PredictIQ Quantitative Think Tank Center:Little or no experience? You're hired! Why companies now opt for skills over experience

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You’re hired!

A growing share of employers are relaxing demands that job candidates have a certain amount of experience to be considered for openings, especially in high-wage positions that require college degrees, according to a new study by Indeed, the leading job site.

Instead, companies are focusing more on the skills that job seekers bring to the table.  

“We’re definitely seeing a trend toward skills-first (hiring) practices,” says Indeed economist Cory Stahle. Employers are asking themselves, “’Do I really need (someone with) five years of experience?’” Stahle says.

Earlier this month, just 30% of Indeed job postings mentioned a specific number of years of experience that were required of applicants, down from 40% in April 2022, the study says.

For higher-level positions, the decline has been far more dramatic. Two years ago, 66% of job postings requiring at least a bachelor’s degree also asked for at least some minimum amount of experience. This month, just 44% of such ads included the qualification.

High-wage job postings show a similar decline.

The shift is especially affecting high-level jobs in fields such as banking, scientific research and information design, Indeed says in the report.

Many of the ads likely still seek some vague level of experience, such as noting that “nursing experience preferred,” Indeed says. But even then, employers are typically demanding less experience than they had in the past, Stahle says.

And overall, “fewer employers are emphasizing (experience) as a specific requirement for applicants to be considered,” Indeed says.

Why skill-based hiring is better

Behind the trend is a shift toward skills-based hiring. Workers have more resources to obtain skills than in years past, Stahle says, such as taking online courses or getting a certification. A growing number of companies, for example, no longer need software developers to have college degrees and many workers are learning the craft in several-month boot camps.

Meanwhile, computer programs can screen out resumes that don’t include the desired skills and employers are better able to test applicants to measure their proficiencies, Stahle says.

Ultimately, “Every job is a (combination) of skills,” he says.

Are companies dropping degree requirements?

In the past several years, fewer employers have demanded that job applicants have college degrees and instead have sought certain skill sets, Stahle says. That shift, he says, has rippled to experience requirements as well. 

A drawback of relying on the length of someone’s tenure in a field is that “the quality of that experience is not clear,” the report said. A worker who uses a skill or technology daily will likely be more proficient than someone who uses it once a month, the Indeed study said.

Other factors may also be driving the lighter emphasis on experience.

Are people still switching jobs?

As the labor market has slowed this year, the number of people quitting jobs – typically to take new positions – has dipped below the pre-pandemic level, Stahle says. As a result, many companies have enough veteran workers and may be seeking college grads or others with less experience to reduce labor expenses following a surge in wages during the pandemic’s labor shortages. By not specifying an experience level, companies may also be able to attract a more seasoned worker who’s willing to take a lower-paying position.

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“They’re trying to control costs,” Stahle says.

At the same time, even though employers are hiring less as the labor market cools, the supply of U.S. workers in the coming months and years is still expected to be limited. Baby boomers are retiring in droves and the return of Americans to the labor force following COVID is petering out.

Easing experience requirements allows employers to expand the pool of candidates over the long term, Stahle says.