Income Is Not Automatic

Ernst & Young no longer requires degrees for entry level jobs.  A lot of people shared articles about the change on Facebook.  On one thread I noticed the following comment:

“[T]his is great but it could also be an excuse to pay people less.”

The word “excuse” stuck out to me.  Why would EY need an excuse?  If they want to offer less pay they can do so at any time.  Of course any potential hire can just as easily refuse the offer and only agree to work for more.

Employers want the best workers for the lowest possible price and workers want the best jobs for the highest possible pay.  “Best” and “highest” of course include the entire bundle of compensation, benefits, work environment, etc.  Both parties have an incentive to bargain.  Both parties have an incentive to only agree if they don’t think they can get a better deal elsewhere.  It’s a bet on the value they’ll receive from the other party.

The comment reveals a bizarre but common belief about work.  There’s an idea that jobs and income are an automatic and deserved reward for moving on the conveyor belt and jumping through all the right hoops.  It implies that pay is based on a rigid credential scale and companies can only adjust pay if they adjust the hoops to jump through.  It implies that, with ironclad causality, a degree will automatically entitle the holder to higher pay and the only way to pay less is to hire those without one.

A degree has never made someone more valuable.  What you can do determines the value you can create and demand.  The degree is only a signal that, with more or less accuracy, tells employers that you are likely to be better on average than someone without the degree.  That signal is no longer working for EY because the reality isn’t backing up the assumed correlation.

EY does potential employees a favor to announce and implement this policy.  The degree is not signalling enough value to distinguish those with it from those without.  Degrees are very expensive.  Everyone who buys one assuming it will bring them a good EY job is buying under false pretenses.  They need to create value to get hired.

EY is saving potential employees money and time by telling them what’s always been true: it’s about the value you can create, not the paper you have.  The paper was used because it often correlated and it was a quick and dirty way to eliminate some weak applicants.  Now the applicants with degrees are not sufficiently better than those without.

This represents not an excuse for companies to pay less, but an opportunity for young workers to pay less.  You are not required to spend four years and six figures poured in cinder block walls with fluorescent lights to take tests on things you mostly have no interest in.  You are free to learn to create value any way you can.


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