Employability, the Labor Force, and the Economy

Narrowly defined, 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 "enables") 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 life-long, continuous process of acquiring experience, new knowledge, purposeful learning, and skills that contribute to improving one's marketability for enhancing their potential to obtain and maintain employment through various shifts in the labor market. It is based on a set of individual characteristics.

It is also not equivalent to employment, but rather a prerequisite for gainful employment. Essentially, employability is a person's 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.

Employability 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, and thus, one has to be able to possess 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 and human capital to white-collar workers.

Labor or human capital is 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 prone to rapid restructuring, striving to adapt to their shareholders' profit-maximizing goals (stock price appreciation and dividend growth), meeting their constituents' needs, and the challenges of the ever-changing business landscape.


The U.S. unemployment rate as of June, 2021.

This changes and limits the need for redundant and bureaucratic careers even in government-held jobs. An individual's employability is of high importance since it not only provides gainful employment but it is also a contributing factor to the individual's 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 measured by the GDP per capita and its potential for economic growth measured by aggregate demand and the GDP.

The component that has the largest impact on gross domestic product (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 the creation or deterioration of an economic recession.

Therefore, employability is vital to any nation's labor force and society's well-being. Economists and policymakers argue that upgrading one's skills can prevent both blue- or white-collar workers from being crowded out. Low-skill, 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 or white-collar workers 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 component of employability that impacts it directly is the ability of workers to meet the demand or the needs 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 of their human capital or labor force.

Some of the most highly sought after skills include:

  • High IQ workers with higher education/academic skills; 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/stress.

One should try to acquire a specific skill set based not only on what is in demand but also with consideration of their personality, likes and dislikes, relevancy to their field of work/profession, otherwise, their 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.

Primary actors are considered employers and workers or employees.

Secondary actors are the educational system and its representatives (schools, colleges {both technical/community and four year}, and universities), as well as their constituents and the 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 (positive or negative) on workers' (blue-collar) employment, based on union negotiations with employers/management, as well as the type of profession that may or may not be impacted by labor unions such as white-collar workers, management, etc.

One's employability is also affected by the degree of employability of others, since how employable someone is creates a pecking order on how one stands relative to others within the hierarchy of job applicants. Therefore, a high supply of candidates with similar qualifications does not improve one's employability when competing for a specific type of job or position (positional competition).

The Skills of Employability

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

Technical, often referred to as hard skills, are the skills and knowledge necessary for effective participation in the workforce. These skills tend to be more tangible, specific to certain types of tasks or activities that can be defined and measured, such as being considered an expert in a field.

Examples of hard skills include (but are not limited to) proficiency using software applications such as spreadsheets, data-entry skills, operating machinery, speaking foreign languages, and the efficient use of math.

Non-technical skills, also referred to as soft or transferable, are the skills and knowledge necessary for effective participation in the workforce such as personality traits (optimism, common sense, responsibility, a sense of humor, integrity, enthusiasm, attitude, ethics) and skills that can be practiced (such as empathy, teamwork, leadership, communication, good manners, negotiation, sociability, ability to teach, attention to detail, etc).

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 are high-order skills that enable someone to select, adapt, adjust, and apply other skills to different situations, across different social contexts, and across different cognitive domains.

Transferable skills can be utilized in almost any type of job or profession and do not limit someone to a specific type of job or industry, which means that a transferable skill is one that can be taken from one type of job and applied successfully to another job. Those skills can be improved and enhanced and they are external to and independent of the education/academic process.

Examples of transferable skills would be social skills: working well in groups and with others. A transferable skill set involves skills that are very sophisticated and personal/intellectual achievements that are more attuned to professional behavior than a list of competencies. This specifically includes disciplinary content, disciplinary skills, workplace experience, workplace awareness, and generic skills.

Non-transferable 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.

A set of skills engaged in everyday activities are metacognitive skills, which are associated with intelligence and enable individuals to be successful learners.

Skills that are metacognitive in nature are transferable and refer to higher-order thinking skills that involve active control over the cognitive processes engaged in learning, such as planning how to approach a given learning task, monitoring comprehension, evaluating progress toward the completion of a task, taking appropriate and effective action, explaining what they are seeking to achieve, living and working effectively with others, and continuing to learn from experiences, both as individuals and in association with others in a diverse and changing global society.

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

Linguistic skills also tie well with cultural competency skills and their development since 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.

Technical progress and evolution in communication have re-emphasized and facilitated the use of the need for social and business/career networking skills. Developing and/or belonging to a social or business network (preferably both) can advance a person forward to help facilitate the changing of jobs or the pursuit of a new career opportunity.

Three Areas of Process

Is employability considered to be a process, a product, or both? Employability can be thought of as a product at a specific point in time, however, over time it is a process. As a product, employability can be perceived as a final product at a specific point in time or at certain time intervals that serve an individual; usually, every time a higher skill level is reached by accomplishing a specific educational or professional goal resulting in the individual's improvement of their marketable skills.

As a process, employability is an ongoing, life-long investment in marketable and gainful employment, which does not stop until an individual's retirement. One of the most important components of the employability process involves continuous self-assessment and evaluation of one's skills, compared to what is in demand at any given time.

From the ongoing, life-long process perspective, employability is not a final product since the individual keeps improving their skills until retirement age or an age where the individual deems further skill advancement is no longer necessary.

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

  1. Personal management, referring to the building and maintaining of a positive self-concept, interacting positively and effectively with others, and continual growth throughout life;
  2. Learning and work exploration, involving participating in life-long learning that is supportive of career goals, locating and effectively using career information, and understanding the relationship between work, society, and the economy;
  3. Career building, pertaining to security (creating and maintaining work/job), making career-enhancing decisions, maintaining a balance between life and work roles, understanding the changing nature of life and work roles, and also understanding, engaging, and managing the career-building process.

The Education Effect

The views on the role of education on employability differ, resulting in a reduction of the cause and effect between education and obtaining gainful employment, thus transferring the burden of capitalizing on the process and maximizing its benefits on each individual involved in the process.

The academic view holds that there is at least some relation—and not a direct correlation—between education and successful job finding/gainful employment, while the employers' view is that schooling does not adequately prepare students to meet the various demands of the labor market.

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 Ph.D. or a master's degree.

Additionally, another view holds that getting a higher education may not necessarily lead to a better job, and the development of new skills or upgrading existing ones starts to lose some of its validity when the number of people who also get an education and learn the same things increases, since this can create conditions of high competition for the applicants of a certain job. Additionally, further training and specialization may limit one's employability for other jobs.

Work Experience

Work experience can be both a transferable and non-transferable 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), co-curricular (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 work and holiday work).

Work experience can be a tricky component since, as a prerequisite for some jobs, it can prevent job applicants from consideration if they are lacking it, or if prospective job seekers are perceived as overqualified, given the compensation level of that type of job as set by the employer.

Socioeconomic Status

Do individuals who belong to the upper-level classes find jobs easier?

Studies have shown that an individual's (especially college graduates) socioeconomic status as measured by their family income is related to their employability both soon after graduation as well as two years later, while individuals from lower income-classes have a harder time finding jobs in the struggle to break through the middle class.


The realization that job flexibility is not a monopoly of employers and neither is job security a monopoly of employees has led to "flexicurity." Flexicurity is a term developed and used in the Netherlands, which 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' realizations that there are benefits to providing stable and long-term employment to loyal and highly-qualified workers, as well as to employees becoming aware of the benefits of adjusting their work-life to more individual preferences in organizing work and balancing work and family life.

Thus, the combination of job flexibility and security produces "win-win" outcomes for both employers and workers/employees that result in reduced unemployment.

Jobs Economy FAQs

What Is Meant by Employability?

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

How Do You Increase Employability?

Employability can be increased through education, work experience, and personal improvement. Any endeavor that broadens one's knowledge and skills that an employer believes will benefit their company, will increase that individual's employability. Taking a class, having an internship, 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 increasing gross domestic product (GDP). When an individual is employed, they are paid by their employer. This results in them having money to spend in society; on food, clothing, entertainment, and 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/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 with various actors and components, some having a direct and others an indirect impact on an individual's ability to find, obtain, and maintain gainful employment over time.

Employability seems to be affected by numerous factors, such as level of training, education, individual IQ, culture, socioeconomic biases, political affiliation, etc.

Since education seems to be the one factor/component that can be used to greatly influence employability, can it be utilized to improve individuals' 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 capable 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, they can explain their goals clearly and what they are trying to achieve, they live and work effectively with others, and they continue to learn from their experiences, both on an individual basis as well as in association with others (synergistically), in a diverse and ever-changing society.

Article Sources

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  1. FRED Economic Data. "Unemployment Rate." Accessed Aug. 4, 2021.