How the Value of Educational Credentials Is and Isn’t Changing
In the last decade, a popular narrative has emerged that the value of a college degree is rapidly declining. As a new wave of well-capitalized educational technology companies arrived on the scene — including massive open online courses (MOOCs) — it became popular in recent years to prognosticate about the “disruption” of American higher education. Yet by many measures, the value of a traditional degree today is as strong as ever in the job market. Innovation in degree delivery is occurring, but it is often being led by traditional, incumbent institutions, often in partnership with technology firms. Rather than sweeping away degrees, new types of online credentials — various certificates, MicroMasters, badges, and the like — are instead playing a complementary role, creating the building blocks for newer, more affordable degree programs. It is still early in the development of this ecosystem, but the receptivity of business leaders to new educational credential offerings and delivery approaches will be key in defining the future shape of the market.
The first year after the Great Recession, 2010, marked the historical peak of college and university enrollment in the United States. In the decade since, a popular narrative has emerged that the value of a college degree is rapidly declining. As a new wave of well-capitalized educational technology companies arrived on the scene — including massive open online courses (MOOCs) — it became popular to prognosticate about the disruption of American higher education. Badges earned online would challenge and replace traditional diplomas. Renowned business theorist Clayton Christensen forecasted that half of all colleges may be in bankruptcy within 15 years. Others said the degree was “doomed.”
A revolution in credentialing appeared underway, with colleges’ core product — the traditional degree — about to be swept aside by digital substitutes and disruptive start-up companies. Even more recently, this narrative has been amplified by reports that certain blue-chip companies such as IBM, Apple, and a number of others no longer “require” degrees for certain positions.
Yet by many measures, the value of a traditional degree today is as strong as ever in the job market. Innovation in degree delivery is occurring, but it is often being led by traditional, incumbent institutions, often in partnership with technology firms.
In a national survey of employers that we at Northeastern University recently conducted, a strong majority of HR leaders said that the value of educational credentials in hiring has either increased (48%) or held steady (29%) over the last five years. And, despite some high-profile employers relaxing their baseline educational requirements in a historically tight job market, more than half of all job openings nationwide over the last year preferred at least a bachelor’s degree, according to the tens of millions of job postings tracked by labor market data firm Burning Glass Technologies. This share has been consistent over the last five years. Additionally, the substantial wage premium that employers pay college degree holders remains at historically all-time high levels, according to recent Federal Reserve Bank of New York research. Businesses are continuing to value degrees and reward more educated workers.
Much of this is due to the increase in skills demands in the modern knowledge economy. In our survey, 64% of employers agreed that the need for continuous lifelong learning will demand higher levels of education and more credentials. This is spurring a boom in post-baccalaureate learning, in particular. For example, even before they turn 30, nearly 1-in-10 American adults now earn an advanced degree — double the proportion in 1995.
In a market that continues to prioritize formal educational credentials, the once free-of-charge MOOC upstarts have found a business model — and today it is squarely focused on online degrees and other fee-based educational credentials. MOOC platforms such as Coursera and EdX have transitioned to focus on the thriving online degree business, a market also long-served by publicly traded education companies such as Pearson, Wiley, and 2U. The MOOC platforms that birthed new credential products such as the “nanodegree” and the “MicroMasters” (both trademarked terms) are now competing in the established, two-decades-old market for online degrees — one of the only growth segments in American higher education.
More than 3 million students study fully online in the United States — and notably, 29% of all students enrolled in any type of graduate-level program are fully online students. Today, according to our national surveys, a majority (61%) of hiring leaders view credentials earned online as equal to or better than those completed in person. This acceptance of online delivery has been steadily driven by employers’ years of growing direct experience hiring from, participating in, and sending employees into online university programs.
First-movers like the for-profit University of Phoenix may have dominated the online credential market 15 years ago. Today, however, the key players include institutions such as Arizona State University, the University of Michigan, Harvard University, and Johns Hopkins, among others — traditional and increasingly prestigious institutions who have boosted the credibility of online education. The shift toward digital delivery in higher education may be happening at a slower pace than in other sectors of the economy, but it is well-established and accelerating.
Rather than sweeping away degrees, new types of online credentials — various certificates, MicroMasters, badges, and the like — are instead playing a complementary role, creating the building blocks for newer, more affordable degree programs. This represents true innovation in terms of the fundamental cost inputs (including faculty labor), pricing, and service expectations associated with the delivery of degrees. By leveraging algorithms and operating at truly disruptive price points, these programs are less expensive for colleges to operate and market, and less expensive for the student.
The MBA market offers an illustrative example. In 2016, the University of Illinois launched its “iMBA” program in partnership with Coursera, building an online degree program on top of a stack of existing MOOC courses and certificates. This program is priced at just one-third of the traditional on-campus M.B.A. program cost — $22,000 for the entire degree. Just three years later, the program has grown to 2,000 students enrolled — an exponential growth rate that represents a leading share of the annual net growth in the national online M.B.A. market. This spring, the university announced it was discontinuing its traditional residential MBA to focus its resources on the online version. It’s a decision that may increasingly be repeated.
In a similar fashion, Georgia Tech has successfully scaled its innovative MOOC-based master’s degree program in computer science, priced at just $7,000 and now enrolling more than 6,000 students. As part of this program, the university has notably pioneered the use of AI-based teaching assistants. Other colleges offering MOOC-based, AI-driven degrees — many launched in just the last year — include the University of Michigan, the University of Texas at Austin, the University of London, and a number of others.
Continued technological innovation in the delivery of educational credentials is increasing access to and creating a diverse range of new options for talent development and corporate training. And, as a greater share of corporate learning is also delivered online, the boundaries between education that happens in institutional settings and on-the-job is likely to continue to blur.
Business leaders should recognize that the professional education market is in a period of experimentation and proliferating program offerings. Quality online credentials can be now earned online from many of the world’s top universities, but what a given program entails can often vary significantly. Through evaluation and experience, the market will over time coalesce around greater clarity and standards. Ultimately, employers will be among the key arbiters of value.
The growing digitization of credentials also heralds a new era of greater transparency for educational outcomes — providing more and better data on which corporate leaders can make hiring decisions. With learning occurring online and increasingly being represented in digital credentials, employers should ultimately be better positioned to assess candidates’ and workers’ skills and competencies. This can help optimize college recruiting strategies; the setting of hiring qualifications; and investment decisions about learning and development and executive education.
Finally, the new credentialing landscape and its potential deeper integration with talent strategy is also catalyzing the development of new corporate tools, services, and businesses. The educational technology sector continues to experience multi-billion dollar inflows — and the corporate HR technology market is itself catalyzed by approximately $3 billion in annual investment. It is still early in the development of this ecosystem, but the receptivity of business leaders to new educational credential offerings and delivery approaches will be key in defining the future shape of the market.
Sean Gallagher is executive director of Northeastern University’s Center for the Future of Higher Education & Talent Strategy. He is the author of The Future of University Credentials: New Developments at the Intersection of Higher Education and Hiring, published by Harvard Education Press. Follow him on Twitter @HiEdStrat.
How the Value of Educational Credentials Is and Isn’t Changing
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