Overcoming a Misaligned Labor Market: How Employers Are Evolving Hiring and Taking a Skills-Based Approach

For nearly a decade there have been more open jobs than unemployed workers. While economists, policymakers and researchers work to understand and close these gaps, employers continue struggling to find talent aligned with their needs, which impacts business productivity, profitability and growth.  

In reviewing unreleased data from our 2024 Employability Report, which analyzed the state of employability from the U.S. graduate and employer perspective, we found that a “lack of career readiness” is creating a hiring disconnect and limiting the talent pool. 

This disconnect puts more pressure on an already volatile, misaligned labor market where — despite indications of a cooling labor market confirmed by the recent BLS Jobs Report and Job Openings and Labor Turnover Survey data — 3 in 4 employers are still hiring the same amount or more entry-level positions this year (73%). With 7.2 million unemployed Americans, employers should have the upper hand in the labor market; yet a staggering 45% of employers admit they can’t fill open roles.  

Why? Gaps in career readiness. 

Two in 5 (39%) grads, up from 33% in 2023, did not even apply to entry-level jobs because they felt underqualified, with 35% saying it’s because they had some but not all the skills listed in the job description — drastically decreasing the talent pool for companies.  

 

As a result, employers are evolving hiring parameters and evaluating candidates more closely on skills and competencies. Half of employers believe that dropping degree requirements is helping them find more qualified talent (45%), and within the last year, admit they have seen more candidates with non-degree credentials versus a traditional degree apply to jobs at their company (52%).

 

When it comes to skills and competencies, employers believe candidates can attain the proper workforce skills through life experiences, internships, skills training credentials, stackable credentials and hands-on experience outside of an institution (44%) or they can be trained or taught on the job (26%).  

This belief aligns with companies’ shift to skills-based hiring to fill specific skills gaps (77%) with talent that has transferable skills (76%) or industry certifications and credentials (versus a 2- or 4-year degree) (67%). Employers are also taking a more holistic approach to a skills-forward workplace as 63% of employers report they offer internships or cooperative education programs, 67% participate in networking events or career fairs and 55% partner with educators to align curriculum with in-demand job needs. In 2023, only 49% of employers partnered with a college, university or workforce organization to identify and hire apprentices. 

 

The misaligned labor market – where there are far too many unemployed workers who don’t possess the career readiness and skills needed for today’s workforce – is pushing employers to reconsider hiring requirements and develop more strategic and impactful hiring strategies.  

But aligning the labor market to meet the needs of employers and the future of work requires a collaborative effort from policymakers, educators AND employers. It is not a task that employers can solve on their own – yet it is one they are making notable strides in addressing. By understanding how career readiness and skills-based hiring can impact our workforce, employers have started to solve some of the talent gaps in our labor market and make meaningful strides toward the future of work. 

 

To learn more about how employers are building their workforce and how educators are also adapting in different industries, read our blog: How Healthcare, Technology and Manufacturing Employers Are Evolving Employment Requirements and Expectations.