Employers around the world are experiencing a crisis when it comes to skills. In 2023, global talent shortages continue to deepen. According to data from our State of Skills-based Hiring report, 60.1% of employers struggle to find suitable talent for open positions - up 2% from the previous year.
Clearly, workers are not receiving the support and education they need to meet the demands of the labor market and specialize beyond the essential skills needed for all roles. But where can they get this support, and can employers have a role in supplying it?
If you ask us, the answer to both these questions lies in skills-based learning, an emerging learning framework that we believe holds the solution to the global skills shortage.
In this blog, we discuss skills shortages, what the skills-based approach to learning is, how the demand for it has emerged, and where employers fit into the skills-based learning landscape.
Skills shortages occur when employers are unable to find employees with suitable skills and competencies to fill certain roles in their organization. These shortfalls are usually identified through employer-based surveys and are measured using a combination of vacancy and unemployment rate statistics.
There is currently a lack of skilled talent in a number of professions.
In healthcare, many countries are struggling to find qualified nurses and doctors. Latest statistics from the UK's National Health Services (NHS) show that the vacancy rate for nurses currently stands at 10.6%, with almost 40,000 workers leaving the field over the past couple of years. Similar shortfalls are reported for medical specialists in areas such as hematology and emergency medicine.
Engineering is another field with a shortage of skilled workers. The industry has many workers approaching or past retirement age and graduates who would otherwise have gravitated toward this field have opted for career paths in IT and software development. In the US, unemployment rates for engineering graduates are at an all-time low due to this deficit in talent.
Skills shortages have been widely reported in the physical sciences, with physics skills, in particular, in high demand. A recently published report from Physics in Demand shows that the demand for physical scientists in the UK has grown by 40% since 2010, making this one of the most requested roles in the country.
Employers in the logistics and transport industries are struggling to hire truck drivers and trained freight machinery operators. These workforce challenges have led to global supply chain delays and higher costs on mass shipments as companies struggle to find talent to fill essential roles.
A number of factors can contribute to a shortage of skills:
When wages don't rise to reflect the lower supply of labor in a profession.
Jobs are currently held by an aging workforce, and there is a lack of new talent to take over these roles.
Jobs may be dangerous, labor-intensive, or highly complex.
When work is dependent on specialist technologies that require a significant amount of time to learn and master.
It is difficult to find educational institutions or programs teaching this domain's essential skills.
These last two factors can be mitigated by adopting a skills-based approach to learning.
Skills-based learning is the process of providing workers and job candidates with the skills needed for employment, usually through practical teaching methods. It stands in contrast to traditional learning, which is typically knowledge-based and associated with schools and universities.
In knowledge-based learning environments, learners are introduced to topics through theoretical explanations and observing demonstrations. They’re usually evaluated using “summative testing,” which covers a range of skills in one examination and uses the same measures of success for every student.
By contrast, skills-based learning is usually hands-on and experiential. It’s most commonly delivered in on-the-job training environments or professional colleges where students can practice what they’re learning for themselves rather than watching an instructor.
Skills-based learning is often closely associated with another learning framework known as competency-based learning.
This is a teaching method that, like skills-based training, also relies on experiential learning. However, competency-based learning is differentiated from skills-based training by the level of personalization it involves.
This is partially down to the subtle but important difference between skills and competencies.
Where skills are long-term and usually transferable between organizations, roles, and projects, competencies are short-term and more specialized, relating to an individual’s specific role with their employer.
Take the head of a social media management team at a large company. This role would involve numerous skills that could be transferred to other marketing roles and organizations, for example, proficiency with Facebook ads and general social media management.
The competencies for this role would be specific to how this individual applies their skills in their workplace. These would include their institutional knowledge of how to get visual assets for social media, and who to get these from, as well as the ability to manage the specific personalities on their team.
Competency-based learning, therefore, is more personalized to each individual learner and teacher. It is often learner-directed and assessed by instructors who look at students’ mastery of competencies that they have identified personally as their targets.
Of course, any learner needs both knowledge-based learning and skills-based learning in order to be successful.
To master the numerical reasoning skills required for many engineering roles, for example, you first need a theoretical understanding of mathematics and physics, which comes from knowledge-based training.
In an ideal world, individuals would enter the workforce with a balance of skills and knowledge behind them with a good understanding of how to apply them. Unfortunately, this is not the case.
As we discussed earlier, three-quarters of all employers in 2022 said they had difficulty finding skilled candidates to fill their open roles.
But why does this shortage of skills exist – and how will skills-based learning come to the forefront as a solution?
To find out, we have to rewind a few decades.
In the late 20th century, Western society began to shift from being an industrial society to what the economist Peter Drucker called a “knowledge economy.”
This refers to when the rise of information processing and automation caused a shift from the economy being driven by physical labor to being driven by so-called “knowledge work” – in other words, people “thinking for a living.”
Universities, as historic sites of knowledge production, were called on to provide the skills that these new workers needed.
Unfortunately, employers overestimated the necessity for degrees in jobs that weren’t strictly knowledge-oriented. This caused a phenomenon known as degree inflation in which degrees were required for jobs that had never previously needed them.
This, in turn, increased the demand for higher education. From 2011 to 2021, the percentage of adults aged 25 and older with a bachelor’s degree or higher increased across ethnic groups.
However, despite the number of graduates growing year-on-year, skills shortages continued to emerge. A skills shortage is a type of skills mismatch that refers to when a skills gap – the lack of a specific skill in an organization – is present across a broader region or industry.
By 2019, three-quarters of those who had difficulty recruiting said that this was due to a shortage of skills among candidates, with the top three missing hard and soft skills being:
Top 3 missing technical skills in 2019
Top 3 missing soft skills in 2019
Trade skills like carpentry, plumbing, welding, machining
Data analysis and data science
Science, engineering, and medical skills
The drop in skills availability worldwide was accelerated by the pandemic. Many workers found themselves out of a job, while fresh graduates were unable to enter the job market. These groups were therefore not gaining hands-on experience, and organizations across the world put their employee development plans on hold.
The effects of these shortages are being felt across industries.
Take advertising and marketing: 56% of brands said that skills shortages were holding the industry back in 2022, and nearly half of all companies say that the sector is facing its “worst-ever crisis” when it comes to talent.
After leaning heavily on universities to supply skills for decades, employers are being hit hard by skills shortages. This can only have one logical conclusion.
The “degree reset” refers to the shift currently occurring in hiring in which employers are removing the requirement for a four-year college degree from their open roles.
Although it has undoubtedly been accelerated by the Covid-19 pandemic, this reset is driven by long-term structural changes in the workforce that were in motion before it – one of which is the failure of universities to keep up with the skills demands of employers.
Indeed, the Burning Glass Institute found that 46% of middle-skill and 31% of high-skill jobs saw degree resets occur between 2017 and 2019, and only 27% of these changes could be attributed to short-term or “cyclical” factors relating to the pandemic.
Basic IT skills
Data communication skills
Knowledge of emerging technologies and solutions
As a result, many employers are now ditching the degree requirements for digital roles. The Burning Glass Institute’s research found that only 26% of Accenture’s Software QA engineer postings required a degree and only 29% of IBM’s did.
Without university degrees to serve as a screening tool for finding candidates with baseline professional skills, employers are increasingly turning to one method to find skilled professionals…
We may be looking at the death of the degree requirement, but this is the dawning of the age of skills-based hiring.
Our State of Skills-Based Hiring 2022 report found that 76% of companies are already reaping the benefits of skills-based hiring, with 89.8% seeing a reduction in cost-to-hire, 91.4% seeing a decrease in average time-to-hire, and 92.5% seeing a reduction in mis-hires.
Of course, skills-based hiring doesn’t directly address skills shortages; it just gives employers a better chance of filling the skills gaps in their own workforce. Even this can be challenging if there’s a lot of competition out there for skilled candidates.
Employers need a way to target and develop the skills they need in their own workforce. Candidates also need a skills-based solution to the crisis because in order to best prepare for success in skills-based hiring, they need:
To know what skills are required for the jobs they want
To know what skills they already have
To develop new skills through experience-based learning
This is where skills-based learning comes in.
We’ve seen that the broken promise of higher education being the engine for skills development in the workforce has under-delivered and produced this skills shortage, which, in turn, has created a demand for skills-based learning.
In the coming years, learners will need a diverse range of options for accessing this training.
But what will these options look like, and who will be responsible for providing them?
Here are our predictions.
We believe that universities will step back as the main provider of employable skills in the coming years. However, many may still evolve to cater to the demand for skills – but as one of a suite of options, rather than the be-all and end-all of skills training.
This might look like:
Being more explicit about the skills taught in traditional courses
Introducing compulsory professional skills modules for all students
Offering short professional development courses to supplement traditional learning
Some universities may even pivot more drastically to bridge the gap between skills training and knowledge-based learning.
A pioneering example is the University of Tulsa, which has already regrouped its business, health, and law colleges into one “professional college,” shifting the teaching approach away from traditional academic departments towards interdisciplinary divisions.
Professional colleges will also be more respected as a place to get skills once the stigma against candidates who are skilled through alternative routes (STARs) begins to fall away.
With employers relying more on empirical measures like skills tests to shortlist candidates, they will see that STARs are no less skilled than their university-educated counterparts, and many of them even bring a valuable new perspective to their teams.
As well as seeing changes in traditional, knowledge-based education environments, we are also likely to see an uptick in the availability of government schemes, either to directly fund on-the-job training or provide resources to support it.
One example is the Apprenticeship USA program already offered by the US government, which incentivizes employers to take on apprentices without a college education.
Of the individuals who complete this program, 93% continue working with their employer with an average annual salary of $77,000.
The key here is for governments to utilize long-term solutions for incentivizing organizations rather than simply offering tax breaks. Schemes that rely on tax relief as an incentive have been heavily criticized because many businesses jettison apprentices after they graduate from training when they can no longer bring them tax breaks.
Partially thanks to schemes like the above, we expect to see more people going directly into the workforce after high school.
These apprenticeships may not necessarily be funded by the government, either. As skills-based hiring and development techniques build up steam, businesses may recognize the benefit of independently training young workers to move up the workforce.
This strategy has already been embraced by many consultancies such as KPMG, which offers consulting apprenticeships.
Independent investors may also step in to incentivize employers, particularly in sectors hit hard with skills shortages. Achieve Partners recently announced a $180m investment fund for organizations that promise to boost economic mobility with apprenticeship programs in skills-gap sectors like IT and healthcare.
We may also see more programs in government and private enterprises for students to split their time between traditional university study and apprenticeships in the workplace, marrying the benefits of knowledge-based and skills-based training.
An example of this already in action is the UK Civil Service’s degree-level apprenticeship program.
The program aims to prepare students for a career in their chosen Civil Service department. Apprentice university studies are fully funded by the government, so students spend half of their time in lectures and the other half in Civil Service work placements.
Finally, we expect to see employers embracing opportunities to provide lifelong learning to workers as they move through their careers.
For example, this might be through sponsoring employees to return to business school or professional colleges for skills-focused courses or to take part-time skills training offered by these institutions.
We’re also seeing an upsurge in the number of employers embracing upskilling initiatives with skills-based learning methods.
This is largely thanks to the increasing awareness of the benefits of upskilling for attracting and retaining top talent, as well as boosting productivity and engagement. One Gallup study found that 65% of workers believe employer-provided upskilling is very important when evaluating a potential new job.
Skills-based development initiatives can take many forms. One of the most common is using skills testing to ensure that skills requirements are met when candidates apply for a role but also to track the development of these skills over time – for instance, after three months on a training program.
It may already be clear why the rise of skills-based hiring requires a complementary shift towards skills-based learning, but here are the key benefits it brings to employers and candidates.
Employers can directly address their skills needs by using skills testing to identify skills gaps and track employee progress.
Not only that, but the side-effects of embracing skills-based learning in your organization also address many of the urgent needs of employers in 2023 – for instance, the growing engagement crisis.
A 2021 report found that only 15% of employees worldwide are engaged with their workplace, but research by McKinsey revealed that organizations that match their HR processes with the skills requirements of their workforce see:
50% increase in engagement
Halved training and development costs
40% higher productivity
This makes sense. Investing in your people helps you build a positive company culture regardless of whether your office is remote, in-person, or hybrid, which keeps employees invested in their work.
It also makes it much easier to hire new employees on the occasions you have a role to fill. Job-seekers rank company culture highly when deciding to take a role, with 86% saying it is somewhat or very important.
Because skills can be applied to different tasks and goals, focusing on them encourages employers to think outside the box in terms of where these resources can be applied and how employee careers might pan out.
A skills focus helps you recognize the “multipotentialities” in your workforce: those whose skills can be applied in many different areas.
An example might be a salesperson who has good communication skills common to both sales and marketing, but also the analytical mindset that makes for a great marketer.
Skills-based learning would enable an employer to identify these analytical skills and pursue development opportunities to help this employee move into a marketing role. It would also enable that employee to personally initiate this movement, and it would give them the tools to prove they have the skills it takes.
Either way, you could bring their understanding of closing sales into higher-in-the-funnel marketing and potentially sharpen your whole process, while also facilitating the all-important internal mobility that encourages great employees to stick around.
Skills-based learning can also be used by employers to adapt to the rapid pace of technological change that has caused skills shortages to open in the first place.
Reskilling – or skills training intended for employees to change careers, rather than simply advancing in their current one – is a great tool employers can provide to stay agile in an ever-changing labor market.
Let’s say you’re going through a period of restructuring. You might use skills testing to map the skills in your workforce, identifying employees who have adjacent skills to the roles you need to fill. You could then use additional training to help redeploy these employees into those roles.
Existing employees are more trustworthy, committed, and knowledgeable about your internal processes than new hires, and the reskilling process is likely cheaper and quicker than onboarding a fresh face.
It might also simply help you keep great employees in your workforce even if their current set of skills becomes obsolete. This is more likely than you might think: Business leaders in 2020 predicted around 40% of their workforce would require reskilling in the near future.
Embracing skills-based learning requires that we move away from traditional four-year degree requirements that have dominated traditional hiring.
We’ve already discussed some of the benefits that this can bring – for instance, opening up your hiring process to STARs.
Hiring STARs can help to increase diversity in your organization because the reasons that many people cannot pursue education through traditional routes are often related to structural inequalities such as poverty or prejudice.
But that’s not all. Removing the four-year degree requirement can also help reduce the impact of bias on employees after hiring because it shifts the focus away from the experience employees have to the potential they demonstrate.
Think about it. With skills-based learning, employers are not simply looking at what employees have already done in order to make decisions about what they will do in the future. Instead, it encourages them to:
Check in regularly on what skills employees actually have by using skills assessments
Promote, develop, or redeploy them based on the results
In practice, you might use skills assessments to conduct a routine skills audit of all employees, including testing their leadership skills. Using this data, you could then create an internal talent marketplace from which to select candidates for future leadership roles.
Finally, there’s the simple fact that embracing skills-based learning in your organization encourages your employees to stick around.
Many workers are already speaking up and letting employers know they want and need skills development. In fact, a lack of learning and development opportunities was the number one reason people left their jobs in 2019.
We’ve also seen that skills training improves engagement. This has knock-on effects on employee retention, with low-engagement teams seeing turnover rates 18–43% higher than their highly-engaged counterparts.
This, in turn, makes it easier to promote a positive work environment when employees stay longer and form firmer bonds.
Giving staff the skills and support to move internally also improves retention.
One study by the Society for Human Resource Management found that employees who received promotions within three years of being hired were 70% more likely to remain with their employer than those who didn’t, and those who made lateral moves were 62% more likely to stay.
It should be clear by now that skills-based learning is the best answer we have to bridging the skills gaps that are opening up across industries. But if it’s so important, why isn’t every employer already using it?
These are the three challenges that are holding most employers back from getting the full benefits of skills-based learning.
We get it: The resume has been around for a long time, and four-year degree requirements are reassuring.
It’s like the hiring equivalent of a safety blanket – it’s hard to let it go. However, years of work experience only predicts job performance with 3% accuracy, while skills testing is almost 10 times as effective.
Now that’s the kind of math that can change the minds of even the most stubborn blanket-clutchers.
Indeed, the truth is that you cannot fully access the benefits of skills-based learning unless you unlearn these outdated hiring habits. By using resumes and degree requirements, you cut yourself off from a diverse range of applicants and this limits the effectiveness of the skills-based development strategies we’ve outlined above.
The research clearly shows that investing in employees helps them to stick around. And yet, many employers are still hesitant to take this approach for fear of seeing their investment walk out of the door when workers leave.
The problem here is that mistrusting your employees only makes them more likely to walk away. One study by PayScale showed that the more trusted staff feels, the happier they are and the less likely they are to search for other roles.
Withholding opportunities for employees to develop their skills and thus preventing them from progressing at your organization also naturally leads them to disengage from their work.
Only just over a third of workers said they were satisfied with the level of skills development made available by their current employer, and we’ve already seen that the availability of skills training is a powerful factor for candidates when considering a new role.
In this regard, investing in skills development kills two birds with one stone: Experts say it is one of the clearest ways you can show your employees that you trust them, deterring them from walking away; it also actively incentivizes them to stay by providing them with the skills to progress.
When used correctly, skills-based methods can inform not just your hiring or retention strategies but support all areas of strategic development in your organization. They can help you plan your resources to align with your business goals or respond quickly to periods of hardship.
Accepting candidates from a range of skills-based learning backgrounds helps you hire more diversely and create more diversity of thought within your teams.
This diversity of thought isn’t just good for putting together a company quiz team; it also increases innovation – by about 20%, according to Deloitte.
Finally, embracing skills-based learning for your employees throughout their professional lives informs the way that you create and promote leaders.
Moving staff up the ranks from entry-level positions into senior management based on their skills and expertise means your future leaders will marry institutional knowledge and experience with demonstrable skills.
It’s an investment in not just your employees’ futures, but the future of your organization.
In this blog, we’ve covered
What skills-based learning is
Why it’s become so important over the past three decades
Where it’s happening
Why you should embrace it
The challenges you need to overcome on the way
Now it’s time to get started. Throw out resumes and switch to skills assessments to hire and develop your employees.
To find out more about how education relates to skills-based hiring, read our blog about how we view the future of education.
To brush up on strategies for developing your workforce using skills-based methods, check out our guide to learning and development.
Or if you’re in the middle of a hiring push already, use our assessments to find the skills you’ve previously used a degree to signpost, such as critical thinking.
“The Talent Shortage”. (2023). ManpowerGroup. Retrieved April 02, 2023. https://go.manpowergroup.com/talent-shortage
“State of Upskilling Report 2022”. (2022). PluralSight. Retrieved April 02, 2023. https://www.pluralsight.com/resource-center/state-of-upskilling-2022
Drucker, Peter F. (September-October 1992). “The New Society of Organizations”. Harvard Business Review. Retrieved April 02, 2023. https://hbr.org/1992/09/the-new-society-of-organizations
“The Global Skills Shortage”. (2019). Society for Human Resource Management. Retrieved April 02, 2023. https://www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/documents/shrm%20skills%20gap%202019.pdf
“Highest Educational Levels Reached by Adults in the U.S. Since 1940”. (March 30, 2017). United States Census Bureau. Retrieved April 02, 2023. https://www.census.gov/newsroom/press-releases/2017/cb17-51.html
Marré, Alexander. (2017). “Rural Education at a Glance, 2017 Edition”. US Department of Agriculture Economic Research Service. Retrieved April 02, 2023. https://www.ers.usda.gov/publications/pub-details/?pubid=83077
“The Benefits of Employee Engagement”. (June 20, 2013). Gallup. Retrieved April 02, 2023. https://www.gallup.com/workplace/236927/employee-engagement-drives-growth.aspx
Bock, Laszlo. “Here’s Google’s Secret to Hiring the Best People”. (April 7, 2023). WIRED. Retrieved April 02, 2023. https://www.wired.com/2015/04/hire-like-google/
Henderson Brower, Holly, et al. (July 05, 2017). “Want Your Employees to Trust You? Show You Trust Them”. Harvard Business Review. Retrieved April 02, 2023. https://hbr.org/2017/07/want-your-employees-to-trust-you-show-you-trust-them
Bourke, Juliet. “The diversity and inclusion revolution: Eight powerful truths”. (January 22, 2018). Deloitte Insights. Retrieved April 02, 2023. https://www2.deloitte.com/us/en/insights/deloitte-review/issue-22/diversity-and-inclusion-at-work-eight-powerful-truths.html
Create pre-employment assessments in minutes to screen candidates, save time, and hire the best talent.
No spam. Unsubscribe at any time.
Our screening tests identify the best candidates and make your hiring decisions faster, easier, and bias-free.
This checklist covers key features you should look for when choosing a skills testing platform
This resource will help you develop an onboarding checklist for new hires.
How to assess your candidates' attention to detail.
Learn how to get human resources certified through HRCI or SHRM.
Learn how you can improve the level of talent at your company.
Learn how CapitalT reduced hiring bias with online skills assessments.
Learn how to make the resume process more efficient and more effective.
Improve your hiring strategy with these 7 critical recruitment metrics.
Learn how Sukhi decreased time spent reviewing resumes by 83%!
Hire more efficiently with these hacks that 99% of recruiters aren't using.
Make a business case for diversity and inclusion initiatives with this data.