In another sign of a tightening job market, pay raises for workers with just a high school diploma have surpassed those of college graduates by a record margin, according to a recent report by Oxford Economics.

“Over the last two months, they received a median average annual pay raise of 3.7% compared to 3.3% for workers with a bachelor’s degree,” Bob Schwartz, Oxford Economics senior economist, wrote in a recent note to clients. “In this job market, you don’t need a degree.”

As workers in the hospitality industry have resisted returning to their old low-wage jobs, employers are luring workers with raises and bonuses. Average hourly earnings for workers in leisure and hospitality have increased from $16.55 in June 2019 to $18.23 in June 2021.

“Employers [are] actually loosening requirements in terms of degree requirements...because everything right now ties back to labor shortages,” said Glassdoor senior economist Daniel Zhao. “Many employers [are] having difficulty finding or retaining workers and so employers are getting more creative about what workers that they would consider as candidates.”

Zhao anticipates this wage growth trend will continue “for some time” as understaffing still plagues industries like leisure and hospitality, which rely heavily on workers without a college degree.

“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,” said Zhao. “It’s going to be more of a slow trickle.”

Pay raises won't last forever

Employment in leisure and hospitality is down by 2.2 million, or 12.9%, from its level in February 2020, according to federal data. While workers with just a high school diploma have been seeing more pay raises compared to college graduates, the overall career earnings of college graduates are more than twice as high as for those without a bachelor’s degree.

“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,” said Zhao. “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.”

Student loan debt has reached $1.4 trillion and policies surrounding repayment or cancellation continue to be a political football.

Oxford Economics’ recent pay data “might change people’s decisions around what degree they choose, what kind of school they go to, [and] whether they look for something more like a community college degree, which is often cheaper than a four-year degree,” said Zhao.