Skills-Based Hiring Can Transform the Job Market, But When?

As a strategy, skills-based hiring has attracted significant national attention and commitments from nearly 100 Fortune 1000 companies in the last four years. But in 2023, the approach was used in less than 1 out of every 700 hires. Skills-first is still in the workforce equivalent of what Harvard Business Review calls the “market development stage,” the point in a product’s life cycle when interest in it is high but its innovator doesn’t yet know how to alchemize that enthusiasm into action, commitment, or both. 

At Jobs for the Future (JFF), we have championed the skills-first method from its early days. We can’t help but be enthusiastic about progress toward a shift in the job market that will ultimately define, advertise, and fill jobs in ways that can better advance career opportunities for millions of people. We believe skills first is the foundation for a learning system that can revolutionize the entire education-to-work pipeline—quite literally a defining feature of the jobs of the future.  

However, it’s not just the talent-management arena experiencing high enthusiasm but low uptake. Competency-based education—a more established, skills-first approach to teaching and learning—has grown in popularity in recent years. But it exists at only a fraction of colleges and universities nationwide, and even then represents only a subset of training and degree programs at those universities. The same is true for digital skills wallets and LERs, which have attracted many early-stage entrepreneurs and start-up companies, but not many consumers.  

How can we meet this moment, turn it into a movement, and mature our market? JFF interviewed 40 practitioners, business leaders, technology entrepreneurs, academic experts, and policymakers to discover their insights on how we might better catalyze the growth of the skills-first ecosystem. The findings, summarized and aggregated across five “levers” for change, demonstrate a clear trend:  

Lever 1: Put the Evidence Where Your Claims Are

Show is always better than tell, particularly when data can substantiate facts you’re working to support. Despite the obvious potential of skills-based approaches, practitioners and investors have struggled to prove the effectiveness of those approaches at scale. The absence of consistent, trustworthy data has made it difficult for stakeholders to fully commit. We can’t collectively afford that hesitation.  

We need a concerted effort to gather and share data about the benefits of skills-first practices. This isn’t just about the bottom line—the data must include metrics on business outcomes, jobseeker satisfaction, and improved outcomes for workers, learners, and educators. By making the case with hard evidence, we can cultivate a stronger, more persuasive narrative to continue building on. 

Lever 2: Design With User Needs and Experience at the Forefront

Evidence alone, however, isn’t enough. To achieve our goal of meeting consumers at the entry point of their real-world needs, the industry must better understand the problems that need solving, design solutions with them in mind, and make improvements along the way. Our interviews suggested that this last step—using feedback and impact data to determine if products are really working as intended and ensuring that products offer flexible and positive user experiences—is often underdeveloped.   

Interviewees highlighted several examples of products and practices that failed to meet user needs. These include applicant tracking systems that struggled to take in new data, skills-first hiring practices designed to meet labor shortages without worker involvement, corporate skills products that targeted human resources while ignoring hiring managers, overly complex and technical requirements to use wallets and LERs, and skills systems built on proprietary and closed tech platforms requiring re-entry of data multiple times over.  

Lever 3: Support the Flow of Information-Sharing

Although there have been many stand-alone successes in the skills-first movement, they often remain isolated, with little replication across different contexts. This is especially true for smaller companies looking to replicate the approaches used by corporations but lacking the resources or staff expertise to do it and for companies that may be in other industries or use different business models. This has created a patchwork of isolated successes rather than a cohesive, scalable movement. 
 
We need to focus on creating solutions that are easily translatable and replicable. This means simplifying systems, aligning data frameworks, and ensuring that successful models can be adapted to different industries and organizational sizes. We need tools and resources to help people adapt skills-first practices to their jobs, companies, and industries. Let’s make it easier for organizations of all sizes to adopt skills-based practices. By supporting replication and reducing barriers to entry, we can transform isolated successes into a thriving, widespread movement across the education-to-work pipeline.  

Lever 4: Get Proactive—Not Reactive—About Policies

Policy has the power to propel the skills-based movement forward, but first, we need to shift to proactive policy-making. The current system, where policies are explored and developed after the new technology is in the market, creates potential for exploitation, muddies the marketplace, and undermines efforts to develop financing models.  

There is an opportunity now to shift to a forward-thinking approach to policy, where we can create a stable, regulatory environment for the skills-first market to thrive. By anticipating challenges and addressing them before they become barriers, we can pave the way for the market to reach its full potential. 

This means engaging with policymakers to develop frameworks that encourage data sharing—such as poorly aligned state, federal and global data privacy and protection laws, and cybersecurity standards—while continuing to protect consumers and limit predatory behavior. 

Lever 5: Diversify Investment Strategies (and the Investors Too)

We’ve observed that the growth of the skills-first economy has been bolstered by a small, concentrated group of investors comprised mostly of philanthropists and venture capitalists. However, the limitations of this small group have created market distortions, discouraged diversity in approaches, and over-focused on technical solutions at the expense of narrative change and consumer adoption. To fully realize the potential of what skills-first can do in the employment marketplace, we need to attract a widening range of investors who can generate more capital and push exploration within the skills-based economy.  
 
Last year, for example, Rockefeller Philanthropy Advisors launched SkillsFWD with support from several funders. On one end, the initiative advances skills-based hiring by implementing secure, user-controlled digital learning and employment records that connect opportunity-seekers to opportunities. On another end, SkillsFWD identifies areas where additional research and policy changes are needed to smooth the course for mass adoption of skills-based hiring systems. The more investors think long-term to strategically grow the market, the closer we get to unlocking the full potential of the skills-first economy. 

Enthusiasm is high, even increasing, for the skills-first economy. But its full potential remains unrealized.  To cultivate the skills-first approach to maturity, we must focus on the critical levers that will transform interest into widespread adoption. This requires a concerted effort to align product design with consumer needs, gather and share compelling evidence, promote replication, and center marketing on tangible outcomes for specific user groups.

The work doesn’t stop here. By tackling these challenges head-on, we can dismantle barriers to growth and move toward a future where skills-based practices are standardized. As we navigate this path, the combined efforts of practitioners, investors, and policymakers will be instrumental in transforming the skills-first vision into a reality that benefits the future of work and drives economic prosperity for millions of people.  

The road ahead is clear: to spark a true movement, we must work collectively to create a job marketplace that not only addresses the needs of today but also anticipates the demands of the tomorrow ahead. 

This initiative is a part of the Project to Catalyze Skills-First Practices. JFF supports transformational efforts to champion skills-first practices, reshaping how workers, employers, and educational institutions communicate and assess skills, experience, and knowledge. The Project to Catalyze Skills-First Practices, funded by Walmart, seeks to redefine and enhance the way an array of actors—including employers, policymakers, learning and education providers, philanthropy, and workforce development leaders—interpret and utilize information about a worker’s skills and experiences.