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Companies claim to need new workers more than ever. So why are they getting so picky?

In a recently published study, Harvard Business School professor Joseph Fuller found that employers have increased their job requirements substantially over generations past through what study authors call "degree inflation." Many now demand a four-year college degree for jobs which never used to require one, with up to three in five employers commonly rejecting people who have qualified, relevant experience in favor of recent college graduates.

This is particularly true in so-called middle skill jobs, typically considered to be non-professional jobs requiring more skill than a high school degree. In one field, production supervisors, Fuller's team found that only 16% of current workers have a bachelor's degrees. Two-thirds of new job postings require one.

Degree inflation is nothing new. While Fuller's work provides specific and detailed insights into this phenomenon, labor analysts have remarked on it for years. What makes modern degree inflation so unusual is its context. At the same time as employers are asking for more than ever to get a job, they also say that it's harder than ever to find new workers.

Per Fuller's study:

"The Bureau of Labor Statistics reports over 12 million Americans are either unemployed or underemployed, while new research finds that three in five employers report difficulty in filling middle-skills jobs - positions that require more education than a high-school diploma, but less than a four-year college degree."

This isn't just a matter of perception. This August the Labor Department recorded a record number of job openings across the country, only one data point in a trend which has lasted for years. Yet while expanding job openings indicate a more vigorous labor market, wages stagnation and increasing time-to-hire indicate a slowing one.

It's a contradiction that analysts have remarked on for years. While talking and posting openings as if hiring were white-hot, many employers approach the process as if the market were ice-cold.

Fuller's data is one of the most recent, and starkest, examples of this phenomenon.

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"There have been essentially two schools of thought," he said. "One is there's data that employers complain that they can't find people, and the cause of that is it that we're not creating people qualified for today's jobs. Aspiring workers aren't developing the skills that will position them for those jobs… And then there are a number of people who say that the most ready explanation for the absence of candidates is that employers are offering not very interesting jobs, and if they raised wages sooner or later you'll get people to either go back into the work force or move out of less good jobs."

When it comes to degree inflation, Fuller believes that both perspectives miss a critical change in modern hiring: companies are increasingly unwilling to train new talent. Instead, they hold out for employees who can walk in the door prepared to go to work.

"Employers seem to be playing the spot market for labor as opposed to really having a more supply chain management type of approach," Fuller said. "Many companies have fallen into a lazy way of thinking about this, [looking for] somebody who is just job-ready to just show up."

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"When you talk to employers about this, it's a very weird conversation," Fuller added. "They'll say, 'Well wait a second, what you're saying doesn't make any sense. I could hire people the way I'm doing now or I could spend more to train people and that might not be a success.' Of course what they're missing is that they're current system has lots of hidden costs in it that they don't understand."

As businesses increasingly look for turn-key employees college has become a proxy for a wide variety of difficult to quantify skills. Soft skills in particular don't show up on a digital profile. In a market where companies increasingly rely on computerized systems to cull out early-round applicants, that has led firms to often consider a bachelor's degree indicative of someone who can socialize, run a meeting and generally work well with others.

So retailers require it for sales positions and offices require it for administrators, whether or not they did 10 years ago. The same often holds true with hard skills, with employers increasingly demanding experience on a given technology instead of offering the relevant training. Even many employers admit that it can create a hiring process that overlooks potentially valuable people.

According to Paul Glomsky, CEO of Detroit Labs, that very frustration led his company to create its apprenticeship program.

"We were growing as a company," he said. "We knew that at some point we were going to have to expand the ways that we find and recruit team members, so when we got to that point of needing to just find creative ways we asked ourselves what we can give on. We certainly can't eliminate the requirement for someone to work well as a team, and you can't take somebody whose character doesn't include persistence. That's something that's hard to change, so you really still have to find that."

"The one thing that we did have some control over was just straight up skills," he added. "So what we did was we removed the requirement to have a computer science degree, and we removed the requirement to have experience in development computer programming. And when we removed those things we found that the pool of potential really good team members drastically expanded."

Programs like the one at Detroit Labs are, Fuller said, are the exception to the rule. For many employers training looks like an additional expense. Although college graduate typically cost 15 to 30% more in salary, he said, to an accountant that hire appears as market rate for labor. A hire without a college degree might require some training to catch up on soft skills, technology or even tools as simple as Microsoft Office, training which will require additional time and money on the budget.

Yet accepting the costs of that training could make the hiring process easier in a more competitive market, and could open up potentially valuable hires. This is especially true when the window of training is compared against the average 4.2 years that a worker stays in one job.

When it comes to middle-skills jobs, Fuller found no difference in performance among people with and without a college degree. Yet employers still look for people with college degrees, who only make up about one-third of the entire workforce.

"I believe a lot of companies are falling into this by default," he said. They don't understand the pay back to making some of these investments."

"When you start up-credentialing your jobs you're doing the equivalent of rowing your boat over to this tightly crowded part of the pond," he added. "Maybe there are fish elsewhere."

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