The Rise of New Collar Jobs in the Tech Industry

As a new year begins, it’s uncertain what 2018 will bring to the nation or the labor market. One thing we can expect is greater emphasis on new collar jobs: excellent career opportunities for people without 4-year college degrees. Continuing to foster and create these opportunities is important for many reasons, some of which we’ve discussed before, and we’re encouraged to see the topic getting so much attention.

A large part of that attention can be attributed to IBM CEO Ginni Rometty and the influential open letter she penned on the subject in November 2016. In her letter, Rometty discussed that getting a job at IBM doesn’t always require a 4-year degree. She noted how as many as one-third of IBM employees have less than a bachelor’s degree and stressed the importance of applicable skills and vocational training. Figure 1 shows how the number of Google searches for “new collar” doubled after her letter was published.

Google Searches for New Collar Jobs Over Time

Real progress is being made toward building a sustained and healthy new collar jobs market. But as we and others have argued (like here and here), what’s needed now to drive more growth is a cultural shift in the way we think about work, the way companies approach hiring, and the way workers prepare for jobs. To determine whether or not this shift has begun, we looked to the field with the most promising new collar opportunities: tech.

Tech is a natural space for new collar opportunities for two reasons. First, since the field changes so rapidly, workers must constantly build and adapt new abilities (rather than relying on formal university training). Second, these jobs often require niche skills (like programming in a particular language, or data analysis methods) that can be learned by anyone. We looked at thousands of tech postings and applications to investigate how prevalent new collar job posts and candidates are in the wake of the Rometty letter.

Shifting Job Requirements

Several indicators signal a rise in new collar tech jobs. The first one we looked at was changing educational requirements for tech job listings. Tech jobs being posted without specific degree requirements is a clear signal that employers are open to new collar candidates. Looking at 300 random listings per month, we found that after November 2016 (and the release of the Rometty letter), the number of jobs requiring higher education stopped increasing and in fact began to decrease. Figure 2 shows that in the 6 months following the Rometty letter, the percent of tech jobs with educational requirements fell slightly from 46% to 43%, though it started rising again toward the end of 2017.  

Figure 2. Education requirements less likely after Rometty letter

This is good news for new collar workers. Applicants to these positions are more likely to be evaluated against the specific skills and experience needed for the job, rather than whether or not they have a degree. As IBM’s Vice President of Human Resources puts it, new collar jobs are those “where skills matter more than degrees.”

SMBs Leading New Collar Growth

We know that more employers are posting jobs without higher education requirements, but which employers? To answer this question we looked at the required skills of tech jobs from four months before and after November 2016. We interpreted jobs that listed specific skills that can be self-taught, such as proficiency with a specific programming language like SQL, Python, Java, and HTML, as new collar jobs, and jobs that listed degree requirements like computer science as white collar.

Despite the fact that the CEO of IBM sparked the focus on new collar jobs, our findings indicate that large companies in the tech industry are not offering the majority of new collar jobs. In fact, small companies are much more likely to create job posts aimed at attracting new collar workers. Figure 3 shows that SMBs more often list concrete programming languages as key skills requirements, while large companies continue to list computer science skills. Large companies made some progress toward incentivizing new collar workers to apply from the end of 2016 to the start of 2017 (meanwhile mid-sized companies regressed slightly), but the biggest shift is clearly demonstrated by small companies.     

Figure 3. SMBs and non-tech-intensive cities leading the shift toward new collar jobs

You may be wondering where Silicon Valley and other tech hubs rank in all this. To find out, we looked at what fraction of each city’s job posts were in the tech industry, and used that information to separate our sample cities into low, medium, and high tech-intensive cities. (See the technical notes at the end for more detailed information.) We found that cities where tech jobs are a small share of all jobs are the most likely to post new collar-friendly positions. These cities have also shown the most growth in new collar job postings. The cities where tech jobs are a large share of all jobs (like Seattle and Austin) have actually shifted more toward emphasizing traditional education.

The Reaction from Job Seekers

We’ve seen that tech employers are becoming more open to new collar applicants, but are new collar candidates applying to their jobs? To determine the reaction from job seekers to the increase of new collar job posts, we compared the rates at which job seekers with bachelor’s degrees applied to tech jobs versus job seekers without bachelor’s degrees.

Figure 4 shows the wide divide in behavior between job seekers with bachelor’s degrees and those without. Job seekers with bachelor’s degrees are over three times more likely to apply to tech jobs than job seekers without bachelor’s degrees. Despite the increase in tech postings aimed at attracting new collar workers, the rate at which these people apply to jobs has remained flat. In fact, job seekers with 4-year degrees applied to even more tech jobs after November 2016, widening the application divide between degree-holding and non-degree-holding job seekers.

Conclusion

Significant progress is being made toward establishing a healthy job market for new collar jobs and job seekers. We found that tech employers are increasingly open to applicants without 4-year degrees, and that small companies outside of popular tech meccas are leading that shift. Though the shift of non-degree-holding job seekers applying to more new collar jobs has yet to occur.

New collar jobs are important today, and they’ll likely become even more important as technological progress continues to accelerate, college costs continue to rise, and fewer and fewer traditional employment opportunities are available. Large companies and industry leaders should follow IBM’s lead, recognize these trends, and make the shift to hiring more new collar workers. Tech jobs require a unique skill set, and a traditional bachelor’s degree is only one way of many to obtain those skills. To hire the most qualified applicants, hiring managers need to lessen the focus on what degrees applicants have, and instead strive to hire the right applicants with the right skills.

Technical Notes

The average tech share of jobs across cities is 4.8%, and the median is 3.8%. We classify cities as low tech-intensity if their tech share is below 3.5% (examples: Memphis, Louisville), medium if it’s between 3.5-10% (most large cities fall into this category), and high if it’s above 10% (examples: Seattle, Austin).

The analyses showing that small companies and low tech-intensive cities are leading the growth in new collar postings are unchanged if we use job title fixed effects (or dummy variables) to look only at posting characteristics within a particular job title, accounting for the possibility that different companies and cities are hiring for different types of positions. This isn’t driving our results.

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Mitch is an Assistant Professor of economics at the Institute for International Economic Studies in Stockholm and a regular contributor to the ZipRecruiter blog.

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