Skills certifications and the paycheck: Trends and truth

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New highly validated data from 3,305 employers reveals that the average cash market value for hundreds of tech certifications is at its lowest point in four years. Meanwhile, pay premiums for non-certified skills in the same period have gained 6 percent in value on average. What gives?

There’s always been a tug of war within employers about hiring tech people with skill certifications versus those who have learned by experience on the job. Eventually the question of comparable pay arises, shining a light on whether certification is a valid factor when measuring a worker’s value or potential on the job. And if it isn’t, then how should employers be assessing skills competence?

While the performance of ISACA certifications in the compensation landscape has been mixed, as a group they are earning the equivalent of 12.4 percent of base salary in average pay premium, with CGEIT and CRISC earning the most. Compare this to the 7.5 percent average premium across all 466 certs reported in Foote Partners’ quarterly updated IT Skills and Certifications Pay Index (ITSCPI).

The fact is, employers have been perfectly willing to throw cash at both certified and non-certified skills for many years, typically in the form of premiums above and beyond base salary. Foote Partners has been capturing and reporting these cash premiums since 2000. Until 2007, certified skills were earning more on average than non-certified skills, but beginning in mid-2007 this trend reversed. Since then, the gap in pay premiums between the two has widened, with 551 non-certified skills now earning, on average, the equivalent of nearly 2 percent of base salary among more than 466 tech certifications tracked at more than 3,300 employers.

Certifications had a long run of consistently losing overall value from late 2006 to 2012. These were dark years marked by charges of fraud in the certifications-testing business and a prevailing opinion by many that certifications were simply too easy to attain, in particular those being offered by vendors to support their product lines. Technology vendors and vendor-independent certifying organizations fought back by adding prerequisites to sites for exams, real-time labs and peer-review panels.

It seemed to work, as certifications pay began to rise, although not nearly to the level of non-certified skills premiums, often for the same technologies. More and more management, process, and methodology skills and certifications gained popularity in the growth years for both intermediate and advanced skill levels, and pay continued to rise for both segments until about two years ago.

Average pay premiums for tech certifications recorded in the ITSCPI have most recently decreased in the last quarter of 2018, down 1.8 percent overall. They lost 2.4 percent of their value in calendar year 2018 and nearly 3 percent over the last two years. In the last three months of 2018, 57 certifications recorded cash pay premium losses against 17 gaining value.

Meanwhile cash pay premiums for non-certified skills increased 0.6 percent overall in October-November-December with 87 of these skills recording pay premium gains and 72 losing market value. Pay gains have been consistently higher in most quarters in each of the past three years.

Declines in certification market value can be misleading

Certification values decline in the marketplace for a number of obvious and not-so-obvious reasons.

Pay premiums diminish as certifications expire, are retired, or as technology evolves, and they’re replaced with more appropriate certifications. Since certifications have traditionally been attached to infrastructure tech (networking, systems, security) they have natural market pay volatility: nearly 17 percent per calendar quarter in the past four years. Volatility measures the percent of total certs that reported that change value every three months.

There also are certifications for architecture and for processes such as project management, frameworks and methodologies; as a group, they earn the highest average premiums among all categories reported, but they have their non-certified skill counterparts. This subjects them to pay erosion as employers feel more confident measuring talent in these disciplines based on work experience, especially at intermediate and advanced certification levels.

Non-certified skills can be found in far greater numbers than certifications in other segments such as programming and applications development, web, and database. Again, employers devise their own ways to judge proficiency in these areas; for example, coding tests, evaluating past work experience, references, and trial-to-hire employment. They drive down certification values by building their own robust internal training and development program, in effect devising their own certification programs.

There also remains a lingering bias that passing a proctored exam does not necessarily confer onto the test-taker an expertise in a subject, especially in cases when the pass rate entails getting only 70 percent of answers correct. Adding a laboratory requirement only works if the lab is a sufficient test of a candidate’s capabilities in the real world.

But, in a counterintuitive twist, cash market value can be a victim of a certification’s success. As interest in a certification escalates and more people attain the certification, the gap between supply and demand for the certification narrows, driving down its price as the laws of scarcity would dictate. This has been documented in the case of hundreds of certifications over the almost two decades of Foote Partners tracking and reporting cash pay premiums. The media rarely recognizes this contradiction in its reporting.

Perhaps the most common reason for certification values falling is a fundamental weakness that persists in the certification industry: a vast number of popular tech skills simply do not have a certification associated with them. No vendor owns the particular tech with products that are supported by certification training necessary to ensure sales and upgrade investments.

And what about so-called soft skills? Employers often are just as willing to recognize their value with pay premiums both inside and outside of salary, especially if they are combined with hard tech skills and industry, domain, or customer knowledge and experience.

(This post orignially appeared on the ISACA blog, which can be viewed here).

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