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Higher Education

How State Governments Can Fight Degree Inflation

States can change their hiring practices and dismantle unnecessary degree requirements in occupational licensing rules
January 23, 2025
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Key Points

  • State governments contribute to degree inflation—the addition of college degree requirements to jobs that did not previously have them—through their own hiring practices, and through occupational licensing laws.
  • While 39 percent of private-sector workers hold a bachelor’s degree or higher, the same is true for 63 percent of state and local government workers. Even within the same occupations, state and local governments are likelier to require a college degree.
  • Several states’ occupational licensing rules require bachelor’s or master’s degrees for jobs where a lower level of education is needed in other states. States require bachelor’s or master’s degrees for many jobs that do not pay enough to justify these credentials.

Executive Summary

State governments have significantly exacerbated the phenomenon of degree inflation, where jobs increasingly require college degrees that were not previously necessary. State hiring practices and stringent occupational licensing laws perpetuate this trend. These policies restrict access to various professions, create labor shortages, and reduce the return to a college education for many students.

A stark contrast exists between the educational requirements of the private sector and those of state and local governments. While only 39 percent of private-sector workers possess a bachelor’s degree or higher, 63 percent of state and local government employees have a degree. Even within the same occupations, state and local governments are more inclined to mandate college degrees than their private-sector counterparts. Fortunately, around half of the states have declared their intention to change this, though it is too early to tell whether their efforts will pay off.

Furthermore, several states impose occupational licensing rules that necessitate bachelor’s or master’s degrees for positions that require significantly lower educational qualifications in other states. Home interior designers, for instance, need a bachelor’s degree to do their job in eight states, but no degree at all in 24 other states. Through licensing laws, states also impose degree requirements on occupations that typically do not pay enough to justify the time and expense of a degree, such as clinical social work.

Fortunately, state governments have a unique capability to fight degree inflation by changing their hiring practices and dismantling unnecessary degree requirements in occupational licensing rules. Innovation-minded states such as Colorado and Utah have taken important steps toward turning rhetoric against degree inflation into reality.

Introduction

Degree inflation—the phenomenon whereby employers demand higher degrees for jobs that did not previously require those levels of education—has garnered more attention in recent years, as governments and private employers alike tackle the scourge of unnecessary bachelor’s degree requirements.

In 2023, FREOPP published How Unnecessary College Degree Requirements Hurt The Working Class, a report that examined the degree inflation phenomenon in detail. The report found that the share of workers with a bachelor’s degree or higher has risen in most occupations over the past several decades. For instance, 73 percent of registered nurses today have a bachelor’s degree, whereas the figure was just 46 percent in 1990.

Since that report’s publication, numerous state governments have undertaken reforms to reduce the share of jobs in the state executive branch that require a bachelor’s degree. Several large corporations, including Walmart and Google, have also announced efforts to rely less on the bachelor’s degree in hiring.

Degree inflation, however, remains stubbornly persistent. According to my analysis of data from the 2023 American Community Survey, 52 percent of workers earning between $60,000 and $80,000 per year hold at least a bachelor’s degree, up from 49 percent in 2019 and just 38 percent in 2000.

The focus of this report, the third and final in a series on state higher education reform, is the ways in which state governments contribute to degree inflation. First, state and local governments impose degree requirements for public-sector workers, which some states are now attempting to reverse. Second, state governments enact occupational licensing laws and regulations that stipulate minimum degree requirements for certain occupations, which also affects workers in the private sector.

Why worry about degree inflation?

Increasing education requirements for various jobs may not immediately seem to be a bad thing. After all, don’t we want our workers to be well-educated? But degree inflation comes with serious costs that we must weigh against the benefits of education. The 2023 FREOPP report identifies three main negative consequences of degree inflation.

First, degree inflation closes job opportunities to the six in ten Americans who lack bachelor’s degrees. Research has found that workers without bachelor’s degrees face employment penalties throughout their careers, from landing that first entry-level job to getting promoted later on.

Second, degree inflation exacerbates labor shortages by making job openings harder to fill. This has downstream effects on the supply of goods and services. Minimum education requirements for child care workers, for instance, reduce the availability of child care.

Finally, degree inflation can reduce the return to college, as degree-inflated occupations typically pay college graduates less than jobs that historically required college degrees. “Underemployed” college graduates—those who work in jobs that typically have not required degrees—earn one-third less money than graduates in college-level jobs.

The 2023 FREOPP report also found that degree inflation affects most occupational categories. However, it is at its most acute among white-collar and middle-skill occupations such as managers, computer software developers, and secretaries. But questionable degree requirements are not evenly distributed across different types of employers. Rather, degree inflation appears to have had the greatest impact on state and local government jobs.

Degree requirements in government jobs

In early 2022, Maryland Governor Larry Hogan made a striking announcement: he would eliminate the four-year degree requirement for thousands of jobs in the state government. As I wrote in response to the announcement:

Hogan noted that out of 38,000 jobs in the Maryland state government, more than half “can substitute relevant experience, training, and/or community college education for a four-year degree.” He aims to recruit candidates who are “active in the labor force, have a high school diploma or equivalent, and have developed their skills through alternative routes such as community college, apprenticeships, military service, boot camps, and most commonly, on-the-job.”

At the time, Hogan was going out on a limb. But now, half of the 50 states have announced similar changes to hiring practices, according to an ongoing tally from the Cicero Institute. The states that have embraced such “skills-based hiring” are about evenly split between Republican and Democratic governance.

An early analysis of the reforms by Justin Heck, Blair Corcoran de Castillo, Peter Blair, and Papia Debroy found that these announcements increased awareness of skills-based hiring, as measured by media attention to the concept, which may have helped promote the idea in the private sector as well.

The authors also found the states that adopted skills-based hiring reduced the share of state government jobs requiring bachelor’s degrees by 2.5 to 3.1 percentage points for every year the policy was in effect. Occupations such as software developers, business operations and management specialists, and general and operations managers benefited the most.

While this is great progress, it is small relative to what proponents of skills-based hiring might have hoped for. Most governors who embraced skills-based hiring declared that they would nix bachelor’s degree requirements for over 90 percent of government jobs. Additionally, it is also too early to tell whether those reduced bachelor’s degree requirements have translated into increased hiring of workers without college degrees.

College degree requirements are highest in state and local government

Skills-based hiring is perhaps most needed for state and local government jobs. In the private sector, 61 percent of workers lack a four-year college degree, while 39 percent have a bachelor’s degree or higher. But in state and local government, those percentages are almost reversed. Sixty-three percent of state and local government workers have at least a bachelor’s degree. One-third have a graduate degree.

Moreover, the proportion of state workers with degrees has risen over time. In 1990, 47 percent of state and local government workers had a bachelor’s degree or higher; the share is 63 percent today. (These figures, and the rest in this section, are based on my analysis of the American Community Survey through the University of Minnesota’s IPUMS database.)

One might object that state and local government employees do different kinds of work than people in the private sector—perhaps more skilled work, on average. But skilled workers can usually command higher salaries, and the pattern holds even when we look at workers earning similar salaries.

Among workers in the middle of the income distribution—those earning between $45,000 and $65,000—31 percent in the private sector have a bachelor’s degree or higher. In state and local government, the proportion is 68 percent. The difference is even more stark at the graduate level: seven percent of private-sector workers in this salary range have a graduate degree, compared to 32 percent of state and local government workers.

In theory, a college degree is supposed to lead to an increase in earnings because it confers more valuable skills. If that is true, state governments aren’t holding up their end of the bargain. The public sector demands college degrees, but it does not pay salaries to match.

Granted, even within given salary ranges, the private sector may be hiring different kinds of workers than state and local governments. For instance, most teachers work in the public sector and almost always need a bachelor’s degree. Teachers tend to earn less than their fellow graduates. For some public-sector jobs, the solution may be increasing salaries rather than reducing degree requirements.

But state and local governments are also more likely to require degrees even within the same occupations. Consider first-line supervisors of office and administrative support workers. Both the public and private sectors have offices that need supervision and hire for this job. Though some differences exist, the basic skill set for this job is still the same between the public and private sectors. Yet office supervisors in the state and local government are 14 percentage points more likely to have a bachelor’s degree or higher.

The same pattern holds in almost all other occupations, as the following chart demonstrates. With a few exceptions, workers in state and local government are more likely to hold degrees than the private-sector counterparts working in the same jobs.

To confirm this finding, I run a logistic regression of a worker’s likelihood of holding a bachelor’s degree or higher on the sector of his or her employer, including a set of binary control variables for occupation. I find that state and local government workers are 39 percent more likely to hold a bachelor’s degree or higher, controlling for occupation. This relationship holds even after adding controls for the worker’s age, gender, race, ethnicity, and state of residence.

Small steps towards reversing public-sector degree inflation

These facts indicate degree inflation in state and local governments is deeply entrenched and that governments must do more than simply declare a switch to skills-based hiring. Fortunately, some states have taken further steps. Colorado, in particular, is a leader in this regard. Colorado’s approach included coaching state human resources professionals and more clearly defining the skills needed for various jobs. According to Jennifer Cercere, one of the specialists tasked with implementing skills-based hiring there, as quoted by Heck and his co-authors:

“Some hiring managers love degrees because it’s a simple check-the-box requirement. When we asked managers to think in terms of skills, they gravitated towards stating titles, creating another barrier for candidates. What we truly needed to do is clearly delineate skills. This was the drive behind our training.”

Colorado has also created a public-sector apprenticeship program to train workers without college degrees for jobs in the state executive branch. The program operates through the federal registered apprenticeship system, which provides federal funding for worker training. Colorado’s program is the inspiration for the Council of State Governments’ Public Sector Apprenticeship Toolkit, which “[serves] as a comprehensive guide for state and local government leaders and human resources professionals to effectively develop, launch and sustain registered apprenticeship programs to fill talent shortages.” The model may enable more states to follow in Colorado’s footsteps.

While state and local governments clearly drive degree inflation through their own hiring practices, they also force degree inflation on the private sector through occupational licensing laws.

Degree requirements in occupational licensure

Occupational licensing—the requirement that a worker hold a government-issued license in order to do their job—is common and getting more so. While only five percent of American workers held an occupational license in the 1950s, the share has risen to around 25 percent today. Licensing is even more common among workers with a bachelor’s degree, of whom 34 percent hold a license.

Many defend licensing on the grounds that it is necessary to ensure consumer safety and the quality of the services that licensed workers provide; that is undoubtedly true in some cases. But licensing also creates a barrier to entry into the labor force, as not every worker who wishes to practice an occupation can satisfy the often-onerous requirements of the license. This reduces opportunity. Researchers have linked occupational licensing to reductions in the availability of services, reductions in occupational mobility, and even higher student debt.

The requirements for occupational licenses vary. They include clock-hour requirements for training or on-the-job experience, written and practical examinations, initial and renewal fees, apprenticeships, minimum ages, and even “good moral character” requirements. But one common and underappreciated requirement for some licenses is a college degree. Often added on top of other licensing requirements, college degree requirements create a barrier to working in that occupation—especially for workers with relevant experience who satisfy the other demands of the license.

It is hard to identify whether a particular occupational license—and its associated educational requirements—is truly necessary or an unreasonable burden on workers seeking opportunity. That would require an in-depth qualitative analysis of each occupation, which is beyond the scope of this report.

But there are some indicators that signal a degree requirement in an occupational license deserves further scrutiny. Two indicators raise red flags of potential excess: licensed occupations that require higher education in some states but not in others ; and licensed occupations that pay salaries well below the average for that educational attainment.

Inconsistent degree requirements across states

The State Occupational Licensing Index, a project of Noah Trudeau and Edward Timmons at the Archbridge Institute, is an extensive database of licensing requirements for over 300 occupations across the 50 states and the District of Columbia. The Index includes information on whether each license has a minimum education requirement. I use this data to create a measure of how much minimum education requirements for a given occupation vary across states. In other words, which occupations require a college degree in some states but not others?

Home interior designers are a good example. Workers in this occupation need a bachelor’s degree in eight states and an associate degree in an additional 19 states. However, there is no minimum education requirement at all for home interior designers in the remaining 24 states. This ought to call into question the education requirements for home interior designers in the states that have them. If North Carolina can get by without requiring home interior designers to go to college, why can’t Virginia?

Other notable occupations with high variation in education requirements include:

  • Dietitian: Requires a bachelor’s degree in 30 states, but has no minimum education requirement in 21 states.
  • Public school principal: Requires a bachelor’s degree in 10 states, a master’s degree in 26 states, and a doctoral degree in one state (Delaware). The remaining 14 states do not license principals separately but may have separate requirements for public school administrators.
  • Speech-language pathologist assistant: Requires a bachelor’s degree in 11 states, an associate degree in 17 states, some college experience in four states, and a high school diploma or equivalent in six states. There is no minimum education requirement in 13 states.

States with abnormally high education requirements for certain professions ought to at least reconsider their standards. Should an experienced public school administrator really need a master’s degree to become a principal? These states ought to look at how other states with lower education requirements for given professions are ensuring quality and consider adopting licensure requirements that lower barriers to entry.

Occupations that pay low salaries relative to education level

In general, occupations where workers typically have higher levels of education also pay higher salaries. But there are important exceptions: jobs that pay well-below the average for the education level they require.

Molly Scott of the Urban Institute has found that 9.2 million workers are employed in jobs that “do not reliably pay an earnings premium for additional education.” For instance, nearly half of occupations that require a master’s degree at entry do not pay higher salaries than the norm for jobs requiring only a bachelor’s degree.

The following figure shows variation in wages for jobs that require the same entry-level of education, according to the Bureau of Labor Statistics’ (BLS) Occupational Employment and Wage Statistics dataset. Most of these occupations are not licensed; some jobs have a certain base level of education as the norm, even if that occupation is not licensed. But for many occupations, licensing plays a major role in setting the minimum level of education.

Some occupations pay well above the norm for their education level. Air traffic controllers require only an associate degree at entry,though many hold bachelor’s degrees. Yet this job pays a median salary of $137,380 per year, according to BLS. For comparison, the median associate degree-level job pays just $61,820.

But other jobs pay well-below the norm for their education level. Notable examples include:

  • Athletic trainer: Requires a bachelor’s degree and pays a median salary of $57,930 per year, while the median salary for all bachelor’s-level occupations is $86,070. The bachelor’s degree is a license requirement for this occupation in all states.
  • Clinical social worker: Requires a master’s degree and pays a median salary of $58,380 per year, while the median salary for all master’s -level occupations is $78,220. The master’s degree is a license requirement for this occupation in all states.
  • Preschool teacher: Typically requires at least an associate degree, though in 31 states, the license for this occupation requires at least a bachelor’s degree. The occupation pays a median salary of $37,130 per year, while the median salary for all associate-level occupations is $61,820 and the median salary for all bachelor’s-level occupations is $86,070.

States should consider whether there are ways to certify a worker’s ability to perform these jobs without excessive degree requirements. For instance, clinical social workers already need clinical experience before they can earn their licenses in addition to the master’s degree. States might consider allowing students pursuing this career to complete these clinical hours and earn their licenses with only a bachelor’s degree in social work. This would reduce the burden of completing additional education and taking on additional student debt, which can be excessive for master’s of social work programs.

Another clever reform pathway is to allow workers with lower levels of education to take on certain duties that licensure currently reserves for workers in the same field with higher levels of education. Utah, for instance, has begun allowing paralegals—who need only an associate or bachelor’s degree—to “practice without a lawyer’s supervision in areas such as divorce, custody, and debt collection,” according to Jarrett Dieterle of the R Street Institute. While paralegals need an additional certification to practice, this is far less expensive and time-consuming than earning a law degree.

Above all, state governments must avoid the mistake of assuming that higher education requirements in licensure are always a good thing. While education requirements may give the air of professionalism, they bring serious negative consequences such as worker shortages, excessive education costs, and denied opportunities to less-credentialed workers. Fortunately, states have the opportunity to turn things around.

Conclusion

States contribute to degree inflation by demanding college degrees for public sector jobs and by imposing these degree requirements on other employees through occupational licensure. This destroys opportunities for workers without college degrees, not to mention fueling labor shortages.

Fortunately, state governments’ outsized contribution to degree inflation means they also hold outsized power to correct the problem. States can dismantle credentialism in state government jobs, remove degree requirements from occupational licenses when they are higher than those in other states, and reduce degree requirements for jobs that pay well-below the norm for that education level. Reform-minded state governments will find they have more power to fight degree inflation than they knew.

ABOUT THE AUTHOR
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Former Resident Fellow, Education (Post-secondary)