Exploring the disconnect: Digital credentials and employer demand

Past work at Brookings has explored the potential for new types of digital education credentials and learning and employment records (LERs) to enable learners to access additional education and career opportunities in support of their transition “from learning to earning.” Advocacy for the use and adoption of digital education credentials and LERs is part of a larger movement promoting more skills-based hiring. The ”skills gap” is real, and there are many things employers can do about it. By documenting not only where and what someone has studied or worked, but also what competencies a job seeker possesses, LERs are a mechanism explicitly meant to provide employers with insight into what potential employees can do. One persistent challenge inhibiting the widespread adoption of LERs has been one of supply and demand. To be blunt: There’s a lot of supply, but where’s the demand?

Supply vs. demand

According to Credential Engine, a nonprofit group that tracks and maps the credential landscape, over one million digital credentials are currently being offered in the United States by almost 60,000 different providers. Supply, then, doesn’t seem to be a problem—or at least not the most important challenge inhibiting adoption. A recent paper from the Aspen Institute suggests that, in many cases, credential providers are “designing products for which there is unclear demand.” Even if there is demonstrated demand for digital credentials and LERs from learners (a separate topic of discussion), for such credentials to have currency in the labor market, they must be valued by employers. Unfortunately, “much of the existing messaging supporting employer adoption of LERs for upskilling (for current employees) or skills-based hiring (for new employees) focuses on benefits for employers that are vague and unlikely to inspire continued interest at scale,” according to a separate study by the Aspen Institute. This same study laments that employers are “not engaged at all” or have “only been marginally consulted” in the development of many LER products and platforms. Numerous barriers to employer adoption are recognized in the LER literature, including those related to standardization, verification, quality assurance, legal and regulatory constraints, and internal company policies, both explicit and implicit. The ability to ingest and make sense of LERs within existing hiring and human resource (HR) systems is then further complicated by the fact that employers are not demanding that the makers of HR systems incorporate this functionality into their products—and so this has not (yet) happened. That said, this is not only a technical problem requiring a technical solution. The challenge is also cultural.

The demand for skills

The recent Opportunity@Work Summit in Washington, D.C., brought together employers, policymakers, nonprofit groups, and academics to explore ways to “rewire the U.S. labor market so that all individuals Skilled Through Alternative Routes (STARs) can work, learn, and earn to their full potential.” Among groups in the room committed to promoting more skills-based hiring, there was a notable disconnect between rhetoric about how hiring should, or could, happen in the future, and today’s reality. One Fortune 50 CEO noted that, at the entry level, his company mainly hires “for attitude and cultural fit.” The president of another Fortune 500 company followed up on a similar note, stating that, at the entry level, they hire for “attitude, will you show up? and will you work hard?” Interesting messages to kick off an event about skills-based hiring! Such sentiments are not out of line with other employers, large and small. A 2023 survey by ZipRecruiter, an American marketplace for job seekers and employers, found that two of the top three traits employers are looking for in potential hires are so-called “soft skills”: work ethic and enthusiasm for the role. When asked in the survey about the top three skills that are “most lacking in the candidates they interview,” employers cited “time management, professionalism and critical thinking.” Such skills are, for the most part, not those that are documented in LERs. Even so: By documenting some of the skills employers might desire in job candidates, might LERs help open doors for job seekers who don’t have formal degrees?

Dropping the requirement for formal degrees: Does it really make a difference?

Acknowledging that formal degrees may be poor proxies indicating whether or not a job seeker possesses these sorts of skills and recognizing that these skills can be acquired and developed through other means than traditional academic programs, many employers faced with staffing shortages have announced that they are considering eliminating formal degree requirements for many jobs. Some have already begun to do so — including many state governments.

That said, just because a degree requirement is dropped doesn’t mean that the successful applicant won’t, in the end, be the one with a degree. Recent work from the Burning Glass Institute suggests that, when it comes to skills-based hiring, there is a “long road from pronouncements to practice.” Just because a door is left open doesn’t mean that a job seeker can get through it. “Even when a degree is no longer required, it is still a heuristic hiring managers are likely to use to weigh a candidate’s strengths,” note the authors. Indeed, despite 50% of employers now saying they want to do more skills-based hiring, there has been only a 3.5% increase in the number of jobs that are filled without a degree requirement.

Who benefits?

Further complicating the picture: Many of the people who have earned LERs already have a formal degree. Research into who completes MOOCs (massive open online courses) and earns a related ”alternative” digital credential or LER, for example, has long shown that the large majority already have a bachelor’s degree, and most are employed full time. Given this apparent reality, it is worth considering to what extent LERs document “soft skills” of the type that degrees are traditional proxies for. Many higher education institutions leading the way in developing and offering LERs do so by mapping skills developed during the pursuit of traditional degrees. Some research even suggests that it is not the specifics of an LER that might be valued by some employers, but rather the fact that someone took the time and energy to get an LER credential—any digital educational credential—and by doing so is demonstrating ambition, self-directed learning, and persistence. Such findings complicate a straightforward narrative about how, and for whom, LERs might provide ”alternative routes from learning to earning.”

Employer perceptions of value

Where such pathways exist: With over one million digital education credentials and LERs in existence in the United States, how are employers to make sense of which are of value and which are not? For the community of organizations who believe in the potential for LERs, this is a nut still to be cracked. As job providers try to make sense of this abundance, four general categories of LERs are emerging in practice which employers appear to value, for better or for worse:

1. A digital credential or LER from a provider with an already well-known, established brand
   (i.e., the credential has value because the employer trusts the issuer)
2. A digital credential or LER aligned with a technical qualification that is already recognized and valued by the employer
   (i.e., the credential is valued because the employer recognizes what the credential is documenting)
3. A digital credential or LER that employees within the company already have
   (i.e., the credential has value because the employer has seen what its employees who have it are able to do)
4. A digital credential or LER that the employer itself offers
   (i.e., the credential is valued because it is from the employer)

A fundamental challenge for the almost 60,000 providers of digital education credentials and LERs across the U.S. is that many of them do not fit nicely within these four categories. Where providers are able to show value to employers, they may face an additional challenge related to public policy: to demonstrate that the value of their LERs can be realized not only for people who are already well served by traditional educational and employment pathways, but by all job seekers.

Looking ahead

Proponents of the adoption of LERs challenge us to “imagine a world where everyone is empowered to access learning and earning opportunities based on what they know and can do, whether those skills and abilities are obtained through formal or informal education or training, work experiences, or independent learning.” Given the persistence of the skills gap and longstanding challenges in providing more, and more equitable, opportunities for gainful employment in a rapidly changing labor market, such imagination is necessary if innovative approaches are to be developed and scaled up. Digital education credentials and LERs are potentially one component of such new and innovative approaches. But for them to be adopted at scale, much work remains to be done to convince employers of their value in signaling which job seekers are good fits for their needs.

Hiring is a messy process. Even when employers pursue more skills-based hiring, place less emphasis on formal degrees, and utilize LERs as part of the process, other factors—experiences, competencies, traits, attitudes, interviews, references—are still likely to be consequential. Going forward, where employers find value in LERs, and as these credentials help enable learners to access additional education and career opportunities in support of the transition “from learning to earning,” a larger, more fundamental question should arise, not only about what is or should be valued—but who?