Skills-Based Hiring Revolutionizes Opportunities for Young Workers

Young people around the world face extensive barriers when entering the labor market: rapidly changing industries driven by AI, the need for digital skills, the energy transition and nearshoring, underperforming education and training systems, the aftershocks of a global pandemic, geopolitical strife, and gender inequities, to name a few.   

But there’s good news. The job market has the potential to become more inclusive by shifting its focus from traditional college degrees to young people’s skills and capabilities. This is where the skills-based hiring approach comes in, a game-changer in the world of talent acquisition. 

The Rise of Skills-Based Hiring 

A college degree is often valued as the golden ticket to a well-paying job. But attaining one is an exclusionary process. Marginalized groups frequently face financial barriers, including prohibitive tuition and living expenses – as well as the opportunity cost of continuing their education rather than earning income. Educational resources are often concentrated in urban areas, disadvantaging rural students. Educational disparity is no myth: globally, more than 250 million children and adolescents remain out of school.

While reducing barriers to a college education should remain a top priority, employers can also advance inclusion through skills-based hiring– prioritizing candidate’s skillset and specialized knowledge as the most important determinants of success. According to the World Economic Forum, on average, talent pipelines can increase by nearly ten times when using a skills-first approach.   

The competency-based approach is on the rise. In 2023, according to a study by TestGorilla, the Dutch talent assessment firm, 73% of employers worldwide used skills-based hiring, up from 56% the previous year.

Employers also take note that a college degree doesn’t always translate to excellent job performance. McKinsey and Company recently reported that skills-based hiring is five times more predictive of job performance than hiring for education, and more than twice as predictive as work experience. Skills-based practices help employers find the most ideal candidates and retain them during a time when economic challenges have intensified due to factors like the COVID-19 pandemic. 

Other Benefits of Skills-Based Hiring 

It fosters a more inclusive workforce: The main benefit of skills-based hiring is it opens doors for people who face barriers to higher education, including women and people of color. By focusing on skills rather than degrees, employers open the hiring floodgates to a more diverse pool of candidates. 

It can improve organizational efficiency: LinkedIn data shows that employees without a four-year degree stick around at companies 34% longer. It can help employers find candidates who are more suited for the position longer-term, which could decrease an organization’s turnover rate. 

Capital Juvenil Program: IYF’s Case Study of Success 

IYF’s Capital Juvenil Program is a shining example of skills-based hiring in action for young people. Partnering with Bécalos and the Asociación de Bancos de México (ABM, for its acronym in Spanish), IYF challenged the norm that bank tellers in Mexico must have a college degree to be employed. 

Historically, banks in Mexico required their bank tellers to have college degrees, creating unnecessary challenges for young applicants with the skills to perform the job but lacking formal credentials. This reality differs from many other countries, where high school graduates are deemed qualified to work as bank tellers. Many compounding structural barriers exist for young people in Mexico trying to attain a college education, such as gender disparities, economic and geographic inequality, and limited infrastructure. As result, only 21% of young people in México aged 25-64 have a tertiary level education.  

Despite these significant hurdles, IYF was determined to work alongside Bécalos and ABM to make a concrete impact and directly benefit young workers. Bécalos, IYF’s long-term trusted partner, encouraged the board of directors of ABM to start a pilot program for skills-based hiring. Thanks to Bécalos’ generous funding and our shared vision, IYF and ABM fostered systemic changes and contributed to training materials and tools, industry showcasing, and more inclusive recruitment processes that recognize youth as equipped with a core set of skills, who would have otherwise been overlooked in the job market. These changes were driven by the strong commitment of the HR departments at major banks in Mexico to rethink the current methods of hiring new talent. IYF, ABM, and Bécalos successfully demonstrated the value of these efforts through an economy of scale. 

José Antonio Lance, a recruiter at the Mexican banking and financial services holding company Banorte, even commented, "The truth is, we were pleasantly surprised. In our case, we interviewed a large number of candidates, and we were genuinely impressed with their profiles. Our branch staff was delighted with many of them, to the point that they practically wanted to hire them all." 

 

Most importantly, this program was transformative for its students. Rosaura Aguirre Estevez, a graduate of El Colegio Nacional de Educación Profesional Técnica (CONALEP) emphasized the program’s impact on her own life: "I had never been in a job interview before. However, I think it really helped that the recruiters knew they were working with young people... After I went through my first interview, I didn’t feel nervous, and in fact, my first interview was with HSBC Bank. And that's where I stayed. They recruited me right there." 

 

IYF’s Unique Approach: 

Curriculum Development: In three Mexican states, IYF collaborated with major banks to create industry-specific curricula, train instructors, and launch a pilot program for skills-based hiring. IYF introduced this curriculum in more than 20 TVET campuses across five Mexican states and elevated their capacity through training educators. 

Pinpointing Challenges: IYF identified the HR-policy roadblocks that kept talented young individuals from breaking into the banking sector, traced these issues back to HR-policy barriers, and shared these findings with bank executives. 

Bridging the Labor Market Gap: The Capital Juvenil Program included labor market training and direct engagement with banking institutions. It set participants up for success with real-world experience. The program has already empowered 2,200 youth to fill some of the 45,000 entry-level positions that the industry demands each year.  

Looking Ahead 

IYF plans to use the skills-based hiring approach of the Capital Juvenil Program as a springboard to design future programs that break down barriers and create more opportunities for young people to thrive based on their unique skills.  

To discuss this topic at greater length, please contact Kaitlyn Anderson, Coordinator of Corporate and Foundation Partnerships, at [email protected].