Research has shown that around 70% of organizations are currently suffering from some form of skills shortage. With the Covid pandemic prompting many to leave the workforce, the problem has only become more severe.

Our research has shown that millions of workers are overlooked for roles they could adequately perform due to factors that are largely unrelated to their ability. For instance, they might have disabilities, mental health problems, or a criminal record. Evidence shows that there are millions of “invisible” workers across the economy that are not being utilized by organizations today.

A skills-based approach

In their latest Human Capital Trends report, consulting firm Deloitte argues that a skills-based approach would help to fill that gap. It’s an approach that Deloitte have helped to spread via the OneTen initiative, which is a coalition formed in 2020 by 37 founding companies to help one million Black individuals advance despite not having a four-year degree.

Research from Berkeley demonstrates just how important a goal this is, as Asian and white men tend to do considerably better than Black men and women without a college education. Indeed, the researchers found that young Black men without a college education earn around half what their Asian American and white peers earn.

“Earnings are an important factor to study because they’re related to other outcomes, like health, engagement with the criminal justice system and family development,” the researchers explain. “So we focus on the non-college population at an early age. They are already disadvantaged economically — they have very low earnings. If there’s a sizable racial or ethnic earnings disparity in this population, there may be severe consequences.”

The researchers estimate that around 1 million young people enter the job market each year with just a high school education. This is a problem as the labor market increasingly requires advanced skills to even earn an average salary. It’s a group in which Black and LatinX people tend to be over-represented.

Systemic barriers

The team behind OneTen believes that the credentials that so often form the basis of hiring today represents a systemic barrier and that a more skills-based approach would be fairer as well as more effective for organizations.

They highlight that too often we perceive skills and credentials as being one and the same, but that’s seldom the case. This has placed those who haven’t been able to get a degree at a clear disadvantage in the labor market as those with credentials are nearly always chosen ahead of them, even if they have more relevant skills to offer.

With an estimated 70 million people across the United States “skilled through alternative routes”, the untapped market is considerable. What’s more, the upward mobility of these people is far less than that of their peers with degrees.

Mapping skills

The U.S. Navy provide an example of what can be done. Their MilGears platform allows both service members and veterans to capture any skills that are acquired via on-the-job experience, education, or training. These skills are then linked to the O*NET framework, which connects those skills with jobs across the economy.

The platform allows service members to log their credentials, determine any skills gaps they may have, and then use their profiles to help them effectively plan for their post-military careers.

Of course, credentials provide a shortcut for employers to use when gauging the skills of individuals, so it’s vital that new and simpler ways are developed to tease out insights about the skills candidates possess and the learning we do regardless of where and how we do it. The MilGears platform offers an example of how this might emerge.

A smarter approach

Deloitte clearly believe a skills-based approach offers benefits to employers too. For instance, workers are commonly now working outside of the narrow confines of their job description, with work increasingly performed across boundaries.

They also believe that a skills-based approach makes it much more likely that talent is placed effectively, with this in turn making it more likely that talent will be retained as their abilities are being better utilized and developed.

Indeed, in their skills-based organization survey, 75% of executives said hiring, promoting, and deploying people based on skills can help democratize and improve access to opportunities. 

Relying on degrees and other credentials to gauge our ability is a blunt instrument for truly understanding what people are capable of, of course, so there are clear benefits for employers of focusing more on skills rather than credentials. A skills-based approach to recruitment not only promises to be faster and more effective but also fairer as resumes no longer need names, years of experience, or the various other things that may bias our decisions.