Daniel Zhao, Glassdoor Sr. Economist, joins Yahoo Finance’s Sibile Marcellus to discuss why high school diploma’s are outperforming college graduates when it comes to pay raises.

Video Transcript

ALEXIS CHRISTOFOROUS: Amid the country's economic recovery, workers with no more than a high school diploma are outperforming college graduates when it comes to pay raises, and by a record margin. Here's Sibile Marcellus now with the latest installment of "Career Control."

SIBILE MARCELLUS: Oxford Economics put it bluntly saying, quote, "in this job market, you don't need a degree." The firm's research data indicates that over the past two months workers with just a high school diploma received a higher pay raise, 3.7%, versus 3.3% for workers with a college degree.

So what does that mean for people looking for work? I want to bring in Glassdoor Senior Economist Daniel Zhao to break this down for us. Now, Daniel, I want to start off with Oxford Economics' take that in this job market, you don't need a degree. Now, the economy is in recovery, but the unemployment rate is still high at 5.9%. What is Glassdoor seeing in terms of the hiring of people with or without a college degree?

DANIEL ZHAO: Well, what we are seeing from employers is that they're actually loosening requirements in terms of degree requirements or other restrictions to get more workers, because everything right now ties back to labor shortages. You're hearing many employers having difficulty finding or retaining workers. And so employers are getting more creative about what workers that they would consider as their candidates.

SIBILE MARCELLUS: Given that these pay increases are driven in large part by the labor shortage in the hospitality industry, how long can we expect this trend to continue of wage increases being higher for those who didn't go to college versus those who did?

DANIEL ZHAO: Well, these labor shortages are likely to last for some time. I mean, the labor market should continue to remain tight even as the economy reopens, because we can't just flip a switch and have the millions of unemployed Americans on the sidelines now return to the labor force. It's going to be more of a slow trickle. And so I do anticipate that we will continue to see wage growth, especially for some of these industries like leisure and hospitality, which do disproportionately employ workers without a college degree.

SIBILE MARCELLUS: And workers with just a high school diploma have generally, traditionally, earned less than workers who went to college. Now, if this labor shortage continues, is it possible that those workers could soon outearn workers who went to college? And if so, what does that do to the value of a college degree?

DANIEL ZHAO: Well, I think it's unlikely that we're going to be in this kind of situation for long enough that workers without a college degree start out-earning workers with one. But it certainly does change the economic calculus. For many people, a college degree is a significant leg up in the labor market, but it is also a very costly decision.

And so it might change people's decisions around what degree they choose, what kind of school they go to, whether they look for something more like a community college degree, which is often cheaper than a four-year degree. So I think it changes the calculus, but still, college degrees are a very useful leg up for many Americans.

SIBILE MARCELLUS: Daniel, coming out of the Great Recession, we saw that the employment situation was worse for workers with just a high school diploma versus those who had a college degree. What's different this time around?

DANIEL ZHAO: Well, in general, when the labor market is weak, employers have their pick of the litter. They can afford to be picky, and they often raise requirements during that time. And so often, the workers who benefit the most from a tight labor market are the ones who come from backgrounds that don't necessarily have a lot of formal education or don't necessarily have the same level of experience or certifications as other workers.

What's different this time is that we've come out of the pandemic with many workers still on the sidelines. And so even though the economy is reopening and employers are trying to hire a lot of workers, there's still a lot of workers who are unavailable. And so this disconnect is really accelerating the tightness in the labor market well beyond what we saw after the Great Recession.

SIBILE MARCELLUS: Well, we'll continue to monitor what's happening in the job market. It was great to have you on. Daniel Zhao, thanks so much.

DANIEL ZHAO: Thanks for having me.

ALEXIS CHRISTOFOROUS: All right, Sibile Marcellus, thanks so much for that installment of "Career Control."