The shift to a skills economy from a knowledge economy accelerated during the COVID-19 pandemic and helped fuel the widespread job departures known as the Great Resignation. “Skills,” as one HR technology CEO recently noted, “are the new oil.”
The possession of desirable skills empowers many workers to seek new employers who pay better, more closely align with their values or offer a more rewarding culture. Understanding the nuances of the skills economy is beneficial to both businesses and job seekers.
Stepping back and taking a longer view of the skills economy can give employers a complete picture of workers’ skill sets and considerations that are important to job seekers to help ensure they make suitable hires. Meanwhile, job seekers can learn to help them identify core skills that may need upgrading and learn how to effectively highlight their transferable skills when applying for new positions.
What is a skills economy?
At its foundation, the skills economy is a landscape where a worker’s skill is more valuable than their formal education in the same field. Can your developer role be filled by a candidate who taught themselves code during the pandemic and can pass a screening test or do you require a candidate with a four-year degree?
Your answer can be limiting your talent pool.
A skills economy is based on the skill sets workers in a given industry are expected to possess and acquire as their particular occupation and field evolve. But as one early study of the concept notes, a skills economy also “incorporates the means by which the expectations of employers, employees and those outside the workforce influence the existing and potential skills base of a region.”
This latter point is a crucial distinguisher from a knowledge economy, which is based on industries and services that stem from intellectual capital and drive innovation and advancement. A knowledge economy favors traditional post-secondary degrees, collective intellectual capabilities over individual skill sets, physical inputs or natural resources.
One factor in the relevance of a skills economy today is a lack of qualified workers to fill skilled positions. Many job seekers possess knowledge of their occupation but lack skills at the level necessary to perform their work at top companies. And those who possess particular skills at a high level may need help connecting with the organizations that would benefit from their services.
This is where a workforce solutions agency can be a valuable partner to both employers and job seekers. A workforce management firm with diverse industry knowledge can help organizations find top-tier talent and help job seekers ensure they’re prepared for their roles, including directing applicants to additional training as necessary.
What triggered the transition to a skills economy?
The ideas of a “skills economy” and a “knowledge economy” have been around for decades. A skills economy has taken deeper root in reality in recent years as the pandemic forced changes in work models, contributed to millions of job losses and spurred countless laborers — both employed and unemployed — to re-evaluate their careers based on their skill sets.
These shifts have been accompanied by supply-and-demand and labor-market changes. Some of these fluctuations stem from natural evolution, others are cyclical, and others result from a global economy rocked by the successive impacts of the pandemic, the Great Resignation and skyrocketing inflation.
One recent column about the emerging skills economy cites multiple studies that show the fluctuations of cognitive skills’ significance in the labor market. The column also quotes renowned Harvard economist David Deming, who, in an earlier analysis of cognitive vs. soft skills in the labor market, wrote: “Strong cognitive skills are increasingly a necessary — but not sufficient — condition for obtaining a good, high-paying job. You also need to have social skills.”
But hard skills — cognitive skills — remain critical, especially in the wake of the Great Resignation, as many industries struggle to fill vital skill positions. Many employers are willing to provide training for job seekers who have a solid foundation of applicable core skills but aren’t quite capable of performing a job at the required level.
Future-proofing your workforce
Eric Wise, Founder and CEO of Stage 3 Talent offered insight into the future of jobs.
“In a skills-based economy, especially one driven by technology, training must be a part of the solution. Industries are evolving faster than the number and skill-level of today’s workforce. If talent can’t be hired, the most logical alternative is to cultivate the skills needed by upskilling the talent you already have.”
The skills-based economy is already here, and it shows no signs of losing momentum in the foreseeable future. And though it may require some adaptability, it is also rich with opportunity.
A 2021 Higher Education Today column about the new skills economy observed that bringing jobs and workers together today is about bridging a “disconnect between learners, education providers, and employers.” This bridge can be accomplished through strategic partnerships, emerging technology, and innovative ideas.
For example, job seekers often desire opportunities for continuing education and training to keep their skills sharp and learn new ones related to their careers.
Companies can partner with staffing agencies and education providers to offer reskilling or upskilling programs for their employees instead of seeking new talent because it costs less, improves recruiting and retention, and enhances culture.
Meanwhile, new technologies can allow job seekers to share verified data about their skills, including their education, related certifications, and ongoing training.
Recruiting skills-based talent
HR professionals are encouraged to consider transferable skills when recruiting talent in a skills economy.
Transferable skills are those that workers can utilize in multiple occupations. They can be a mix of hard skills — such as coding — and soft skills — such as interpersonal communication and problem-solving.
The move to a skills economy has also altered the application and interview processes, including how job descriptions should be formatted. Job descriptions in many localities today must include salary details, and an organization’s work model — home, in-office or hybrid — has also become a key factor. Then there are the specific skills the job demands and the other compelling reasons to work for the company (benefits, education opportunities, social engagement, etc.).
On the application front, some companies and workforce agencies are ditching traditional resumes in favor of video applications. Video interviews have also become commonplace, and they offer a chance for talent to articulate their abilities and personality quickly and effectively.
The Re-Imagined Recruitment Playbook
Over the past two years, we have captured hard won lessons learned across thousands of worker hiring engagements by our team of professional recruiters and distilled them into practical ideas that you can start using immediately. The Re-Imagined Recruitment Playbook is a step-by-step guide to help source, screen, select, onboard and retain talent in the New World of Work.