In Texas, money is flowing for short-term credentials. The state’s new funding formula, signed by the governor in June, is allocating dollars to community colleges in part based on how many credentials of value they award.
It would appear that there is no better time to invest in alternative credentials. Interest rates on student loans are the highest they’ve been in a decade. Employers are loosening degree requirements for jobs, in the midst of advocacy campaigns and a still-tight labor market.
The big idea: If Texas can stick the landing—getting citizens without a college education into short-term programs and subsequently into well-paying jobs—it could be a model of upward mobility for others around the country.
But that feat will require participation from state and national employers. Certain well-paying jobs, especially in the trades and transportation, have never required a degree, and with cranes and new warehouses dotting the landscape in cities like Dallas, Houston, and San Antonio, hiring in many of those fields is booming. The state’s goal, though, is also to open up new paths to roles in fields like tech, financial services and accounting, and construction management that have traditionally required degrees.
And right now, data and interviews paint a picture of a private sector that is certainly changing, but slowly.
Take Turner Industries. The industrial construction company is based in Louisiana but has large regional offices in Texas, employing more than 20K people across all its sites. It hires for craft positions straight out of high school, says Carla Thompson, workforce development manager in the company’s western region.
But for white collar roles at the company, degrees can still matter.
“If you want to go into project management, construction management, accounting, human resources, degrees become more important,” Thompson says. “It depends on experience. Somebody with 10 years of experience with no degree can find a place with us.”
“But we do look for degreed people,” she says.
What the Data Say
It’s difficult to get a full picture of how hiring practices in Texas are changing—in part because employers are reluctant or too focused elsewhere to talk. Work Shift spent months tracking down businesses willing to share their direct experience with nondegree hiring, or with sticking to degree requirements, and got a lot of no’s along the way.
The state has launched a new data tool that will give residents a better idea of what credentials pay off. It only includes college programs, but many of those are certificates or other short-term options. And the state is refining its definition of credentials of value, based in large part on labor market demand, as part of the new community college funding formula.
Big picture: National data, for its part, paints a mixed picture on nondegree hiring for white collar roles. Research by Harvard University’s Project on Workforce has found a substantial loosening of degree requirements for both middle-skill and high-skill jobs. But removing degree requirements is one thing. Changing hiring is another.
LinkedIn has found that employers using its site to recruit are asking for degrees less and less often. And in a few industries, like consumer services, entertainment, and government, that has been followed by fast growth in hires without degrees.
But in the three industries where the trend of dropping degree requirements is the strongest—financial services, accommodation and food services, and tech—new hires without degrees are only growing slightly faster than new hires with degrees.
- In financial services, for instance, job posts that have no degree requirement are growing 354% faster than those that do. But actual hiring of nondegree applicants is only growing 6% faster than hiring of their degreed peers.
“Where skills-based hiring is growing, but is early, is in the parts of the world of work that historically used degrees as kind of a proxy for candidate quality, like desk jobs, design and technology jobs,” says Wendi Safstrom, president of the SHRM Foundation.
What employers say: A recent national survey of over 1K full-time hiring managers found that about two thirds said their organization still relies on a four-year degree as the primary measure of whether an employee can perform.
“There’s still a good bit of gatekeeping with the four-year degree, as this is what you need to enter the kingdom,” says Bruce Etter, senior director of research and consulting at the University Professional and Continuing Education Association, which conducted the survey along with InsideTrack.
“To advance throughout the ranks, microcredentials or non-degree credentials can help do that,” he says.
Ready to Work?
On the ground: That aligns with what the City of San Antonio has seen since launching its Ready to Work program in 2022. Voters approved the $200M initiative in hopes of helping 40K lower-income residents move into quality jobs in high-priority industries for the city. The funds cover short-term credentials all the way up to bachelor’s degree programs for people who haven’t previously earned one.
Residents have shown a particular interest in pursuing short-term training that would help them break into the booming tech and healthcare industries. But despite employers saying they are desperate for talent, hiring has been slow for many graduates. That’s especially true in tech.
- In the first year, 90 residents completed training in IT and cybersecurity and only 36 have landed quality jobs in the field, according to city data.
As the Ready to Work pipeline grows—about 800 people are currently enrolled in tech programs—officials are eager to improve those odds for graduates. The city’s Workforce Development Office partnered with Social Finance to create a “pay it forward fund” that will provide funding for graduates of short-term training programs to intern at local companies.
The idea is to make it attractive for more employers to take a chance on nondegree talent. The six-week internships will function as “working interviews,” and employers don’t have to pay anything unless they decide to make a hire. And if they do, they still receive a subsidy—hiring employers are expected to reimburse 50% to 75% of the intern’s wages, or about $5K, that is then reinvested in the fund.
“If the city can not only subsidize the wages, but take on some of the administration for employers, then maybe we can take down some of those barriers and expand those pipelines,” says Matt Latimer, a director at Social Finance.
Elsewhere in the state, some of the nation’s most established sectoral training programs, like Year Up and Per Scholas, are doing some of the heavy lifting for companies.
They’re a crucial part of Southwest Airlines’ strategy.
The Fortune 500 company headquartered in Dallas, recruits workers through partnerships with training providers like Per Scholas for its junior technology associate program—which requires a certificate, but not a degree.
“How can we find the pool of people that we want to pipeline for those roles we know we’re going to have high volume hiring in?” says Stephanie Munson, senior manager of pipelines and programs at the airline.
The program is still small, only about a dozen people or fewer, Munson says.
For employers, the demand for labor may not be an insignificant part of the move away from degree requirements. Southwest is looking to grow the JTAP program to other parts of the company, but it will depend on where it is expecting to see growth in its workforce.
“Where are the areas that are going to continue to grow at Southwest, where we can continue to create programs to help them have that pipeline of people who are ready to come in and work when the need is there?” Munson says. “That’s where we’re going to find those programs.”
Cheryl Oldham, vice president of education policy at the U.S. Chamber of Commerce and senior vice president of education and workforce at the Chamber’s foundation, said that while a dissatisfaction with traditional higher education and the desire to bring in more diverse talent are certainly factors in the move towards skills-based hiring, so is a difficult labor market for employers.
“We’ve got job openings. We need people,” she says. “We need people with skills.”
Outside of the JTAP program, Southwest is removing high school diploma requirements from some of its operations roles. Elsewhere in the company, degree requirements depend on the role.
“There are those groups that require the four-year degree,” Munson says. “There are those roles where it is nice to have but not required.”
The ‘Trouble’ with Skills
Part of the challenge of the skills-based hiring movement is that any careful and thoughtful attempt to bring on more people who do not have degrees takes a lot of time and effort.
Part of that process means thinking critically about what skills are really necessary in each position, rewriting those job descriptions, and also figuring out a way to validate those skills in prospective hires. The technological systems that companies use to hire and parse through applicants are often not equipped to understand the skills associated with different credentials or lines of work.
“We all have trouble showcasing and making visible what we know and can do,” says Naomi Boyer, senior vice president of digital transformation at Education Design Lab. “There’s going to have to be guardrails along the way that help prompt the opportunity seeker to say, ‘You did this, have you thought about the skills you might have to do that?’”
In some cases it can involve a great deal of effort to ascertain what skills a person has and to what level. Sectoral training programs may be large and have many graduates, but there are thousands of smaller community college programs. And employers say in surveys that they don’t know how to ascertain the quality of short-term education or how ready an applicant is for work.
UpSkill Houston, an industry-led initiative, is currently working with Accenture on a project related to the hydrogen industry. Part of that process involves looking at what roles in the hydrogen sector don’t require four-year degrees, but also investigating what occupations are common in disadvantaged Houston communities. From there, the plan is to find overlap in skills.
“What are the shorter-term educational programs that would prepare those individuals for careers in hydrogen?” says Peter Beard, senior vice president for regional workforce development at the Greater Houston Partnership.
But not every company is Accenture.
“You’ve got large-scale employers like Google and Walmart and Amazon who have been in this space for quite some time. And those job opportunities are tremendous,” says Safstrom, of the SHRM Foundation. “The majority of job opportunities in America reside with small to medium-sized employers. They don’t necessarily have the infrastructure nor the time to institute this systems-wide change.”
The return on investment for nondegree talent is murky in the eyes of HR professionals, SHRM research has found. That’s one reason the foundation found it worthwhile to engage with members in making that shift easier.
The movement towards skills-based hiring is gathering speed, but it is still just that—a movement, not a completed arc.
“We’re at the beginning. We’re not at the very beginning,” says Oldham, of the U.S. Chamber of Commerce and its foundation. “I do think we’ve made real progress, but we certainly have a ways to go.”