Re-post from LinkedIn – April 8, 2016

Much of the national debate around the value of a college education seems to revolve around the cost of college, particularly in finding ways of making college more affordable and accessible to more people. This frame of reference assumes that a college education is the only means of post-secondary training and education that has value; this is simply not true. According to an analysis of employment during the Great Recession, 4 out of every 5 jobs lost were held by those without any formal education beyond high school; those without post-secondary training were more than three times as likely to lose there jobs than those with even “some college” (Carnevale, Jayasundera, & Cheah, 2012). This, by itself, suggests that even minimal post-secondary training can garner significant benefit; having a job is preferable to not having one. One way to accomplish this is through industry-based certifications (IBCs).

IBCs offer a number of advantages for improving an individual’s employability over simply making college more affordable and accessible. First, in regards to affordability and accessibility, IBCs offer greater return on investment (ROI) than traditional college education. In part because of their far lower time and money commitment, IBCs also provide a more flexible solution either to replace college, or to aid in preparation for later college education. Finally, the dynamic nature and industry relevancy of IBCs provide stronger signals to employers concerning an individual’s ability to actually do the job they need today, rather than months or years down the road. The strong case for IBCs begins with simple economics.

Direct ROI

Given the focus on ROI of post-secondary education, a comparison of the ROI of certification versus a Bachelor’s degree seems relevant. According to the U.S. Census Bureau (Ewert & Kominski, 2014), with the exception of a Master’s degree, there is an earnings premium for achieving certification or licensure regardless of education level. This premium predominantly benefits those with less post-secondary educational investment (see Figure 1). While it is true the earnings premium for having a Bachelor’s degree is much greater (see Figure 2), this is not a measure of return on investment. Return on investment is a measure of what you get for what you put in; i.e. ROI is the amount you can expect to get back for every dollar spent. This is where the ROI of certification is substantially better.

Assuming a cost of $40,000 for a Bachelor’s degree (probably a low estimate) and a cost of $5,000 to achieve certification (probably a high estimate), the ROI of achieving certification for someone with only a high school education is 2.3 times that of achieving a Bachelor’s degree (see Figure 3). Furthermore, this is just a starting point as it doesn’t account for differences in earning while those achieving a Bachelor’s degree remain in school or the cost of interest on student loans for college tuition. The fact is, certification provides individuals an extremely efficient mechanism to improve their earnings potential, and achieve the post-secondary credentials that improve their ability to get and keep a job, even during tough economic times. The fact that IBCs add value to both those without other post-secondary education as well as those with, also demonstrates the greater flexibility of certifications.

Flexibility

One of the challenges to simply making a college education more affordable (or free), is that cost is not the sole factor contributing to non-participation or non-completion. An analysis of college completion statistics showed a 7% difference in achieving a Bachelor’s degree between students who complete high school with a 3.0 GPA versus those with a 3.5 GPA (Rose, 2013). Rose also reported that family and work responsibilities significantly affect the chances of completing a degree program. In other words, while the cost of a college education might inhibit individuals from starting a degree program, individual preparedness and the time commitment necessary to complete a degree are significant contributors to whether individuals ever actually graduate and garner the benefits. This is likely to be particularly true for low-income or disadvantaged students. IBCs provide more flexibility to address these challenges.

Firstly, IBCs have significantly lower time commitments associated with their completion, making it that much easier for students who must also maintain family and work obligations to complete the requirements for certification. Many IBCs do not even require formalized classes or specific training, allowing individuals to self-study as they are capable or as life permits. Finally, most IBCs award credentials, not based on having completed a regimented program of study, but upon the passing of competency-based exams. This means that students can take as much time, and as many attempts, as necessary without suffering negative consequences; it is not a one-time deal, thus providing greater chances of ultimate success. This applies to both those without any other post-secondary training as well as those with degrees who are simply looking for additional earnings potential.

Secondly, IBCs may provide students not ready for a formal degree program with the knowledge and skill to prepare them for a future degree. IBCs can provide students with exposure to a field of study without the time and financial commitment associated with a formal degree program, reducing the costs associated with choosing a career they ultimate find unsatisfactory or unfulfilling. In addition, this additional knowledge and skill may give students the confidence and ability necessary to complete degrees they would otherwise have been unprepared for.

Not everyone has the time, or capability to commit to formal degree programs. This has a much larger effect on educational outcomes than the cost; simply reducing the cost or providing universal access does not address either of these challenges. IBCs fill a gap between the demands of formalized postsecondary training, and the real world needs of students just trying to stay a head in a highly competitive marketplace while simultaneously making ends meet (Claman, 2012). In addition, IBCs are increasingly more valuable to employers.

Stronger Employability Signals

“The value of paper degrees lies in a common agreement to accept them as a proxy for competence and status, and that agreement is less rock solid than the higher education establishment would like to believe” (Staton, 2014, para. 3).

Despite the nearly $800 billion dollars spent each year in the United States for human capital development beyond primary and secondary education, nearly 70% takes place outside of four-year colleges and universities; of that, U.S. employers spent almost $460 billion on formal and informal employ training alone (Carnevale, Jayasundera, & Hanson, 2012). According to the Economist, only 39% of hiring managers feel college graduates are ready to be productive members of the workforce (“Higher education: Is college worth it?,” 2014).  The Economist further points out the skill gap between college degreed applicants and the needs of employers has left 4 million jobs unfilled. It is no wonder employers are beginning to question whether degrees are appropriate proxies for real world competence; and, some are even seeing advance degrees as a negative hiring signal requiring more cost with little benefit (Staton, 2015).

“The world no longer cares about what you know; they world only cares about what you can do with what you know” (Tony Wagner as quoted by Friedman, 2012, para. 11).

The hands-on, competency-based aspects of IBCs not only create value for individuals directly, but indirectly by providing stronger signals to employers about the actual competence of job candidates. The dynamic and flexible nature of IBCs make them a better reflection of current industry standards and competence even in rapidly changing industries (Carnevale, Jayasundera, & Hanson, 2012). Perhaps even more important, the standards and competency-based testing utilized in IBCs improves the ability to objectively compare applicants, something that has proven extremely unreliable for post-secondary metrics like GPA (Carnevale, Jayasundera, & Hanson, 2012; Swift, Moore, Sharek, & Gino, 2013). IBCs provide employers with highly credible evidence of applicant’s ability to actually do something with their knowledge, not just their ability to know something.

IBCs are increasingly embraced by employers as a more reliable and valid indicator of candidate competence and questioning the value of traditional post-secondary indicators (Carnevale & Hanson, 2015). Because IBCs are, by definition, industry-based, applicants holding IBCs are more likely to have relevant, up-to-date skills meeting national, or international standards. IBCs are not only easier to evaluate, but also provide strong indicators that a prospective applicant will not need additional employer-based training before becoming productive. This is likely why even holders of advanced professional degrees are paid premiums for also having IBCs (Figure 1).

Conclusion

The debate about the current state of education in the United States is a worthwhile discussion, perhaps even a critical discussion in light of the challenges facing us. The problem is the single means of post-secondary education (four-year degrees) that dominates the debate and a singular focus on the cost of educating to this level. This debate fails to account for the many other factors affecting student outcomes, and the actual needs of employers. The reality is that advanced economies are not dominated by high-volume, low-value production, but low-volume, high-value production (Friedman, 2012), and the demand for “middle-education” jobs is growing and will continue to grow for many years (Carnevale, Jayasundera, & Hanson, 2012).   Without addressing these realities, we are only perpetuating a divide between those with degrees and those without, while still failing to meet the needs of business. There will always be a need for formal degrees, but that does not make them the panacea for all people and for all jobs.

At the end of the day, credentialing is an attractive option for anyone looking to improve their employment options.  IBCs provide a greater ROI, in a shorter amount of time than formal degrees.  The flexibility and less structured design of IBCs  make them easier to obtain successfully, especially for students either unprepared for, or unable to commit to formal programs.  Furthermore, IBCs provide strong employment signals to potential employers about the individuals ability to contribute on day-one of employment.  In many cases, the ROI, the flexibility, and the strong employment signals attributed to IBCs may very well be a better option than college; in other cases, IBCs may be an essential stepping-stone to that first degree by providing the skills, and the additional income, necessary to commit to obtaining a formal degree.  AND, if you already have a bachelor’s degree, these same benefits await you compared to getting a graduate degree.  Certification may very well be better than college to many.

NOTE: Anyone interested in exploring how competency-based credentialing is a critical component of the future of higher education should investigate WorkCred (http://www.workcred.org/), a non-profit organization working to elevate the visibility of credentialing as an essential ingredient in the future of human capital development in the 21st century. The author is not affiliated with WordCred.

References

Carnevale, A. P., & Hanson, A. R. (2015). Learn & earn: Career pathways for youth in the 21st century. E-Journal of International and Comparative Labour Studies, 4(1). Retrieved from https://cew.georgetown.edu

Carnevale, A. P., Jayasundera, T., & Cheah, B. (2012). The college advantage: Weathering the economic storm. Retrieved from https://cew.georgetown.edu/

Carnevale, A. P., Jayasundera, T., & Hanson, A. R. (2012). Career and Technical Education: Five Ways that Pay. Retrieved from https://cew.georgetown.edu/

Claman, P. (2012). The skills gap that’s slowing down your career. Harvard Business Review. Retrieved from http://hbr.org

Ewert, S., & Kominski, R. (2014). Measuring Alternative Educational Credentials: 2012, (January), 14. Retrieved from https://www.census.gov/

Friedman, T. L. (2012, November 17). If You’ve Got the Skills, She’s Got the Job. The New York Times. New York, NY. Retrieved from http://www.nytimes.com/

Higher education: Is college worth it? (2014, April). The Economist. doi:Article

Rose, S. J. (2013). The Value of a college degree. Retrieved from http://cew.georgetown.edu/

Staton, M. (2014). The degree is doomed. Harvard Business Review. Retrieved from https://hbr.org/

Staton, M. (2015). When a fancy degree scares employers away. Harvard Business Review. Retrieved from http://hbr.org/

Swift, S. A., Moore, D. A., Sharek, Z. S., & Gino, F. (2013). Inflated applicants: Attribution errors in performance evaluation by professionals. PLoS One, 8(7). doi:http://dx.doi.org/10.1371/journal.pone.0069258