Across OECD economies, the currency of the labour market is shifting from traditional credentials alone towards a stronger focus on skills. Formal education and qualifications remain essential foundations for developing and signalling knowledge and skills, but they cannot always capture the full range of skills individuals possess or keep pace with rapidly changing skills demand. This has important implications for labour markets, as firms face talent shortages, while many workers report that their skills are underutilised. As adults increasingly acquire emerging skills through non-formal and informal learning, relying solely on degrees can narrow the talent pool. In a context where tasks evolve quickly and career paths are less linear, complementing qualifications and job titles with more granular information on skills can help identify the specific capabilities needed to increase productivity and drive innovation.
Skills-first approaches have gained traction, in the context of lifelong learning, as a way to better align the skills employers demand with those workers possess. These approaches place demonstrable skills at the centre of hiring, career progression, and training, with credentials reframed as a complementary structure that organises bundles of skills rather than serving as a proxy for competency. What began as experimentation within individual firms is now influencing workforce development systems, education and training policy, and career guidance services. The appeal of skills-first systems is not only practical but grounded in economic reasoning. Educational attainment can be an imperfect signal of productivity, particularly in fast changing environments. More granular information on skills can improve allocative efficiency by reducing information asymmetries between workers and employers. Skills-first approaches also carry distributional implications, as they can widen access to job opportunities for individuals without traditional credentials but with relevant competencies.
The shift towards skills-first labour markets requires a systemic transition rather than a single reform. It rests on two interdependent pillars. The first is skills development, understood as the continuous acquisition and updating of competencies throughout the life course. The second is skills recognition, meaning the capacity to signal, recognise, and value what individuals can do in ways that are fair and portable across contexts. These pillars depend on a broader enabling environment that includes data infrastructure, governance arrangements and cultural mindset to support and sustain skills-first approaches. No country has developed all components into a fully coherent system yet. Progress is uneven, with strengths and gaps distributed differently between skill development systems and skill recognition practices.
A common skills language forms a central component of skills-first approaches, which cannot be scaled without shared definitions of skills and consistent links to occupations, qualifications and learning outcomes. Countries have invested in skill taxonomies using a mix of expert judgement, stakeholder consultation and data-driven methods drawing on online job vacancies and leveraging artificial intelligence (AI). The United Kingdom’s Standard Skills Classification illustrates this approach by combining skill and task statements from multiple sources and linking them to occupations and qualifications, with stakeholders involved throughout to strengthen accuracy. Yet, the fragmentation of skills languages remains pervasive across the OECD. Skills are often embedded unevenly in occupational standards, qualification frameworks and non-formal learning systems, limiting transparency and mobility. Where skills are not consistently embedded in registries and user-facing platforms, learners struggle to navigate options, employers face higher recruitment costs and training providers lack clear signals of demand. Interoperability remains a central constraint.
Education and training remain largely organised around long programmes completed early in life. Skills-first approaches require re‑orienting these systems so that qualifications represent clearly defined bundles of competencies and support learning throughout working lives. Modularisation enables incremental and personalised learning pathways, but only where credit transfer, qualification frameworks and data systems ensure portability and stackability. For instance, in Finland and Sweden, higher education institutions offer modules that can be accumulated towards degrees, supported by legal frameworks. Micro-credentials build on this foundation by providing flexible and timely responses to emerging skill needs. Their value depends on transparent outcomes, robust assessment and integration within recognised quality assurance frameworks. For example, in New Zealand, micro-credentials are accredited by the New Zealand Qualifications Authority, which reviews programme design and assessment practices. Systematic employer engagement remains essential to ensure relevance, while a shift towards a culture of lifelong learning requires policies that address persistent barriers related to motivation, time and cost through active outreach, flexible delivery, training leave and targeted financing instruments.
Within firms, talent recognition practices are beginning to shift, though progress remains uneven. Recruitment and career progression continue to rely heavily on qualifications and professional experience as proxies for skills. Employers face practical difficulties in assessing skills reliably and at scale, while organisational norms and unconscious biases reinforce established practices. Where skills-first approaches are adopted, they tend to begin with pilot roles and are supported by emerging technologies that enable skill profiling, assessment and workforce planning. Cross-country evidence suggests that removing qualification requirements alone is insufficient to broaden opportunities. Inclusive skills-first hiring requires deliberate measures to address bias and create alternative entry routes that allow candidates of all backgrounds to demonstrate competence. Public authorities can support wider adoption, with particular attention to SMEs. For example, Japan has set out career progression pathways for several occupations, specifying the skills and proficiency levels required at each stage, while the United States has developed a practical toolkit to help employers navigate and implement skills-first practices.
Connecting the worlds of learning and work is essential to making skills-first systems function. Career guidance can help individuals interpret labour market trends through a skills lens and translate them into informed learning choices. Skills passports are also gaining ground. France and Singapore, for example, offer skills passports that combine administrative data on employment and training with skills information, enabling individuals to share verified records with employers, career counsellors and training providers. During the transition to a skills-first economy, recognition of prior learning remains important, particularly for mobility and progression in regulated professions, as it translates demonstrated skills into credentials. Ultimately, the effectiveness of skills-first approaches depends on sustained collaboration among governments, employers, training providers and social partners. Germany’s National Continuing Education Strategy provides one example of institutionalised multi-stakeholder co‑ordination by bringing together federal ministries, regional authorities, employers, trade unions and the public employment service to define shared priorities and align them with funding measures.