Ask any leader if they’re struggling, or have recently struggled, to fill a position, and you’re likely to get some head nods.
U.S. job openings sat at 7.7 million in January 2025, we have an aging and quickly retiring workforce, and the industries that need workers – hospitality, public safety, health care – are not the ones people are trained for. What’s more, changing immigration policies continue to affect industries that traditionally rely on foreign-born workers.
This labor shortage and mismatch of education and training are causing companies and government agencies to rethink recruiting, casting a wider net and adopting a skills-based hiring approach. Gone are the days when hiring managers could ask for – and get – only college graduates with specific industry credentials. Now they must define the skills needed for each position, be willing to train candidates on missing skills and monitor changes in necessary skill sets to maintain an effective workforce.
“We have to change how we are searching for people today,” said Lesley Delgado, president of Strategic Recruiting Services in New Hudson, Mich. “The pool is limited. You’ve got to be very open-minded.”
What is skills-based hiring, and who’s doing it?
In short, skills-based hiring focuses on abilities rather than credentials. A February 2025 report from the public sector provides a clear definition: “Skills-based hiring aims to identify the specific knowledge, abilities and competencies that a candidate possesses and evaluate whether they match what is needed for an open role. This a shift away from the traditional way of evaluating candidates based on the colleges they attended, the degrees they earned and the job titles they have held.”
This report from the National Governors Association, entitled “Empowering Progress: Harnessing Skills-Based Strategies to Drive Public Sector Excellence,” details how more than half of state governments have issued formal directives on skills-based hiring, including eliminating degree requirements in government job postings, with the aim of widening the pool of candidates, reducing poor job fits when degrees are the primary filter, reducing turnover and increasing job satisfaction.
The report indicates that states adopting skills-based hiring policies saw a reduction in job postings requiring college degrees. For example, between 2022 and 2024, Maryland’s public sector job postings not requiring a degree went from 32% to 47%. In Colorado, where the governor enacted skills-based hiring and apprenticeship executive orders, job postings without degree requirements moved from 48% in 2022 to 58% in 2024.
Cole Napper, vice president of research and innovation for labor market analytics company Lightcast, said the private sector is following suit with skills-based hiring. Lightcast’s December 2023 joint study with BCG, entitled “Competence Over Credentials: The Rise of Skills-Based Hiring,” shows the United States leading the shift toward skills-based hiring compared to other countries. The study relies on Lightcast’s analysis of 22 million job postings that normally require a bachelor’s degree or equivalent.
The study shows a slow decrease (down 3.9%) in the number of U.S. jobs that required degrees from 2017 to 2022. Dell, Accenture, IBM and Amazon have embraced the trend, according to the study. However, at just under 80% of U.S. postings not listing degree requirements, the United States is ahead of other countries, which are holding on to degree requirements for the same types of jobs.
In Canada, the United Kingdom and Singapore, there’s a lesser shift and even an increase in requirements for college degrees. Singapore showed a 5.3% increase in college degree requirements from 2017 to 2022. Canada showed a 1.8% increase. The United Kingdom and Australia showed 1.8% and 1.6% decreases, respectively.
Trends driving skills-based hiring
There are four major trends driving skills-based hiring, or what the 2023 Lightcast report calls “tearing down the paper ceiling.” The first, as mentioned, is the labor shortage. The birth rate has decreased over time, people are aging and retiring, and unemployment is low, so companies struggle to fill positions.
Second is evolving employee expectations, making employees more mobile than ever as they seek flexibility and work-life balance. This creates competition among employers to hire and retain employees, so they must widen their recruitment efforts.
Third is the 70 million U.S. workers, according to Lightcast, who are “STARs,” or skilled through alternative routes. These workers don’t have bachelor’s degrees but have valuable self-taught or experiential skills. Screening these types of workers out by requiring degrees limits recruiting efforts.
The final and most multifaceted trend is rapidly changing technology. The Lightcast report states that 54% of college graduates don’t work in their original fields of study, and the jobs that will be available in the next decade might not even exist today.
“Organizations are understanding that skill change is happening faster than ever,” said Napper. His organization’s January 2025 report, “The Speed of Skill Change,” indicates that one-third of the required skills for the average U.S. job have changed over the past three years. It further indicates that 32% of required skills for average jobs are different in 2024 than they were in 2021, and that 75% of the skills have changed for the top 25% of occupations.
The pace of skill change is driven by three factors: generative artificial intelligence, green technology and cybersecurity. Generative AI permeates almost every industry, including non-technical roles like education and marketing, and the demand for AI skills is great. Lightcast reports that the number of generative AI-specific job postings has risen 15,625% over the past three years.
Green technology, related to clean and renewable energy, is also driving change and touching multiple industries. Lightcast reports that green skills, related to everything from installing solar panels to environmental planning and knowledge of electrical vehicles, have grown 31% from 2021 to 2024. Roles demanding sustainability skills have expanded to include case workers, data scientists and supply chain management positions.
Finally, the demand for cybersecurity has skyrocketed across multiple industries, surging over 570% in biomedical roles and nearly 400% among laboratory technicians. Napper noted that we’re also seeing cybersecurity among the skills desired for roles like career counselors, since they deal with sensitive data.
“The Speed of Skill Change” report provides a skill disruption index score (0 to 100) from 2021 to 2024 for certain occupations. STEM fields topped the list, with jobs like computer scientist, mobile applications developer, chief information officer and statistician showing scores of 89 or higher. Other fields with high disruption levels were clinical data systems specialist or manager, with a score of 73, followed by data scientist at 71 and validation engineer at 69. At the lower end of the scale were dishwasher and cook, with scores of 7, and drywall installer or finisher, with a score of 10.
Industry outlook
Which industries show the greatest shift toward skills-based hiring? Lightcast’s December 2023 report provides data on five countries’ practices, based on requirements listed in job postings in 2017 versus 2022.
In the United States, agriculture, horticulture and outdoor jobs showed the greatest decrease in college degree requirements, followed by law, compliance and public safety; transportation; construction, extraction and architecture; and manufacturing and production. Customer and client support, engineering, and science and research, showed the lowest percentage change.
Globally, engineering is the only field that has four out of five countries increasing the demand for degrees. Occupations in community and social services, health care and hospitality showed decreases in degree requirements across all five countries studied. That’s not surprising, given labor shortages in jobs like counselors, medical support roles and restaurant workers.
Degree requirements also decreased in at least four of the five countries for education and training roles (primarily support roles like school directors and administrators) and for construction, extraction and architecture (think landscape designers, architects and construction managers that were traditionally college-level positions).
The research shows a mixed picture for sales and marketing, manufacturing and information technology, where Singapore, Canada and United Kingdom show increases in degree requirements. The United States shows a modest decrease (2.7%) in degree requirements for information technology workers, and Australia shows only a .2% decrease.
An “extreme” IT example
Skills needed for information technology roles are rapidly changing, and, according to Lightcast, companies in the United States, the United Kingdom and Canada are loosening their formal education requirements for degrees in this area. One software company, Menlo Innovations in Ann Arbor, not only does not require degrees, but eschews resumes and traditional interviews in its recruitment process.
“Our selection process is interesting,” said Rich Sheridan, CEO, chief storyteller and tour guide for Menlo Innovations. “We look for an ability and a willingness to learn. We’re looking for a more complete version of a human.”
Menlo applicants begin by attending a two-hour “extreme interview” with 30 to 40 candidates working in pairs on a company project and observed by Menlo employees who have no access to the candidates’ resumes.
In that first interview, we’re looking at collaboration skills and an ability to adapt to a rapidly changing environment, said Sheridan. “It’s a very adaptable and scalable process. If we have 20 candidates, we need 10 observers. If we have 40, we need 20.”
Candidates who progress to the next round are invited to work a full day for pay. They’re paired with one person for half of the day and another for the other half, which mimics Menlo’s environment, where employees always work in pairs and change partners regularly.
The second interview reveals skills — and not just which programming languages you know, said Sheridan. “We may put you on a different programming language from the one you know. We’re looking for a willingness to say, ‘I don’t know.’”
After the second day, three votes emerge on whether to hire the employee — the two employees paired with the candidate and the candidate — Sheridan explained. Menlo is not for everyone, and it’s important candidates understand and try out the environment.
The final step in the recruitment process is a paid three-week trial. “Now we’re seeing your learning skills,” said Sheridan. “We’re looking for a growth mindset.”
While resumes are used in the process of inviting candidates for the initial group interview, they’re not the main source of information on the candidate, said Sheridan. “An 8½- by-11 paper can say a lot and say a little. We’re more reliant on your ability to demonstrate skills.”
Menlo’s recruiting process allows the company to find employees who might be filtered out in traditional recruiting methods, like one employee — now a team leader — who at first struggled with the extreme interviewing process but persevered. Asked why he was so interested in working at Menlo, he said it was because he was a self-taught programmer with no formal education, and most companies wouldn’t consider him.
Another benefit to Menlo’s process is team building. Where other organizations build teams of people hired by managers, Menlo empowers employees to choose their own teammates, since they’re the ones voting on hires. “The team is building the team,” said Sheridan. “If they’ve chosen the person, they’re more committed to making it work.”
The role of higher education
Are college degrees headed toward obsolescence? Not necessarily, but they might evolve over time.
Asked how higher education fits into Menlo’s recruiting process, Sheridan had this to say: “We don’t filter on it, but we certainly appreciate it.” Those with degrees sometimes demonstrate more well-rounded skillsets, but that’s not always the case, he said.
Sheridan went on to say that diplomas are less important than persistence and a willingness to learn. Case in point: Menlo has a number of PhDs on staff, but their degrees are in other research fields, where programming was a part of the research process that they became interested in.
Where a doctorate degree might be a detriment to obtaining certain positions — with concerns about overqualification and a demand for higher salaries — Sheridan sees determination and patience in these candidates that can be put to good use. “This is a patient group of learners,” he said, going on to note that they are used to wading through documentation and other self-directed education.
And even with all its talk of the “death of the degree” and the rising costs of higher education, Lightcast sees enough value in higher education to help colleges adapt to changing skill demands. A product called Skillabi helps educators identify the skills employers most need and adjust their syllabi, or coursework, accordingly.
Effects of skills-based hiring
For employees, skills-based hiring helps make the recruiting process more inclusive and can improve career mobility and job satisfaction. For employers, it not only broadens the pool of candidates, but can also help reduce turnover by better matching candidates to roles.
“It makes hiring more cut and dry and increases operational continuity and efficiency,” said Napper. “You can find the people you need more easily.”
Delgado agreed: “The wider net you cast, the better your opportunity to find who you’re looking for.”
Lightcast’s December 2023 report notes that skills-based hires were typically better problem-solvers and more loyal. They had a 9% lengthier tenure than traditional hires.
Skills-based hiring is also causing companies to change their organizational structures, said Napper. “A lot of organizations are pushing for more flat and team-based structures,” he said.
That’s true of Menlo, said Sheridan. “We’re flatter and more flexible. This gives us a nimbleness most organizations would envy.”
“We can ask people to do different things,” said Sheridan. For example, Menlo has a programmer who’s recently become interested in business operations, so he’s doing some project management, which benefits both Menlo and the employee.
Putting skills-based hiring to work
Napper noted that hiring based on skills is just one part of becoming strategic about skills management, which involves breaking down the skills needed for each position, monitoring changing skills, and aligning development and education programs with the skills needed to advance company goals.
If that sounds like a lot of work, you’re right. The National Governors Association study identifies challenges to skills-based hiring, including the need for data and assessment tools to support talent management, plus an investment in training. In other words, it’s not just about changing job descriptions; it’s about changing how your organization recruits and manages talent.
The “Competence Over Credentials” report provides five practical tips for skills-based hiring:
• Challenge biases in talent acquisition. Consider whether college degrees or certificates are really needed for each position, remembering that candidates may have acquired skills through experience or self-learning.
• Understand the skills you need. Examine each role and identify specific skills, including those less often listed in job descriptions like collaboration and communication. Understand which skills are essential to each job.
• Assess skills. Look for ways to get proof of skills, including microcredentials, like learning badges from online courses, and skill tests or role playing. Find ways to allow candidates to demonstrate what they know.
• Break down cultural barriers. Look for ways to eliminate unconscious bias toward candidates with degrees and be open to considering candidates with non-traditional backgrounds and experience.
• Stay skills focused. Continue to focus on skills past the hiring process. Regularly evaluate employees’ skills, offer training or upskilling, promote based on skills and be aware of new or emerging skills necessary to meet organizational goals.
