Photo by Vitaly Gariev on Unsplash

Everyone knows a bachelor's degree makes you more money. The numbers aren't even subtle: according to the Bureau of Labor Statistics, in the first quarter of 2025, full-time workers with only a high school diploma had median weekly earnings of $953, while workers holding at least a bachelor's degree earned $1,754. Roughly 84% more, every single week for sticking it out and getting that degree. (That includes people with master's degrees and doctorates, but still.)

The usual explanation is that school teaches you valuable skills, and the market pays for them. But that's only part of it. I think there's a less flattering part that gets skipped: the people deciding who gets hired—and at what salary—mostly went to uni themselves.

The people with the keys

Somebody makes every hiring decision. In the better-paying corners of the economy, that somebody usually holds a degree, because the job they hold required one. So what happens when the graduate sits down with a stack of résumés?

Researchers who interviewed recruitment consultants got a fairly direct answer. Recruiters said hiring managers' educational preferences reflect the managers' own educational paths, and that credentialism is driven mostly by those managers' own experiences, which can lead to selection based on educational homophily. One English recruiter summed it up as "people hire in their own mould." That's the whole thesis of this post in six words. From someone who does this for a living.

It shows up in surveys too. In a survey by Intelligent.com, two-thirds of hiring managers said they're more likely to advance a candidate who attended their own alma mater. An older Indeed survey of managers who require degrees found that 37% of those from top schools prefer hiring only from top institutions, compared with 6% of those who didn't attend one. And the Intelligent survey shows the effect carries straight into pay: among managers who believe top-school candidates make better employees, 83% say they're more likely to meet that candidate's salary ask.

Fit over function

Sociologist Lauren Rivera spent years studying how elite investment banks, law firms and consulting firms hire. Based on 120 interviews with employers and observation of a hiring committee, she found evaluators wanted candidates who were not just competent but culturally similar to themselves, and that concerns about shared culture often outweighed concerns about actual productivity. More than half of the evaluators ranked cultural fit as the single most important criterion at the interview stage.

Those firms recruit almost entirely from a short list of universities. If the culture you're matching is "people like me," and the people doing the matching all came out of the same schools, then your degree is just a membership card.

The requirement that doesn't need to be there

If degrees were purely about job skills, you'd expect employers to require them only where the work demands it.

They don't.

A Harvard Business School study with Accenture and Grads of Life—a Year Up nonprofit that advocates hiring workers without degrees—analyzed 26 million job postings and found 6.2 million middle-skill jobs at risk of degree inflation, meaning roles that historically didn't ask for a four-year degree now do. The lead author, HBS professor Joseph Fuller, said one of the major reasons degree inflation is so common is that employers use the degree as a proxy for soft skills.

And get this: in that study's survey, 61% of business and HR leaders admitted tossing résumés without four-year degrees even when the applicant was qualified. Meanwhile, in jobs where both groups already work side by side, 68% of employers said experienced non-graduates were as productive as recent graduates, or more so.

So the people screening out candidates know the screen isn't measuring productivity, and they use it anyway.

Ouch.

Removing the requirement doesn't remove the habit

A lot of companies have made a show of dropping degree requirements. A 2024 follow-up from Harvard Business School and the Burning Glass Institute checked whether that changed who actually got hired. Mostly, it didn't. Across 11,300 roles at large firms, removing degree requirements produced only a 3.5 percentage point average increase in hiring workers without a bachelor's, and the promised expansion showed up in fewer than 1 in 700 US hires in 2023.

The report sorted many of these firms into "in name only" companies that made no real changes, and "backsliders" that hired more non-degree candidates at first and then drifted back. That's the kind of "improvement" you'd expect if the requirement was never really written on the job posting, but written in the heads of the people reading the résumés.

The researchers say as much: even when the degree requirement is gone, it's still a shortcut hiring managers are likely to reach for.

And the kicker? At the firms that actually followed through, non-degreed workers had a retention rate 10 percentage points higher than their degree-holding colleagues!

This isn't a new idea

Sociologist Randall Collins made a version of this argument back in 1979.

Oh God, I'm old.

Anyway, 1979. Dr. Collins. His book, The Credential Society, argues that rising educational requirements for jobs weren't driven by technological demand for skills, but by changing standards of cultural respectability.

Economist Bryan Caplan gets at a related point from a different direction. He argues the education premium is roughly 80% signaling and only 20% actual skill-building. There's also the well-documented "sheepskin effect," where people holding a completed degree earn more than people with the same amount of schooling who never finished. If you're one class short of a diploma, you learned basically everything your graduating classmates did. You just don't have the paper.

Who gets left out

Opportunity@Work counts over 70 million American workers who built their skills through alternative routes like military service, community college, bootcamps, apprenticeships and on-the-job experience. They call the barrier those workers hit the "paper ceiling," and they report that the wage gap between these workers and bachelor's degree holders has doubled over the last 40 years.

So what?

To be fair, the evidence doesn't all point one way. A Danish study of twins found that signaling explains a big chunk of the degree premium, but not all of it. Graduates kept out-earning their own twin for the full 15 years the study tracked, which suggests employers are paying for something tangible. A 2009 review in Personnel Psychology concluded that screening candidates by education level does a fairly good job of predicting performance, and Noah Smith has argued that the sheepskin effect actually undercuts the signaling theory rather than supporting it. Even Joseph Fuller, lead author of the degree-inflation study, has said some of the rise in degree requirements is legitimate where jobs are getting more technical.

I'm not saying a degree is worthless, and I'm not saying every graduate in a hiring seat is deliberately gatekeeping. Some jobs really do need the training. But a meaningful chunk of that 84% premium looks less like a reward for learning and more like a reward for belonging to the club that signs the paychecks.