older with college degrees increased 16.6%, according to the Census Bureau.

There’s no “one size fits all” solution to the imposition of four-year college degree requirements in hiring, says Gallagher, and degrees will continue to persist as a measure of skills and competency.

But that doesn’t mean in an increasingly tight labor market that companies should not look to alternative routes such as boot camps, vocational programs, or apprenticeships for candidates, Gallagher notes.

“I think most people understand that not all college degrees are perfect,” Gallagher tells Fortune. “And not all time that’s spent on a bachelor’s degree is necessarily going to be relevant to a job or even what’s needed in life.”

More from Fortune at the intersection of race and business:

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• Want progress on diversity? Link it to your CEO’s pay
• Black women are more entrepreneurial than white men
• Can Black people make up one-eighth of corporate board members by 2028?
• Women and minority-owned small businesses aren’t sharing in the U.S. recovery