The “war for talent” is accelerating in the U.S. job market, as private-sector payrolls recently posted their 77th consecutive month of growth. Notably, today’s economy is demanding professionals with higher levels of education, as evidenced by the very low 2.5% unemployment rate for adults with a bachelor’s degree or above. Yet, during a critical presidential election cycle, it is surprising that the economic role of education beyond the bachelor’s degree is so little examined, especially at a time when higher education’s relevance is being critiqued in so many corners.
Respected economists such as MIT’s David Autor have illustrated that for a number of years, the job market has been favoring more highly educated individuals as technological evolution demands higher levels of skill. A recent analysis from Georgetown University highlighted that since the beginning of the economic recovery, holders of graduate degrees have gained nearly as many jobs as bachelor’s degree holders—despite the fact that undergraduate students outnumber graduate students by 2-to-1. Looking forward, the U.S. Bureau of Labor Statistics (BLS) projects that occupations that typically require a master’s degree for entry—such as statisticians, nurse practitioners and so on—will grow the fastest over the next 10 years, outpacing growth at other educational levels.
Post-baccalaureate education has thus emerged as one of the fastest growing segments of higher education. Over the past decade, master’s degree enrollment in the U.S. has grown 35%—and the share of adults that hold a master’s degree has gone from less than 7% to nearly 9% of the population. Keeping the supply and demand dynamics of basic economic theory in mind, it is noteworthy that despite this substantial increase in supply—5 million more individuals with a master’s degree in the workforce—the wage premium for master’s degree holders has grown significantly, while it has stayed flat or in some cases declined for those with lower levels of education.
Post-baccalaureate education is becoming substantially more accessible to professionals, a development that has been accelerating over the past decade. Online and hybrid education now accounts for fully 33% of all graduate-level college enrollment in the U.S., according to U.S. Department of Education data. Hundreds of online graduate and post-baccalaureate programs are now offered by some of the country’s most reputable institutions, a marked change in just the last few years, with institutions ranging from the University of North Carolina-Chapel Hill and Harvard University to Columbia University and the University of California-Berkeley launching and aggressively growing a host of new online programs since 2012. Post-baccalaureate education is also being made more accessible by universities’ growing experimentation with competency-based education models that focus on demonstration of what professionals know and can do, irrespective of classroom time. A large number of universities are also innovating in making post-baccalaureate education available in shorter, bite-sized and novel forms, ranging from certificates to new types of “microcredential” programs short of a degree. The higher education field’s interest in these models is a direct response to demand for quality post-baccalaureate learning.
Critics of the higher education system point to unbridled credential inflation and mounting student debt—yet advanced degree earners continue to be paid 20% more, on average, according to the BLS, indicating that employers value and students are rewarded for advanced educational attainment. Student debt is indeed a critical issue for our higher education system to address, but the student loan default rate for graduate degree holders is very low due to the increased earnings power of additional education, as acknowledged in a recent White House Council of Economic Advisors analysis. Moreover, employers are seeking and preferring employees with higher levels of education. A recent national survey of more than 2,000 hiring and HR managers by job search firm CareerBuilder found that last year, 27% of employers reported hiring employees with master’s degrees for positions previously at the bachelor’s level, reportedly due to an evolution of skill demands. Among employers who had raised their educational requirements, 57% attributed higher quality work and 43% increased productivity as a direct result of doing so.
In the post-baccalaureate economy, it is not just master’s degrees that are emerging as useful tools and signals of knowledge and ability: An entirely new sector is responding to this market demand. New business models and firms are now emerging that focus on learning, development, and credentialing beyond the bachelor’s degree level. Companies in this space—such as massively open online course (MOOC) providers Udacity and Coursera, and coding “bootcamps” such as General Assembly and Galvanize—are often positioned as competitors, substitutes or disrupters to the bachelor’s degree. MOOCs have enrolled tens of millions of participants, and the coding bootcamp market has reached $200 million in revenue in just a few years and will grow 74% in 2016, according to CourseReport, a resource on coding bootcamps.
Yet, various studies have found that the vast majority of these upstarts’ customers—80% for both MOOCs and coding bootcamps—already hold a bachelor’s degree. Essentially, these firms are addressing a similar market opportunity as professional graduate degrees: meeting the tremendous demand for career-focused, post-baccalaureate learning. This market opportunity is fueling billions of dollars in investment into start-ups focused on professional training and educational technology. Critically, this expanding range of options from “non-institutional providers” typically does not have recognized academic credentials attached. However, this is beginning to change as universities and companies enter into mutually beneficial partnerships; new accreditation and recognition options emerge; and technology introduces the opportunity for market-driven quality assurance.
In this era of lifelong learning, business leaders are key influencers in determining how the market evolves, based on their policies and actions with respect to how educational credentials factor into hiring and promotion, and the extent to which major employers will invest in or recognize various forms of learning and development. Human capital strategy (talent acquisition, development and retention) is increasingly at the top of corporations’ strategic agendas. According to PWC’s 2016 Global CEO survey, more than 70% of CEOs are concerned about the availability of key skills and rate a skilled, educated and adaptable workforce as an absolute top priority for business. Expert Josh Bersin of Deloitte notes that corporate learning is being truly revolutionized by the availability of content and services via the internet as corporate human resources functions ramp up their adoption of technology and increasingly deploying analytics..
It has never been clearer that higher education is a central driver of economic opportunity. Given this reality, it is notable that social and political fault lines are increasingly being drawn along educational lines. In the U.K.’s June “Brexit” referendum, for example, educational level was one of the single largest indications of how individuals voted: 71% of those with university degrees voted for the U.K. to “remain” in the E.U., while 66% of individuals with a high school diploma voted to “leave.” Based on polling, similar demographic dynamics may also factor in the 2016 U.S. presidential election.
A failure by higher education institutions, businesses and government to recognize and support the demand for post-baccalaureate learning risks widening the gap between haves and have-nots and reinforcing divisions in our economy. It is critical that these groups consider the economic data and evidence, and work together to ensure that both foundational levels of formal education and more advanced, job market-relevant lifelong learning are an opportunity accessible to all—a challenge that will require business model innovation, appropriate quality assurance, evolved policies and regulations and, most significantly, a change in culture and mindset among both employers and institutions.
Sean Gallagher is chief strategy officer at Northeastern University, He is author of “The Future of University Credentials: New Developments at the Intersection of Higher Education and Hiring” available in September 2016 from Harvard Education Press.