Skill or diploma? The potential influence of skill‐based pay systems on sources of skills acquisition and degree programs

A degree or diploma has traditionally served as a general criterion for hiring and pay decisions. This approach is inconsistent with emerging skill‐ or competency‐based compensations systems. Such systems only recognize and pay for the skill or competency required by the task to which an employee is assigned. As employers adopt skill‐based pay systems, it is reasonable to ask whether they will continue to use degrees and diplomas in their hiring and pay decisions. A shift away from the diploma as a criterion for hiring and pay decision may influence educational systems to offer both diplomas and skills acquisition programs.