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Practical expertise drives salary premiums in the AI sector, finds new study

A new analysis by researchers at the Oxford Internet Institute, University of Oxford, in Technological Forecasting and Social Change, examines how businesses in the UK are responding to the hiring gaps in AI-related recruitment, and whether skills proficiency commands a higher salary than a higher education degree.

In their paper titled "Skills or degree? The rise of skill-based hiring for AI and green jobs," the team analyzed over 10 million online job vacancies in the UK between 2018 and 2024, and applied statistical analysis and a regression model to examine the association between higher education degrees, skills requirements and financial remuneration.

The researchers note several significant findings.

Specific skills now outweigh traditional qualifications in many AI jobs

• Between 2018 and 2024, job postings requiring at least one AI skill increased by nearly 21%.

• For AI-related roles, such as developing a chatbot like ChatGPT, job advertisements were three times more likely to mention explicit skills compared to job openings in other sectors.

• AI-related occupations typically still require a higher level of education and a larger number of skills, reflecting the complex nature of these roles.

Fewer AI employers require formal higher education qualifications

• Between 2018 and 2014, the number of AI job advertisements requiring formal higher education qualifications fell by 15%.

• The demand for formal education requirements for AI roles has fallen over time, from 36% of AI roles in 2018 to 31% of AI roles in 2023, suggesting a slight shift towards employers valuing skills and experience over formal education in AI roles.

Shifts in demand for specialist skills lead to higher salaries in AI-related fields

• Science, engineering, and technology jobs such as data science roles, requiring AI capabilities and skill-based qualifications, can lead to salaries that are three times higher than general roles stipulating higher education qualifications, like bachelor's or master's degrees.

• AI skills and expertise are highly valued by employers, offering a 23% wage premium, compared to a 13% wage premium for masters' degrees and a 33% premium for Ph.D.s.

• In science, engineering, and tech jobs, the AI skills premium is 36%, higher than the wage premium for formal degrees.

Commenting on the findings, Dr. Fabian Stephany, Departmental Research Lecturer in AI & Work, Oxford Internet Institute, and co-author of the study, said, "Our research suggests that the UK's labor 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 programs informed by industry requirements and provide micro-certificates and credentials for skills acquired outside of formal education. By valuing a candidate's proven abilities as much as their academic background, employers can gain access to a far wider talent pool—one better suited to handle the rapid evolution defining the future of work."