Labor competency certifications in commercial occupations: a literature review

Firms generally seek to acquire a competent and stable workforce, as well as to maintain and upgrade the aggregate knowledge and skills of their workers at the lowest possible cost. In doing so, they routinely face imperfect and asymetrical information, together with recruiting, turnover, and other transaction costs. When they hire individuals whose skills are not a good match for the needs of a given firm, local labor regulations may make it very expensive to change or release these workers. This review has five sections. The first section describes the different features of certification and certification systems. It provides a short taxonomy, defines labor competency certification and the systems associated with it, explains how these systems fit into broader national qualifications frameworks, and discusses their common institutional arrangements. The second section examines the advantages and disadvantages of these systems, while the third explores what is known about their impact. In general, the empirical evidence currently available for answering key questions is mostly insufficient or tempered by endogeneity concerns. This paper therefore calls for more, and more carefully designed, future research. An exception to the current knowledge gap comes from the information technology (IT) sector, and in the fourth section, a study linking certifications to wage premiums is highlighted. The fifth and final section offers some conclusions and suggests possible avenues of future research.

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