In December, the United States Department of Education (US ED) announced the Connecting Talent to Opportunity Challenge[1] to support states in building and scaling talent marketplace platforms. The investment reflects a growing understanding that skills data can play a powerful role in connecting learners to jobs, helping employers find the talent they need, expanding workforce participation, and strengthening state economies.

Over the past several months, UpSkill America and our partners at Alvarez & Marsal engaged more than 40 experts, including leaders from states, technology providers, nonprofits, advocacy groups, and philanthropy. These conversations focused on what is holding this work back and what is most essential to scaling the use of digital credentials and validated skills data to improve employment outcomes. A consistent theme emerged from those conversations: State platforms are most effective when they function as real marketplaces, delivering clear and differentiated value to both employers and jobseekers.

State talent marketplaces are most effective when they support the seamless exchange of skills data as the currency of a functioning market. That data, often packaged as digital credentials, should make it easier to understand what skills learners have and how those skills align with what employers need. Strong platforms also surface clear signals about which skills are in demand, allowing both learners and employers to adjust and respond to one another in real time.

Many existing playbooks for building talent marketplace platforms have focused heavily on capturing and organizing the supply of skills data. Far less attention has been paid to fully engaging employers. US ED has described this prize challenge as catalytic funding designed to spur additional state and private investment, with the goal of helping states activate employer participation and move toward a self-sustaining market. As states take on this work, several considerations rise to the top.

Capture What Employers Care About Through Effective Feedback Loops

Too often, new state platforms replicate existing approaches without meaningfully strengthening feedback loops between learner skills and employer demand. States typically start on the supply side by developing expansive skills taxonomies and registries, “skillifying” resumes, and creating digital wallets where learners can store information about their achievements. But there are few ways to test whether that output actually reflects what employers are looking for. The result is an explosion of skills data and credentials that can be difficult for employers to interpret or differentiate.

States can build stronger feedback loops by designing platforms that track how employers engage with skills data. This means looking not only at the skills employers hire for, but also at the types of information they rely on to make decisions and the level of detail that is most useful in real hiring contexts.

Constrain the System to Valuable Credentials and Reduce Noise

With employer feedback loops in place, states can use those demand signals to be more intentional about curating skills data. Credential registries are a required component of this prize challenge and a central feature of most talent marketplaces. Yet without a clear strategy, registries can quickly become unwieldy as states attempt to catalog hundreds of thousands of credentials without creating shared meaning for employers as data users.

States have an opportunity to play a more active role by driving adoption of high-value credentials and standardizing data and entries so registries provide information employers can actually use. At the same time, registries should give learners clearer signals about which skills and credentials are most in demand. Flexible, extensible tools can help surface credentials that are creating value and gradually prune data that is not.

Unlock True Interoperability to Sustain Engagement

US ED has made clear that states are expected to design platforms that are interoperable, with a longer-term vision of a nationally connected network of state systems. Interoperability is a familiar term across education and workforce conversations, but our discussions with the field reinforced that it often means different things to different people. For talent marketplaces to work, platforms must be able to exchange skills data securely and reliably with other systems, including those used by employers and other states. This matters not only for building a national network, but also for ensuring the success of individual platforms.

Many talent marketplaces are built as destination platforms with integrated features, but they do not always make it easy for data to move in and out. That limits value for learners whose data lives across multiple systems, for states with cross-border labor markets, and for employers that need to work within their own enterprise tools.

A practical approach has two parts. First, states should invest in the infrastructure that supports data exchange, including data packaging standards such as Open Badges and Verifiable Credentials, along with transport and transactional standards that enable secure, privacy-protected sharing across organizational boundaries. Second, states should focus on creating shared meaning around skills data by harmonizing existing skills taxonomies rather than adding new proprietary ones, and by capturing the context in which skills data is created and used.

Develop Integrated Capabilities That Engage Employers

The prize challenge requires states to include three core components: Learning and Employment Records (LERs), a credential registry, and a skills-based job description generator. Each of these tools can support matching on its own, but the real value emerges when they are designed to work together. LERs need to be consumable by employer systems. Credential registries should help employers understand what candidates can do. Skills-based job descriptions should make it easier to identify qualified candidates and streamline hiring. Measuring success across all three tools based on employer engagement and hiring outcomes will lead to stronger platforms over time.

Taken together, these strategies address challenges that field experts consistently point to as barriers to organic, market-driven adoption of digital credentials and skills data. States, as proving grounds for innovation, are well positioned to serve as catalysts for progress. Several early movers have already made meaningful strides in testing state talent marketplace approaches over the past decade. US ED’s prize challenge reflects both the promise of this work and the importance of building on what has been learned. States should view this investment not simply as a prompt to adopt a platform playbook, but as an opportunity to use technology to create real, lasting connections between jobseekers and employers and to bring these markets to life.

[1] The Connecting Talent to Opportunity Challenge, sponsored by the U.S. Department of Education, is “a $15 million prize competition to strengthen the connections between learners, education and training providers, and employers by fostering the development of integrated Talent Marketplaces.”