Why Skills are More Important than Credentials in Earning a Living

Charles Hugh Smith has written and spoken on many occasions that a college degree functions primarily as a signalling device. That is, it doesn’t actually prepare the graduate for a job, but rather signals that he or she is worthy of consideration for employment. A college degree serves mainly as a credential. But in today’s economy, skills are more important than credentials in earning a living.

Why Skills are More Important than Credentials
Why Skills are More Important than Credentials

In recent decades, a college degree has become perhaps the most significant of all credentials. And as the job market has tightened significantly, and often subtly, the race is on to acquire more education. The best evidence of this trend is the tendency of students to virtually bankrupt themselves to get a degree. Lost in educational arms race is the reality that skills are more important than credentials as a means of making a living in a 21st-century economy. And we’re now in a very different economic environment than we’ve been at any time since World War II.

If Americans don’t get it, it seems workers in the United Kingdom do. A recent Yahoo!Finance article, Brits would rather learn new skills than get a pay rise this year, reported that nearly three times as many British workers consider learning new skills to be their top career priority than getting a promotion.

The article reports the main driver is dissatisfaction with their current employers and a desire for change. Many would like to change industries, and almost as many would like to start their own businesses. Apparently, British workers are keenly aware of the necessity of acquiring more skills as a bridge into either endeavor.

Unfortunately, that connection seems lost on Americans.

The Credentials Trap

35% of Americans 25 and older hold college degrees, with more than a third of that total having advanced degrees. That’s up from 28% 10 years earlier, and just 4.6% in 1940.

But if you look around the job market, it’s not at all clear that one-third of the jobs even require a college degree. But the flood of graduates has led to a college degree being required even for jobs where it clearly isn’t necessary.

The predictable outcome is that many young people are attending college with no real clue or passion about what it is they’ll do after graduation. Many more, mired in low-paying, stagnant positions, return to college to get still another degree in hopes of moving up to a better position.

But is it working? The results are mixed. Certainly if you want to enter a technical field, like accounting, engineering, or nursing, having a college degree is the preferred way in. But many humanities degrees have become virtually worthless, while degrees in programs like business, marketing, and finance have mixed value at best.

The flood of college graduates is serving to limit pay levels in many fields. Many of the graduates are working in relatively low paying positions, often ones that have nothing to do with their degrees.

Credentials, including a college degree, only have leverage if they’re relatively rare. In the aftermath of World War II, when the vast majority of the workforce didn’t have college degrees, having one practically guaranteed entry into the upper middle class. But with tens of millions of people now holding degrees, the economic value of having one is diminishing.

The Cost of Credentials

None of this would be a serious problem if it weren’t for the cost escalation in getting a college degree. 30 or 40 years ago, the cost of higher education was much lower, particularly when measured against the income a student could expect upon graduation. Today, the cost of an education at a typical state or private college is several times higher than the expected first year income.

This is what happens when everyone wants to go to college. Like any other commodity that’s in high demand, the price goes up. But the higher education addiction has also been greased by a media bias unquestionably favoring a college education for all, as well as government programs providing the financing to make it all happening.

That last point is particularly important. The cost of higher education is increasingly being financed through debt. There are now 44.7 million people with student loan debt, totaling $1.53 trillion. The delinquency/default rate is 11.4%, signaling significant financial stress.

To put it in stark terms, graduating from college and earning $30,000 per year – while carrying $50,000, $75,000 or $100,000 or more in student loan debt – means the graduate is technically bankrupt coming out of the starting gate! And with the combination of low income and high debt, that status may persist for years.

What’s lost in this financial melt up is that getting a college degree is no longer a risk-free proposition. You’ll invest a fortune in the degree, with no guarantee of a high paying career at the end.

The Experience Trap

Next having a college education, the single most highly esteemed credential is experience. But in today’s fast-paced economy, even experience isn’t the advantage it once was.

Just ask anyone who has lost a job after 20 or 30 years with the same employer. While it would seem that kind of stability and tenure will be a positive, it’s often quite the opposite. A new employer is very likely to view you as being entrenched in your previous job. How else can it be explained that you spent so much time in the same place?

It leads to assumptions that you may have been too comfortable in the position or even unmotivated. On a more practical level, it makes clear that you have a skill set dedicated to the previous employer. That experience – long that it is – may not be of any real benefit to a new employer.

The other issue is compensation. People who have been in the same position for decades are usually at the top of their pay grade. That’s often a major reason why they stay on the job so long in the first place. It’s not unusual for a “lifer” to suddenly become unemployed, only to find no employers willing to pay a comparable level of compensation.

Age Discrimination – An Unexpected Outcome of Heavy Experience

Heavy experience also points to the age issue. 25 years with the same employer is a dead giveaway that you’re at least pushing 50. Employers tend to favor younger workers with more cutting-edge skills. This is particularly true with technology, which is now part of nearly every job.

Middle-aged workers who have spent a very long time with the same employer are often the most traumatized by sudden unemployment. Not only is there an expectation of being with the same employer for life, but there’s also often an assumption that the many years with the same employer will enable getting a replacement job quickly. It doesn’t usually play out that way.

Whether it’s fair or not, extensive experience is no longer the advantage it once was.

Why Skill are More Important than Credentials

The advocates of college-at-any-cost are fond of pointing out the long-term financial advantages of a college degree, as well as the value of attending more prestigious schools. There’s truth to both claims. But unfortunately, those advantages don’t extend everyone.

When tens of millions of people have college degrees, who gets the job is often determined by which candidate has the most specific hands-on skills.

For example, two candidates apply for a job in marketing. Both have marketing experience, but one has a degree in marketing. The other doesn’t, but is bilingual, speaking both Spanish and English fluently.

If the employer markets to both English-speaking and Spanish-speaking clients, it’s likely the non-degreed bilingual candidate will be hired.

That’s just one example. Others include experience with specific types of computer software, or SEO or social media skills.

If you look at the jobs advertised on the job boards, there’s a consistent pattern of nearly all providing a laundry list of very specific skills. Many do require a college degree, but the job is more likely to go to the person who has the most required skills, even if she has no degree.

This is likely to become more common going forward. Back in the days when there were widespread employer training programs, college graduates were seen as a natural choice, since they were programmed to learn. But employer training programs are rare nowadays. Most employers expect you to have all the skills necessary when you walk in the door, so you can “hit the ground running”.

What Wider Skills can Add to Your Life

It’s easy to get stuck in a rut, where you get so comfortable with your job and skill set that you stagnate. But when that happens, it increases the likelihood of paltry pay raises, being passed over for promotions, and being unable to transition into outside positions. It’s even possible you’ll find yourself increasingly “out of the loop” within your company or department.

But by increasing your skills you’ll open the following options to yourself:

  • More generous pay raises.
  • Greater likelihood of promotion.
  • Ability to take a job with another employer at higher pay or position.
  • Ability to change careers completely.
  • Opportunity to start your own business.
  • Develop sufficient skills to start a side business for extra income.

Yet another advantage is something of an intangible. The more skills you have, the more value you’ll have to either your current employer or a future employer (or client, should you become self-employed), as well as greater respect from your coworkers and superiors.

Skills are likely to be the golden ticket going forward. The economy is changing quickly, and it’s easier to acquire skills than another college degree.

Acquiring Skills for the College Student or Graduate

The worst mistake any college student can make is assuming a degree will be a magic bullet that will lead to a high-paying career. The degree may get you in the door, but it’s the specific skill sets you’ll bring that will determine your pay and your career path. And sometimes it’ll even determine if you get the job at all.

There’s much you can do to develop additional skills before graduation. And you should, because the one thing you probably won’t bring to the table is work experience. A good set of related skills could make all the difference.

For example, you should do all you can to develop your computer skills. Not just from a social or entertainment standpoint, but for potential business applications. Learn software that may be relevant in your field. Gain some hands-on experience with social media marketing, web design, content creation, and even search engine optimization.

These are just a few examples. Exactly which skills you’ll need to learn while you’re in school will depend on your degree program. Study what secondary skills might help your candidacy before you begin your job search.

There’s another equally important factor with acquiring additional skills. Many college graduates come to the realization that the subject they majored in is not really their passion. Or, upon entering the field, they learn it isn’t what they thought it was.

It can lead to the decision to make a career change shortly after graduation. The wider your skill set, the more options you’ll have in making that transition.

Think of it as an ongoing process. You may hold several careers during your lifetime, depending on economic circumstances and your own personal motivation. You may even want or need to consider self-employment very early in life.

Skills vs. College Late in Life

What I think is one of the biggest mistakes middle-age people make is going to college late in life to train for a career change. Now if you’re in your 30s, this can make sense. But if you’re well past 40, and particularly 50, the benefits become more questionable.

First, as we’ve already discussed, you have to consider the outrageous cost of getting a degree today. That can also lead to taking on substantial student loan debt at a time in life when you’ll need to be preparing for retirement.

Second, you’ll need to consider how you’ll support yourself while you’re attending college. If you go on a part-time basis, getting the degree can take many years. But if you do it full-time, income is likely to be a problem.

Third, and perhaps most important, you have to ask how much value you’ll have as a new entrant into a career field as a 40-something or 50-something rookie. Age discrimination doesn’t get a lot of coverage in the media, but it’s a real issue in the job market. Just ask anyone who’s lost a job after 50.

In any venture we undertake, it’s always important to evaluate the cost versus the benefit. And generally speaking, the cost of getting a college education late in life is very likely to outweigh the benefits.

Acquiring Skills Needs to be a Lifelong Pursuit

There’s a definite human tendency toward seeking comfort. I’d even say it’s more pronounced culturally in America. People naturally gravitate toward what they believe will be safe and secure. Unfortunately, the brave new world of the 21st century doesn’t offer much in the way of safety and security.

One of the best protections we have against unemployment, and the financial fallout it causes, is to make acquiring skills a lifelong pursuit. Personally, I made the decision a long time ago that I need to approach work and even life with the mindset of a student. That means always being ready and willing to learn new skills.

That’s true even though I’m a freelance blog writer and not an active member of the job market in the strict sense. If I don’t keep up and raise my market value, I’ll eventually become economically irrelevant.

Every one of us owes it to ourselves to learn new skills on a continuous basis. It makes sense to learn those skills that will improve your performance, position and income in your current occupation. But it’s also a good idea to think beyond your current occupation. You can pursue learning skills in areas that interest you, and that may be totally unrelated to your current job. The upside is that such skills can prepare you to transition into that preferred career.

And if you acquire enough skills, you may even form the basis of self-employment. After all, self-employment is really nothing more than selling your skills directly to individuals and businesses, rather than to a single employer. The more skills you have, the greater the potential will be.

How to Acquire New Skills

This is where most people draw blank. But fortunately, there are more ways to acquire new skills today than ever before.

Here are some examples:

  • Attend courses, or even enroll in a one- or two-year program at a local community college. You can take specific courses for the skills you want to learn, and it’s lot cheaper than four-year colleges.
  • Get on board with YouTube. It isn’t just a platform where you can listen to music and watch cat videos. It can help you to learn just about any skill you can think of. You may have to key in on several videos on the same skill, but it will at least give you an overview.
  • Take a part-time job where you can learn a specific skill. This may best be done with a small employer, since they often have important jobs that need to be done, but fall short of a full-time job.
  • Find someone who already has the skill you want, and offer to work alongside them. Offer to work for free – that’s an offer that will be hard to refuse.
  • Seek out and sign up for online courses teaching the skills you’re looking to learn. Yes, it’ll cost you some money. But this is precisely what the term investing in yourself is all about.

General Skills Categories to Pursue

From my decades of working in several different career fields, there are three general skills categories I believe need to be emphasized:

  • Sales and marketing. Sales get a bad rap. It’s really about learning how to persuade people. You’re do that when you ask someone on the date or apply for a job. You can learn to turn it into a career skill too. Marketing is increasingly done on the web, and you can learn that on YouTube, by imitating others, and by experimenting on your own.
  • Retail skills. No, I’m not referring to working at Walmart. Rather, I’m talking about developing any skills that you might be able to sell directly to either the public or to small businesses. These need to be seriously emphasized.
  • Technical skills. I’m not talking about becoming a computer expert here, but learning any type of skill the majority people consider to be undesirable. Examples include social media marketing, graphic arts, web design, or any other type of skill the majority of people are intimidated by. It can be much easier to learn these skills than you ever imagined, not the least of which because so few people have them.

One final point on all the skill suggestions. You don’t need to be an expert in any of them. You just need to be better than most people are. I’m certainly not the best writer on the web, but I’m making a comfortable living just by being above average.

If you’re better than the average person at a skill – that’s actually easier to do than you might think – everybody who knows less than you is a potential client. And the better you are at that skill, the bigger your potential market will be.

Final Thoughts on Why Skills are More Important than Credentials

There’s not much we can do about the state of the job market, and even less about the economy. But falling back on credentials, like a college degree or many years of experience, is increasingly becoming a losing proposition. The best way to fight the tide – and to learn to surf on top of it – is by developing new skills that will increase your value in an increasingly complicated and unpredictable economy.

We all owe it to ourselves to do all we can in this all-important survival category.

What are you doing to either improve your existing skills or to develop new ones?

3 Responses to Why Skills are More Important than Credentials in Earning a Living

  1. In general, I agree, but with the following caveats and items not overtly discussed in most career advice:

    1. For many professional jobs, having some sort of degree is a necessary box-checker, because, for example, of:

    Contractual requirements (especially in Federal and state/local governments)
    The employer wants to showcase worker achievement and/or pedigree (Harvard, Yale, Princeton) to potential clients to lend some sort of air of competency to those clients — and, in turn, charge said clients more in terms of fees.
    Many of the current employees have college degrees, and so they don’t want any odd men out.

    Sure, there are now news stories of larger firms that are relaxing the college degree requirement because they don’t see the point of this. But, very few firms are following suit because there’s no societal pressure for them to do so, because admitting that many employees can do the job without the degree might cause them to lose face, and because those larger firms can afford to waive the degree requirement.

    2. Skills are important, but equally (or more) important is “fit.” “Fit” is a nebulous term, like “chemistry,” and has no rigorous methods to back it up. I’m sure there are legions of well-qualified and skilled workers who don’t get the job because of “fit” or because they’re “overqualifed” or “underqualified.” This leads to bewilderment and fustration, but there’s no way of knowing what the problem was because there’s often no feedback.

    Using this article as a reference:


    “Overqualified” usually translates into “I don’t want to take a chance on you.” This could happen to someone who meets the requirements to the T and who will work with the employer. Nope, not gonna get the job because of “reasons.” So, one wonders, just how interested are the employers in hiring you for your skills?

  2. Hi Tim – I completely agree with you about the fit, and even wrote an article on that topic a while back (7 Dark Reasons Why Good Workers Don?t Get Promoted). I also agree that a degree is a prerequisite in some fields. But that’s no longer true in most jobs, particularly if you want to move outside government or large corporate employment, where many of the best opportunities are.

    So the question I’m attempting to answer is “where do you go when you’re not on the career track, or your not moving forward on the career track”? Most people focus on the twin credentials of education and experience, then they’re defeated (stuck) because they either don’t have them, or it will take too long to get them. But they’re doing it against the backdrop of an economy that’s more interested in specific skills than in credentials. For example, in my own experience, I once got a contract accounting assignment (that lasted for six years!) because I knew a very specific tax software program that’s very commonly used in small CPA firms. And of course, my whole blogging career has been a story of learning a succession of specific skills with no prior experience.

    I’ve known people who have turned taking a graphic arts course into a career or business, or starting a video editing side business just from messing around with video editing software. It’s amazing the doors that can be opened when you learn a simple new skill, particularly if it’s one that’s exotic to the average person. Any of us can do that, and literally change the course of our careers and even our lives. I’ve seen too much of it to think otherwise.

    But meanwhile, The System advises everyone to jump through firey hoops by getting a new degree, when all you have to do is spend a few weeks or months mastering a single skill. And almost magically, once you master one new skill, it’s so much easier to add a second and a third. By then you’re on a roll, and asking yourself “what career crisis?”

    But I don’t disagree that some careers are largely credentials driven. Fortunately, most people aren’t in those fields. And they’re often the ones who feel most trapped. They don’t have to be.

  3. I?m interested in what others think are skills other than computer skills that are valuable to acquire. And how to document that you have successfully acquired a skill.

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