Employability, the Labor Force, and the Economy

Narrowly defined, the term employability is a product consisting of a specific set of skills, such as soft, hard, technical, and transferable. Additionally, employability is considered as both a product (a set of skills that “enables”) and as a process that “empowers” an individual to acquire and improve marketable skills that can lead to gainful employment.

Key Takeaways

  • Employability is a product consisting of a specific set of skills, such as soft, hard, technical, and transferable.
  • It is also considered as both a product (a set of skills that enable) and as a process that empowers an individual to acquire and improve marketable skills that can lead to gainful employment.
  • For labor/human capital to be used efficiently, it warrants the acquisition of knowledge, skills, and capabilities that employers need in our current economic times and knowledge-driven economy.
  • From a macroeconomic perspective, a lack of employability contributes to both frictional and structural unemployment and affects the productivity of the labor force.
  • If individuals are not employed, they are not spending, which means businesses do not invest in capital and labor or try to expand to meet consumer demand. This translates into an economic slowdown and increasing unemployment.

What Is Employability?

Employability is the lifelong, continuous process of acquiring experience, new knowledge, purposeful learning, and skills that contribute to improving your marketability for enhancing your potential to obtain and maintain employment through various shifts in the labor market. It is based on a set of individual characteristics.

It is not equivalent to employment; rather, it is a prerequisite for gainful employment. Essentially, employability is your relative ability to find and stay employed, as well as make successful transitions from one job to the next, either within the same company or field or to a new one, at the discretion of an individual and as circumstances or economic conditions may dictate.

Employability will vary with economic conditions, although there are some exceptions in professions insulated from economic fluctuations, such as healthcare, education, and defense sectors. It applies to almost everyone who is part of the labor force, as the ability to obtain, maintain, and switch employment over time is imperative to anyone’s survival as well as success in life. You must have a set of skills that are usable in the labor market.

Understanding Employability and the Economy

Each factor of production is used differently, and labor or human capital can be used either in the process of manufacturing a product or providing a service within an economy. The distinction between labor and capital may relate to the fact that labor usually refers to blue-collar laborers/workers, while human capital generally means white-collar workers.

Labor and human capital are in limited and scarce quantities. For labor/human capital to be used efficiently, it warrants the acquisition of knowledge, skills, and capabilities that employers need in our current economic times and knowledge-driven economy.

Firms and businesses are running leaner, with fewer organizational layers, and they are prone to rapid restructuring, striving to adapt to their shareholders' profit-maximizing goals (stock price appreciation and dividend growth), meeting their constituents’ needs, and surmounting the challenges of the ever-changing business landscape.


The U.S. unemployment rate as of March 2022.

This changes and limits the need for redundant and bureaucratic careers even in government-held jobs. Your employability is of high importance, as it not only provides gainful employment but it is also a contributing factor to your personal well-being and growth.

From a macroeconomic perspective, a lack of employability contributes to both frictional and structural unemployment and affects the productivity of the labor force. This subsequently impacts a country’s standard of living, as measured by the gross domestic product (GDP) per capita, and its potential for economic growth, as measured by aggregate demand and the GDP.

The component that has the largest impact on GDP and economic growth is consumer spending. If consumers are not spending on purchases of goods and services, businesses do not invest in capital and labor or try to expand to meet consumer demand. This translates into an economic slowdown and increasing unemployment, conditions that set the stage for an economic recession.

Therefore, employability is vital to a nation’s labor force and society’s well-being. Economists and policymakers argue that upgrading your skills can prevent both blue-collar and white-collar workers from being crowded out. Low-skilled, manual labor/task (blue-collar) workers working indoors or outdoors can also benefit from changes in the demand for skills, if they receive additional training.

This also applies to human capital (white-collar skilled labor), who usually have a more accomplished educational background and utilize skills for performing tasks in professional jobs, often in an office setting, by pursuing additional higher education and professional development, such as certifications or other credentials related to their respective field.

Meeting the Demand of the Labor Force

One important component of employability is the ability of workers to meet the demands of the labor force. It requires the continuous upgrading of skills, especially in sectors that experience rapid technological and organizational change, to help avoid obsolescence.

Some of the most highly sought after skills include:

  • High IQ workers with higher education, academic skills, and broader transferable skills
  • Increased self-awareness about an employee’s strengths and weaknesses
  • Strong work ethic and a positive attitude
  • Analytical/critical thinking and problem-solving
  • Communication
  • Cultural competency
  • Social and digital technology skills
  • Team players with self-confidence who have the ability to learn from criticism
  • Flexible, adaptable workers who can work well under pressure

You should try to acquire a specific skill set based on what is in demand but also with consideration of your personality, likes and dislikes, and relevancy to your field of work/profession. Otherwise, your career could be short-lived.

The Actors of Employability

There are a number of actors concerning employability and they are divided into primary and secondary categories.

  • Primary actors – These are employers and employees.
  • Secondary actors – These are the educational system and its representatives: schools, colleges (both technical/community and four year), and universities, as well as their constituents, plus legislation that will have an impact on employers, workers, and educational institutions.

Are labor unions also considered an actor of employability? The answer depends on whether they have an impact on blue-collar workers’ employment, whether positive or negative, based on union negotiations with employers/management, as well as the type of profession that may or may not be affected by labor unions, such as white-collar workers, management, etc.

Your employability is also affected by the degree of employability of others, as how employable you are is relative to other job applicants. A high supply of candidates with similar qualifications does not improve your employability when competing for a specific type of job or position.

The Skills of Employability

Employability consists of numerous components or skills, such as technical, nontechnical, transferable, nontransferable, context-dependent, context-independent, and metacognitive.

Technical Skills

Often referred to as hard skills, these tend to be more tangible skills, specific to certain types of tasks or activities that can be defined and measured, such as being considered an expert in a field. Examples include proficiency using software applications (such as spreadsheets and databases), data-entry skills, operating machinery, speaking foreign languages, and the efficient use of math.

Nontechnical Skills

Also referred to as soft or transferable skills, these include personality traits, such as optimism, common sense, responsibility, a sense of humor, integrity, enthusiasm, attitude, and ethics, and skills that can be practiced, such as empathy, teamwork, leadership, communication, good manners, negotiation, sociability, ability to teach, and attention to detail.

With the advent of technology, increasing your skill set has become significantly easier. Many universities offer certificates and degrees that can be completed online. In addition to universities, there are numerous other institutions and organizations offering pathways for people to improve their skills.

Transferable Skills

These are high-order skills that enable someone to select, adapt, adjust, and apply other skills to different situations, in different social contexts, and across different cognitive domains. They can be utilized in almost any type of job or profession, are portable from one job to another, can be improved and enhanced, and are generally not learned in school.

An example of a transferable skill would be social skills: working well in groups and with others. They are very sophisticated and consist of personal and intellectual achievements that are more attuned to professional behavior. This specifically includes disciplinary content, disciplinary skills, workplace experience, workplace awareness, and generic skills.

Nontransferable Skills

Nontransferable skills place limitations on their applications to specific types of jobs, industries, or sectors of the economy, thus limiting the number of jobs on which they can be applied. One example would be certain types of computer skills pertaining to a specific (or proprietary) type of software or program.

Metacognitive Skills

A set of skills engaged in everyday activities, these are associated with intelligence and enable individuals to be successful learners. Metacognitive skills are transferable and refer to higher-order thinking skills that involve active control over the cognitive processes engaged in learning. Examples include:

  • Planning how to approach a given learning task
  • Monitoring comprehension
  • Evaluating progress toward the completion of the task
  • Taking appropriate and effective action
  • Explaining what they are seeking to achieve
  • Living and working effectively with others
  • Continuing to learn from experiences, both as individuals and in association with others in a diverse and changing global society

Cultural Competency Skills

Another skill set that is both soft and transferable is the cultural competence of the workforce. This refers to your ability to work harmoniously and productively with people from other cultures as the labor force becomes increasingly diverse.

Linguistic Skills

Linguistic skills go hand in glove with cultural competency skills, as they provide the ability to speak a foreign language and communicate in another culture’s native tongue, which helps the process of understanding another culture’s mentality and way of thinking.

Networking Skills

Technical progress and evolutions in communication, such as online social media, have reemphasized the need for networking skills in both social and business areas. Developing and/or belonging to a social or business network (preferably both) can be of great help when you want to change jobs or pursue a new career opportunity.

Three Areas of Process

Is employability considered to be a process, a product, or both? It can be thought of as a product at a specific point in time, but over time it is a process. As a product, employability can be perceived at certain time intervals that serve you, say when you reach a higher skill level by accomplishing a specific educational or professional goal resulting in the improvement of your marketable skills.

As a process, employability is an ongoing, lifelong investment in marketable and gainful employment that generally does not stop until you retire. One of the most important components of the employability process involves continuous self-assessment and evaluation of your skills, compared to what is in demand at any given time.

The employability process can be divided into three areas, each entailing different competencies such as:

  • Personal management – This involves the building and maintaining of a positive self-concept, interacting positively and effectively with others, and continual growth throughout life.
  • Learning and work exploration – This pertains to participating in lifelong learning that is supportive of career goals, locating and effectively using career information, and understanding the relationship between work, society, and the economy.
  • Career building – This is a process that includes creating and maintaining job security, making career-enhancing decisions, maintaining a balance between life and work roles, and understanding the changing nature of those roles.

The Education Effect

Views on how education affects employability differ. The academic view holds that there is at least some relation—though not a direct correlation—between education and gaining employment. The employers’ view, however, is that schooling does not adequately prepare students to meet the various demands of the labor market. This puts the burden of using your education to gain the employment you want on you.

Though some studies do show further education may not improve employability, most white-collar jobs do require at least a bachelor’s degree and many professions require a master’s or even a doctoral degree.

A third view holds that getting a higher education may not necessarily lead to a better job. That’s because developing new skills or upgrading existing ones starts to lose value when more people are doing it, as it makes the job market highly competitive. Additionally, further training and specialization can limit your employability for some jobs, as anyone who has ever been told they are overqualified for a position knows.

Work Experience

Work experience can be both a transferable and nontransferable skill, depending on the type of job, field, etc., and it can cover a wide array of activities, including part-time work, voluntary work, and internships.

For students, work experience can be curricular (work within an academic subject area), cocurricular (skills and experience gained while being a student, such as tutoring and teamwork), and extracurricular (any activity that can provide skills or experience, such as part-time and holiday work).

Work experience can be a tricky component. As a prerequisite for some jobs, it can prevent applicants who lack it from being considered, but if you have too much of it, the overqualified scenario can play out.

Socioeconomic Status

Do individuals who belong to the upper-income class find getting a job easier? Studies have shown that your socioeconomic status as measured by your family income is related to your employability, both soon after graduation and two years later. Those from lower-income classes have a harder time finding jobs in the struggle to break through to the middle class.


The realization that job flexibility is not a monopoly of employers and job security is not a monopoly of employees has led to the concept of flexicurity, a term developed and used in the Netherlands that combines both job flexibility and job security.

Job flexibility comes in four forms: numerical, working time, functional, and wage. Job security also comes in four forms: the ability to stay in the same job, staying employed not necessarily in the same job, income security, and combining or balancing work and family life.

As a concept, flexicurity holds that job flexibility and security are not contradictory or mutually exclusive. They can coexist based on employers realizing that there are benefits to providing stable and long-term employment to loyal and highly qualified workers while employees become aware of the benefits of adjusting their work-life balance to their individual preferences. The combination of job flexibility and security can produce win-win outcomes for employers and employees that result in reduced unemployment.

What Is Meant by Employability?

Employability refers to the various skills, experience, and knowledge you have that make you an attractive option for gainful employment. Employers look at your employability to determine whether or not you should be hired based on what they believe you will be able to contribute to the company.

How Do You Increase Employability?

Your employability can be increased through education, work experience, and personal improvement. Any endeavor that broadens your knowledge and skills that an employer believes will benefit their company will increase your employability. Taking a class, having an internship, and reading a book are all different ways of increasing employability.

What Is the Most Labor Absorbing Sector of the Economy?

Agriculture is the most labor-absorbing sector of the economy.

How Does Creating Jobs Help the Economy?

Creating jobs helps the economy by GDP. When an individual is employed, they are paid by their employer. This results in them having money to spend on food, clothing, entertainment, and in a variety of other areas. The more an individual spends, the more that demand increases. When demand for a product or service increases, companies increase their output to meet the increased demand. Companies do this by investing more and hiring more workers. More workers start the cycle over, with there being even more money spent in the economy, increasing demand further.

What Are Factors That Affect the Job Market?

A variety of factors affect the job market. These include job turnover, unemployment and employment rates, immigration, income inequality, discrimination, seasonality, and the overall economic climate.

The Bottom Line

Employability’s fluid nature makes it a very complicated and highly controversial concept that has various actors and components, some having a direct and others an indirect impact on your ability to find, obtain, and maintain gainful employment over time. It is affected by numerous factors, including level of training, education, individual IQ, culture, socioeconomic biases, and political affiliation.

As education seems to be the one component that can be used to greatly influence employability, can it be utilized to improve your employability if all or most of employability’s components are incorporated in the educational curriculum? If so, can this be measurable using both quantitative and qualitative methods to show the possible improvement by exposing students to those components and providing training for them?

It appears that people with a high degree of employability tend to possess the following traits: They have confidence in their ability to take effective and appropriate action, can explain their goals clearly, live and work effectively with others, and continue to learn from their experiences, both on an individual basis and in association with others in a diverse and ever-changing society.

Article Sources
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  1. FRED Economic Data. "Unemployment Rate."

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