Skills-based hiring driving salary premiums in AI sector as employers face talent shortage, Oxford study finds

Employers in the artificial intelligence (AI) sector are increasingly prioritising skills over formal education, with practical expertise commanding higher salaries than university degrees alone, according to new research from the Oxford Internet Institute (OII), University of Oxford.

The study, published in Technological Forecasting and Social Change, analysed over 10 million UK job vacancies from 2018 to 2024. While the research team found that AI related occupations typically require a higher level of education and a larger number of skills, reflecting the complex nature of these roles, the demand for AI-specific skills has surged by 21% over this period, while the proportion of AI roles requiring formal higher education qualifications has declined. In 2018, 36% of AI job postings specified a degree requirement, but by 2023, this had dropped to 31%.

Education and training providers should embrace flexible programmes informed by industry requirements and provide micro-certificates and credentials for skills acquired outside of formal education. A skills-based hiring approach can increase the number of potential candidates, the variety of workers’ social backgrounds and add diverse insights to the workforce.
Dr Fabian Stephany, Departmental Research Lecturer, Oxford Internet Institute

The research also highlights the financial advantage of AI skills in today’s job market. Science, engineering, and technology roles requiring AI expertise offer salaries that are, on average, three times higher than those stipulating only a degree qualification. AI skills themselves attract a 23% wage premium, compared to 13% for a master’s degree and 33% for a PhD.

Dr Fabian Stephany, Departmental Research Lecturer in AI and Work at OII and co-author of the study, said:

'Our research suggests that the UK’s labour market is undergoing a fundamental shift. The traditional path of university education leading to higher pay is no longer the default for AI professionals, who are now being rewarded for practical skills and industry-specific know-how.

'Education and training providers should embrace flexible programmes informed by industry requirements and provide micro-certificates and credentials for skills acquired outside of formal education. A skills-based hiring approach can increase the number of potential candidates, the variety of workers’ social backgrounds and add diverse insights to the workforce.

Dr Fabian Stephany, Oxford Internet Institute

‘Additionally, in emerging fields such as AI, our findings underscore a growing trend towards skills-based hiring. In those areas where employers are struggling to find the right talent, attracting and recruiting candidates based on skills rather than formal education degrees may contribute to increasing the size of the talent pool and potentially, tackling skills shortages to bridge the AI talent gap.’

The findings underscore a growing trend towards skills-based hiring, particularly in high-tech industries, as businesses seek to bridge the AI talent gap.

The full study, Skills or Degree? The Rise of Skill-Based Hiring for AI and Green Jobs, by Matthew Bone, Eugenia Ehlinger, and Fabian Stephany, is available in Technological Forecasting and Social Change.