Can Alternative Credentials Help Correct Labor Market Imbalances?  

Latin American employers cannot find the workers they need. Workers lack the right skills, but they don’t have time or resources to participate in training. Micro-credentials, a type of alternative credentials, could be a solution, given their targeted nature, as they can increase the number of workers with a specific skill. But, for micro-credentials to be a real solution, some challenges must still be addressed. How are other countries addressing these challenges? 

Mismatch Between Employers and Workers 

Over 60% of Latin American employers struggle to find the right employees. Employers often need digital or transversal skills, which may be hard to find or to assess. 

On the other hand, almost 60% of Latin American adults do not participate in training. Cost, followed by lack of time, are among the most cited barriers to participate in further education or training, along with a lack of awareness.

What Can Micro-Credential Offer To the Labor Market?

Micro-credentials are a potential solution to correct labour market imbalances as they:

1. Can be rapidly developed and deployed.
2. Can provide a solution in cases where a prospective employee has a deficit in one particular required skill.
3. Can be useful for surfacing and signaling existing skills.
4. Allow professionals to continuously upskill in small amounts, mitigating the risk of obsolescence of skills.
5. Could increase participation in training by reducing its cost in countries where formal education is expensive, such as in some Latin American countries, and the time needed to complete it.

Micro-Credentials are Widespread in Some Fields but Could be Used More Broadly

Many governments and private players, such as Google or Microsoft, already offer micro-credentials for digital skills. In France, for example, the Pix initiative is a public online service for assessing, developing, and certifying digital skills. Micro-credentials were also developed in the fields of nursing, teaching, and green recovery during the pandemic in countries such as Denmark and Australia.

Transversal skills and basic skills could also be developed and certified through micro-credentials. Certification of transversal skills would be especially useful for youth Not in Employment, Education or Training (NEET) and for adults who have already left the education system. Some online tools, such as the OECD Skills Profiling Tool, already assess and signal existing transversal skills, but do not offer certification. In addition, the development of basic skills through micro-credentials could benefit adults who lack the literacy and numeracy skills needed to enter or advance in the labour market, such as migrants and refugees who may lack host-country language skills.

Some challenges must still be addressed for micro-credentials to reach their full potential.

Micro-credentials must be:

1. Of high quality,
2. Recognized in the labour market,
3. Stackable, with the option to be combined into larger credentials,
4. Portable, allowing their holders to have micro-credentials recognised by institutions other than the awarding institution and
5. Known and used by adults.

Countries That Are Making Progress in Regulating Alternative Credentials

To address some of these challenges, some countries are regulating micro-credentials. However, the right framework for micro-credentials depends on the specificities of each training market.

In 2018, the New Zealand Qualifications Authority created a quality assurance system for micro-credentials, defining them in specific regulations and setting their quality standards. In New Zealand, micro-credential programs are defined as a stand-alone education offering and feature compulsory employer involvement, ensuring employer recognition of micro-certifications.

In June 2022, the Council of the European Union (EU) adopted the Recommendation on a European approach to micro-credentials for lifelong learning and employability thanks to which micro-credentials will be developed, used and compared in a coherent way in EU Member States across different actors, sectors, fields and borders. It sets out a European approach and emphasizes the potential use of micro-credentials for upskilling, highlighting the importance of portability and stackability.

The Challenge of Making Micro-Credentials Known

Portability and stackability remain an issue for credentials uniquely developed by the private sector. Consequently, alternative credentials need to leverage the collaboration between private employers (as providers and users of credentials) and education institutions.

This collaboration, additionally, has the potential to ensure a good alignment of the content of micro-credentials with labor market needs and leverages the benefits involving education institutions: being able to articulate micro-credentials into credit towards degree programs and quickly integrating new knowledge into education programs.

Finally, for micro-credentials to be useful, workers and job-seekers must be aware of their existence and labor market value. To this end, career guidance is a crucial policy instrument. It can identify skill gaps and opportunities to fill those skill gaps, for example, using micro-credentials.

Alternatively, workers can become aware of micro-credentials through informative course catalogues, such as the system within the French Compte Personnel de Formation (individual learning account). This catalogue provides an assessment of the skill level through self-reported information, in addition to the course catalogue.

Read How Can Alternative Credentials Help Close the Skills Gap?, the first entry of these series here. Learn more from our co-publication with Workcred “A World of Transformation: Moving from Degrees to Skills-Based Alternative Credentials.” Watch our webinar and panel discussion with experts from OECD, Google, Coursera, Laboratoria, and Tec de Monterrey, and stay tuned and follow our blog series on education, economic opportunities, and #skills21.

Micro-credentials could be a solution to support lifelong learning and help employers find the skills they need. How are alternative credentials used in your country? Let us know in the comments section below!