The skills-based hiring train has left the station—and is gaining momentum as it barrels toward the future of work. This driver of change is reshaping how employers evaluate talent and how individuals prepare for opportunity, signaling a transformation in labor markets across the U.S. and around the globe.
The skills-based train is carrying a heavy load:
- Narrowing the skills gap by identifying individuals who can succeed in job roles, regardless of how or where they gained their skills
- Opening doors to jobseekers from diverse backgrounds who may have been overlooked by traditional degree-based hiring practices
- Using tools like skills assessments, training programs and job simulations to evaluate competencies
- Promoting lifelong learning, where employees gain new skills through industry certifications and on-the-job experience
Organizations worldwide are rethinking traditional college degrees and shifting attention to skills and competencies. As more employers prioritize hiring for demonstrated skills, we’re seeing rising demand for alternative credentials—certificates, badges, microcredentials and industry certifications—as validated indicators of job readiness. Increasingly, these credentials are being used in combination with traditional degrees to offer a fuller picture of a worker’s capabilities.
According to Mercer’s 2024/2025 Skills Snapshot Survey Report, the adoption of skills-based talent practices is accelerating. Surveying 1,100 HR leaders across 74 countries, Mercer found that organizations are embedding skills into core HR functions, from hiring and career development to compensation and promotion.
This journey comes with many challenges. Mercer identified these top three challenges companies are facing when adopting a skills-based approach: (1) limited HR capacity/capability; (2) the strain of excessive change; and (3) lack of funding or perceived increased costs. Interestingly, leadership buy-in, a key obstacle in Mercer’s 2022–2023 report, has dropped out of the top three, which signals a growing acceptance of the business case for skills-first models.
Some industries are farther along in this transformation. Data from the Burning Glass Institute and McKinsey spotlight sectors leading the way in skills-first practices:
- Information technology and software: Rapid innovation cycles and a high demand for specific technical skills make this sector ideal for skills-first hiring.
- Healthcare: With evolving roles in telehealth, informatics and patient care, health systems are expanding use of credentials to validate practical and clinical skills.
- Advanced manufacturing: Employers are using industry certifications and competency-based training to address workforce shortages in precision machining, robotics and automation.
- Finance and insurance: As fintech grows, roles demand digital literacy and analytical skills that aren’t always taught in traditional business degrees.
- Retail and hospitality: Especially for frontline roles, employers are using skills assessments and microcredentials to identify talent and support career advancement.
These sectors are not just adopting alternative credentials; they’re also tying rewards like pay, promotions and career growth to verified skill sets.
At the Learn & Work Ecosystem Library, we’re seeing this shift reflected in our growing collection of resources and partnerships. Notable signals include:
- Increased use of glossary terms related to skills validation, digital badges and microcredentials
- A rise in special projects focused on employer collaboratives, state policy innovations and platform developments like skills wallets and taxonomies
- Expanding education-employer partnerships centered around aligning curriculum design and hiring needs with skills-first principles
These signals indicate that skills-based hiring is no longer a niche strategy. It’s becoming a driver of change across the ecosystem.
One of the most revealing insights from the Mercer report is how organizations are mapping and assessing skills—evaluating a person’s ability to perform a specific task or set of tasks, often tied closely to job roles. While nearly three fourths of organizations (72%) still use job-based mapping and two thirds (65%) rely on manager identification of skills, only a fraction (8%) of them use AI-powered tools for these purposes. There’s clear room for innovation, especially as industries change rapidly and workers need to reskill quickly.
Skill assessments themselves vary widely. Mercer reports one third (33%) of organizations conduct them annually, about one fourth (21%) continuously, a small percentage (10%) twice a year, and 12% do not assess. Moreover, most skills assessments depend on self-assessment coupled with manager validation (69%), and one fourth (27%) of organizations make skill profiles broadly visible. These practices limit the strategic use of this data in a skills-hiring environment.
Despite challenges, many organizations are embracing multiple strategies to evolve their workforce development and skills-based hiring practices, such as (1) hiring external talent with verified, in-demand skills, (2) rewarding skill acquisition through pay premiums or promotions and (3) incentivizing lifelong learning with bonuses, recognition or advancement opportunities. These efforts point to a larger structural shift in how individuals learn, work and advance in jobs.
The movement toward skills-based hiring isn’t just transforming employer practices. It’s impacting all twelve components of the learn-and-work ecosystem:
- Alliances & intermediaries
- Career navigation
- Communications & technology
- Credentials & providers
- Data ecosystem
- Employers & workforce
- International developments
- Policy
- Quality & value
- Research
- Transparency
- Verifications & recordkeeping
The skills-based hiring train is barreling through every part of this ecosystem, driving cross-sector collaboration, experimentation, and transformation. As an information aggregator, the Learn & Work Ecosystem Library can play a watchtower role, monitoring this journey, tracking progress and equipping stakeholders with better information to navigate this fast-changing landscape.
Skills-based hiring is reshaping how individuals learn, how institutions credential and how employers hire. It’s not just a train on the move but an engine of change for the entire ecosystem.
You Might Also Like
