The $5.5 Trillion Dollar Problem: How to Solve the Skills Gap in 2025 and Beyond

What’s costing businesses more than failed projects, supply chain disruptions, and cybersecurity breaches combined?

A lack of skilled workers.

By 2026, 90% of enterprises will face a critical shortage of skilled technology talent, according to IDC research. The result?

Delays, lost revenue, and missed opportunities tallying up to a jaw-dropping $5.5 trillion.

Yes, trillion.

The problem isn’t just that the talent isn’t there—it’s that businesses are looking for it in all the wrong places (spoiler alert: where all their competitors are also looking.)

The traditional hiring model, built on degrees and past job titles, is no longer enough. There are two main reasons for this:

• Pedigree doesn’t guarantee productivity, and,
• The most in-demand skills of the future are not necessarily being taught in college classrooms – or at scale

In 2025 and beyond, survival will depend on adopting a skills-based hiring approach.

So, how do we fix this?

It starts with rethinking how a workforce is made, trained, and kept.

Smoothstack’s Hire-Train-Deploy model is already paving the way, delivering the skilled workforces that businesses desperately need.

But before diving into solutions, let’s examine why the current state of hiring is failing—and how skills-based hiring offers a better way forward.

Why the Current State of Hiring Is Failing

The traditional hiring model of posting a job, sorting through hundreds of resumes, and selecting candidates based on the contents of that resume has been a cornerstone of workforce development for decades, but it’s crumbling under the pressures of today’s rapidly changing economy.

Companies still rely heavily on outdated metrics like degrees, years of experience, and rigid career paths to evaluate candidates.

These practices might have worked in the past, but they’re woefully inadequate in addressing the challenges of 2025 and beyond.

Here’s why:

Outdated Focus on Credentials

Degrees and titles dominate hiring decisions, yet they often fail to reflect a candidate’s actual ability to perform the job.

According to Harvard Business Review, more than 70% of employers prioritize skills over formal qualifications, but hiring processes haven’t caught up. This over-reliance on credentials creates unnecessary barriers, excluding capable candidates who lack the “right” degree or conventional experience.

The Experience Conundrum

Job postings often demand years of experience, even for entry-level positions. This creates a Catch-22 for job seekers and narrows the talent pool unnecessarily. Burning Glass Institute data shows that nearly 50% of jobs requiring a degree could be performed by candidates without one if they possess the right skills.

Ineffective Screening Tools

Applicant tracking systems (ATS) and rigid hiring frameworks prioritize keywords over human potential. These systems routinely filter out nontraditional candidates who might excel if given the chance.

A study by Korn Ferry found that nearly 40% of qualified candidates are eliminated by ATS systems before a recruiter even sees their resume.

Lack of Investment in Training

Employers often expect candidates to be “day-one ready,” but fail to invest in the training needed to bridge skills gaps.

This results in longer hiring cycles and high turnover when employees fail to meet unrealistic expectations. According to Bamboo HR, recruiting costs can be as much as $28,000 per employee—an unsustainable cost as skills shortages continue to grow.

Missed Opportunities in Nontraditional Talent Pools

Traditional hiring excludes a wealth of untapped talent, including:

• Career changers transitioning into tech from unrelated fields.
• Veterans with practical leadership and technical skills.
• Early-career professionals with high aptitude but limited experience.

By focusing on rigid qualifications, companies fail to unlock the potential of these groups, perpetuating the talent crisis.

The current hiring approach is broken because it’s reactive, exclusionary, and slow. It focuses on checking boxes rather than building capabilities.

Skills-based hiring offers a solution by identifying and developing talent based on what candidates can do, not where they’ve been.

Smoothstack’s skills-based approach is designed to bridge this gap, ensuring businesses have the workforce they need to thrive.

Although a skills-based approach to hiring is taking hold across sectors, it’s still a relatively novel and underutilized method of future-proofing a workforce.

The Current State of Skills-Based Hiring

The skills gap is a growing concern for businesses worldwide, driving a shift toward skills-based hiring.

This approach prioritizes what candidates can do over where they’ve been, valuing capabilities and practical experience rather than degrees or previous job titles. While adoption is growing, the current landscape reveals both progress and challenges.

Growing Momentum for Skills-Based Hiring

• Increased Job Postings: Skills-based qualifications in job descriptions have risen significantly. LinkedIn’s Future of Work study reported a 21% annual increase in job postings that highlight skills rather than credentials. This reflects a growing recognition among employers that traditional hiring metrics often miss high-potential candidates.
• Shifts in Workforce Development: Many companies are investing in internal programs to assess and build skills. According to a World Economic Forum report, 50% of employees will need reskilling by 2025 due to technology-driven changes in roles.
• Diversity Benefits: Skills-based hiring opens doors to nontraditional talent pools, including career changers, veterans, and individuals from underserved communities. This approach is helping organizations achieve critical staffing needs with a diverse workforce.

Challenges Slowing Widespread Adoption

Despite these trends, skills-based hiring faces hurdles:

• Assessment Gaps: Many organizations lack reliable tools to evaluate a candidate’s real-world abilities. Traditional methods, such as resumes and interviews, often fail to provide an accurate picture of skills.
• Bias Toward Credentials: Hiring managers and recruiters frequently default to familiar qualifications, like degrees or years of experience, even when skills-based approaches could yield better results.
• Lack of Training Infrastructure: Without proper training systems, many companies struggle to upskill employees or onboard talent effectively, creating bottlenecks in workforce development.
• Technology-Driven Inequalities: The rapid pace of technological advancement has left many workers behind. Research by McKinsey highlights that up to 87% of executives see significant skill gaps within their organizations, particularly in tech-related roles.

Skills-Based Hiring’s Connection to Workforce Readiness

Skills-based hiring isn’t just a buzzword—it’s a strategic necessity. The digital economy demands practical knowledge in areas like cloud computing, AI, and cybersecurity, where theoretical learning often falls short.

Employers that embrace this approach report faster hiring cycles, improved employee performance, and stronger team dynamics.

Fields like advanced manufacturing, data centers, semiconductors, and telecommunications are rapidly adopting skills-based frameworks to fill critical roles. In these industries, having the right technical know-how directly impacts operations and revenue.

What to Expect in 2025

As businesses face mounting pressure to innovate and scale, the demand for a skills-based workforce will intensify. Experts predict:

• Increased adoption of AI-driven tools to assess skills more accurately.
• A rise in micro-credentialing programs designed to provide real-world, actionable certifications.
• Growing reliance on apprenticeship and training models to bridge workforce gaps.

The current state of skills-based hiring shows promise, but remains fragmented.

Success will require businesses to adopt a holistic approach to workforce development: innovative talent strategies, investment in training programs, and leveraged partnerships with workforce development leaders.

Smoothstack is leading the way with solutions that address these challenges directly.

How Smoothstack Is Leading the Way

Smoothstack is at the forefront of solving this $5.5 trillion dollar problem.

Our Hire-Train-Deploy model builds skilled workforces by addressing gaps at their root. Here’s how:

• Sourcing overlooked talent: Smoothstack recruits high-aptitude individuals, many from nontraditional backgrounds.
• Custom training programs: Our training is custom tailored to clients’ specific technical environments, ensuring an accelerated rate to productivity’.
• Proven ROI: Our approach reduces hiring timelines, mitigates risks, and delivers long-term value.

Proven Success in Skills-Based Hiring

Our model isn’t theoretical; it’s proven. clients across industries, from Data Centers to Semiconductors, to Global System Integrators, have leveraged Smoothstack to build resilient, skills-based teams. The results:

• High retention rates.
• Rapid deployment of skilled software engineers and high-tech technicians
• Measurable cost savings in hiring and onboarding.

Solving the Skills Gap Is a Team Effort

The $5.5 trillion at stake isn’t just a business issue; it’s an economic imperative. Skills-based hiring is the most promising path forward, but it requires innovative models, collaborative partnerships, and actionable frameworks.

Smoothstack is committed to leading this change.

Let’s build a future where skills drive the workforce, not credentials.