One career trend that seems to be here to stay is the
up-credentialing of occupations. By this I mean that occupational entry
requirements keep going up, whether they are set by licensure requirements or
by employers’ expectations. Compared to past job applicants, new candidates
need more schooling, more training, perhaps having passed a new exam. One might
expect that the boost in occupational credentials may give a boost to the
occupation’s prestige, but does it result in increased earnings? I recently
found a small data set to help answer this question.
First, let’s step back and look at the factors that contribute
to the up-credentialing trend. In some occupations, workers may be raising
credential requirements (for example, by forming an association that develops a
certification exam) as a way of erecting barriers to the entry of new workers,
with the goal of restraining competition. This is sometimes called “professionalizing,”
and workers justify it on the grounds that they are safeguarding the public by
ensuring that only highly skilled people are allowed to practice the occupation.
In other occupations, the set of skills required for mastery
or even competency in the work may have ramped up, especially because of scientific
and technological advances, and thus a longer period of study—in other words, a
more advanced degree—is necessary. For example, when I prepared the third
edition of the College Majors Handbook,
I found that pharmacy could no longer be described as a four-year degree, as it
had been in the previous edition. Audiology became a doctoral-level program a
few years ago, and physical therapy is now following suit.
In still other occupations, employers may be trying to
simplify hiring decisions by eliminating low-credentialed applicants. Perhaps
certain academic or training programs have diminished in rigor and thus have lost
their meaning as a signifier of skill mastery. Or perhaps a recession has made
the ratio of resumes to job openings so great that recruiters feel it necessary
to raise credential requirements to cope with the flood of applicants.
What might be the effect of up-credentialing on pay?
It seems reasonable to suppose that if up-credentialing
happens because of increased skill requirements, workers should enjoy a
commensurate increase in pay. This is not just a matter of fairness; in a field
where the professionals are highly skilled, they often can enlist the help of
less-skilled paraprofessionals and thus boost their productivity. For example,
think of how physical therapists use assistants and aides to do much of the
work of preparing patients and equipment so that a therapist can serve many
more patients. Highly-skilled workers may also be more adept at using
technology or outsourcing to be more productive and thus earn more.
It also seems likely that workers should reap higher
salaries when they “professionalize” an occupation by creating credentialing
barriers to competition from new entrants. I’ve blogged about one study that found that licensure provides a pay boost
roughly equivalent to that of union membership: about 15 percent. Probably
certification has a similar effect.
When employers require higher credentials simply to cut down
the number of application letters that must be read and interviews that must be
conducted, we should not expect them to increase higher-credentialed workers’
pay.
I decided to investigate the effect of raised employers’
demands by analyzing the results of a study by the labor-market researchers at Burning Glass. These
researchers analyzed job ads from more than 20,000 online sources, including
both job boards and employer sites. Catherine Rampell, a blogger on The New York Times Economix page, asked
Burning Glass to compile a list of the occupations that have shown the most
up-credentialing in the past five years—specifically, those that have seen the
greatest percentage increase in percentage of advertisements specifying the
bachelor’s degree compared to those not specifying this degree.
The list of 40 most-up-credentialed occupations ranges from Dental
Laboratory Technicians, which experienced a 175% increase in the percentage of ads
requiring the bachelor’s (from 12% to 33%), down to Sound Engineering
Technicians, which experienced an 8% increase (from 60% to 65%). From this
list, I was able to identify 33 occupations for which the Department of Labor publishes
earnings figures. The figures for up-credentialing apply to the period from
2007 to November 2011, and for comparison I looked at the earnings figures from
May 2007 and May 2011.
It turns out that, on average, a 1 percent increase in
bachelor’s-requiring advertisements results in a $483 increase in average
earnings. (This is a weighted average, in which the differences in the number
of jobs advertised have been figured into the calculations to give greater
weight to more-widely-advertised occupations.) Now, if $483 seems a small
figure, consider that a 1 percent increase is also a very small amount of
up-credentialing. Also consider that this earnings difference is averaged out
across everyone in the occupation,
not just the new, up-credentialed recruits.
On closer inspection, however, this apparent earnings effect
proves illusory. I calculated the correlation between the percentage increase
in bachelor’s-requiring advertisements and the percentage increase in earnings
over the same period and got –0.15. This figure is too small to suggest the
existence of a relationship. That negative finding, in turn, suggests that
up-credentialing over the past five years was not caused primarily by the up-skilling
of the occupations.
On the other hand, if recruiters were using up-credentialing
mainly as a quick way of tossing out most of the resumes that crossed their desks,
one would expect a decrease, or at best
a below-average increase, in earnings within up-credentialed occupations. That
is, if up-credentialing is the recruiters’ response to an oversupply of job
applicants, then employers shouldn’t need to increase incentives for applicants
to these occupations.
In fact, the (weighted) average pay increase for the most-up-credentialed
occupations, about $6,000, is almost
exactly the same as the average increase in pay of all associate-degree-level occupations over the same time period, also
about $6,000.
So I conclude that up-credentialing probably occurred for a
mixture of reasons: actual up-skilling of some occupations mixed with
oversupply of applicants for other occupations. However, I should point out
that the data set I’ve been working with is quite small. Burning Glass provided
figures for only the 40 occupations with the largest increases in up-credentialing.
I could calculate more confident correlations if I had access to credentialing
shifts, both upward and downward, for the full range of occupations.
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