The latest trick companies could be using to pay workers less

• More US companies are dropping education and experience requirements for jobs, according to Indeed.
• This could help some Americans find work, but it could also help companies pay their workers less.
• As hiring slows, dropping hiring requirements could help businesses land some workers at a discount. 

More US companies are dropping experience and education requirements from their job postings. For some firms, it could be their latest strategy to save money on labor costs.

As of April, the most recent data available, 30% of US job postings on Indeed included a desired level of work experience — down from about 40% in 2022. As of January, 48% of Indeed postings included an education requirement, down from about 52% in 2019.

In recent years, many employers have struggled to find workers and therefore considered a wider talent pool. Some companies began prioritizing skills-based hiring — rather than evaluating workers based largely on their education and experience — in the hopes of finding talented candidates they might have overlooked in the past. This shift could increase competition for some jobs, and applicants with a college degree, for example, might have less of an edge than they once did. But advocates for this new hiring approach say giving more people a chance at landing more jobs is a positive development overall.

However, companies aren't simply dropping requirements out of the goodness of their hearts. As some businesses look to cut labor costs amid economic uncertainty, ditching hiring requirements could be an effective way for some companies to get workers at a discount, Cory Stahle, an economist at Indeed, told Business Insider via email.

Take a job posting that requires two years of work experience, Stahle said. Two years ago, when job openings were at record highs, the typical worker with about four years of experience might have had little interest in this job. There was a decent chance they could find another role that better fit their experience level and paid more as a result.

But things have changed. While the unemployment rate is low compared to past decades, slowing hiring across the country has made it more difficult for some Americans to find work. As of March, hiring on LinkedIn was down compared to the prior year in each of the 20 industries measured, including financial services, tech, and healthcare.

In this new hiring landscape, Stahle said a job seeker with four years of work experience might be willing to accept a more junior role — even if it means taking a pay cut. But if the job posting lists two years of experience as the requirement, a more experienced job seeker might think the employer is focused on more junior candidates and be less likely to apply, Stahle said. Dropping an experience requirement could convince this type of candidate to submit an application.

"It's possible that workers with more experience may be more willing to accept a position requiring less experience — potentially, perhaps especially, if the actual desired or required level of experience is not specified," Stahle said. "Removing these requirements may allow employers to attract a higher number of high-quality candidates, including those with more years of relevant work experience under their belt, to jobs that may pay at a more junior level."

Dropping hiring requirements could save some companies money

There's some evidence that companies could already be dropping hiring requirements in part to cut costs. Using Indeed data, Stahle analyzed the industries that had the largest declines in experience and education requirements in Indeed job postings between April 2023 and 2024. He found that the industries with the largest declines in hiring requirements also saw "rapidly cooling demand" for workers over this period.

Stahle said companies in industries that have slowed hiring might be particularly motivated to cut labor costs — and well-positioned to do so.

"With fewer opportunities available and more competition, job seekers might be willing to take a lower paying position — even if just temporarily," he said.

The banking and finance industry, which has seen layoffs and a hiring slowdown in recent years, was among the industries with the largest declines in education and experience requirements. The marketing and IT sectors also have experienced hiring slowdowns and large declines in hiring requirements, per Indeed data.

Additionally, when a company drops education and experience requirements, workers with more experience or education aren't the only ones who might be more likely to apply. This could also attract capable applicants with less experience and education — and whose salary demands could be more modest, Stahle said.

It's not clear how much of an impact the decline in hiring requirements has had on employer's labor costs. But it's one example of the way a shift in labor market power away from workers and toward employers can impact workers' pay.

Compared to two years ago, many workers have less power to switch jobs and ask for a raise — and people who need work have fewer options. These developments are among the reasons wage growth has fallen over the past two years.

To be sure, not all companies that have dropped job posting requirements have made significant changes to their hiring practices. But Stahle thinks the decline in requirements could reflect a real shift in how many companies will approach hiring in the years to come.

Though he doesn't expect the broader shift away from education and experience requirements to reverse anytime soon, Stahle said some companies could modify their hiring strategies if the economic environment changes.

"It's possible that employers are shifting their hiring preferences — perhaps temporarily — toward less experienced but also very likely less costly hires," he said.

Are you struggling to find a job? Are you willing to share your story? If so, reach out to this reporter at jzinkula@businessinsider.com.