Labor-market losses do not begin only when hiring falls through. They may start years earlier, when a student invests in a path that does not match their skills, and educational institutions invest in training that does not keep pace with the economy’s needs.

Every year, families spend money on education, institutions devote resources to developing curricula, and governments invest in preparing the next generation for the labor market. But these investments do not deliver their full return simply because a student earns a degree. Their economic value also depends on whether graduates can put what they have learned to productive use, and whether their skills align with employers’ needs.

The key question, then, is not just how to prepare young people for jobs, but how to narrow the gap between what they learn and what the economy needs before that gap becomes a cost borne by individuals, businesses, and society.

Education is an investment—but returns are not guaranteed

Education is considered one of the most important forms of investment in human capital: it builds knowledge, helps develop skills, and opens the door to better job opportunities. Yet the return on this investment is shaped by factors beyond the number of years spent studying or the type of degree earned.

A student may spend years studying a particular subject, only to find themselves working in a different field or in a job that does not fully use their skills. They may find work but lack the practical experience or communication skills needed to perform their duties effectively.

These situations do not necessarily mean that education has failed to create value, but they do raise an economic question about how efficiently the resources invested in preparing an individual are being used.

In a study published in 2025 in Economics Letters, researchers estimated that removing the factors that cause mismatches between educational attainment, skills, and job requirements could increase economic output by an average of 3% to 4% across 17 Organisation for Economic Co-operation and Development economies. Estimates ranged from 0.5% to 9%, depending on the economy studied.

These are estimates derived from an economic model, not guaranteed gains that can be achieved simply by introducing a career-guidance program. Nor are they specific to Saudi Arabia.

Even so, the study shows that skills mismatches can carry an economic cost beyond the individual, and that making better use of workers’ skills is an opportunity to boost economic output.

Who bears the cost of the gap between education and work?

When graduates’ skills do not match job requirements, the costs are shared by more than one party.

For individuals, the gap may mean spending more time acquiring the required skills, taking longer to find a suitable job, or accepting work that does not make full use of their abilities.

Companies may have to devote additional resources to training new employees or repeat hiring processes when a candidate is not suited to the job’s requirements. Productivity may also suffer if workers take longer than expected to reach the required level of performance.

Across the economy, human resources may be used less efficiently when people work in jobs that do not make appropriate use of their qualifications or skills, while other organizations struggle to find the talent they need.

But it is important to distinguish skills mismatches from a shortage of jobs. Good career guidance can help candidates match better with available jobs, but it cannot create new jobs on its own.

Closing the gap therefore requires better preparation for individuals, alongside policies that support business growth and expand opportunities for productive work.

Early training: an investment in better decisions

In this context, opportunities for hands-on training matter economically for more than simply introducing students to different professions.

Early experience gives students a chance to test their assumptions about careers before making long-term educational and professional decisions. It also gives employers a chance to learn about young people’s abilities and helps educational institutions understand which skills real workplaces need.

A survey conducted by Survation for BBC Radio 5 Live and BBC Bitesize, covering 2,087 young people aged 13 to 18 in the United Kingdom, found that:

  • 44% wanted more opportunities for hands-on training while studying.
  • 43% wanted more guidance on managing money.
  • 42% wanted more help with job applications.
  • 39% wanted more support with managing stress and mental health.
  • 38% wanted to develop their communication skills.

The survey was conducted online between July 2 and 17, 2026, and its results were published in October of the same year.

These figures point to needs that go beyond academic knowledge, encompassing the ability to move from education into working life.

When students experience a workplace early on, they may discover that a subject they had hoped to study does not suit their interests, or that a field they had not considered offers opportunities that match their abilities. They may also learn which skills they need to develop before graduating.

Economically, these experiences can be seen as a way to improve the information available before a decision is made. The more realistic the information about a profession, the better informed the career choice can be—though this does not guarantee that every mistake will be avoided.

But to realize these benefits, training opportunities need to be well organized and substantive, rather than brief placements that do not give students a real understanding of a job or its requirements.

Is the problem a shortage of jobs or how candidates are prepared?

It is important not to reduce employment challenges to a shortage of skills alone. Young people may have the right qualifications but face a labor market that does not offer enough suitable jobs, or where opportunities are concentrated in areas that are difficult for them to reach.

Some participants in a BBC report noted how difficult it was to find suitable training opportunities outside London, as well as the financial burdens associated with education, transportation, and living costs.

This highlights the importance of distinguishing between three problems: a mismatch between people’s skills and available jobs; an insufficient number of jobs in some sectors; and limited access to training and employment opportunities for some groups.

Better guidance and training may help address the first problem, but they cannot solve the other two on their own. Even the best training programs will not achieve their full impact if demand for labor does not grow, or if good opportunities remain confined to a narrow geographic or social group.

Improving the transition from education to work therefore requires coordination among educational institutions, employers, and policymakers, as well as investment in creating productive jobs and expanding access to training.

AI is changing the equation for skills investment

This issue is becoming more important as the adoption of artificial intelligence and digital technologies accelerates. The tasks involved in jobs are changing, the skills organizations need are evolving, and some types of knowledge may become less in demand while others grow in importance.

In the same BBC survey, 32% of teenagers felt their schools were not preparing them well for the future of work, while more than half of respondents felt their schools were preparing them well.

In this kind of environment, relying on fixed curricula or qualifications alone may not be enough to assess an individual’s readiness.

This does not mean educational institutions should try to predict every job that will emerge in the future. Rather, they should focus on building a strong knowledge base and developing critical thinking, problem-solving, communication, and lifelong learning skills.

Companies also need to explain the skills they require more clearly and provide training opportunities that help new employees move from theoretical knowledge to practical application.

Students, in turn, need to understand that investing in their education does not end when they earn a degree; it continues through gaining experience, updating their skills, and adapting to changes in the market.

How can the economic return on career guidance be measured?

If career-guidance and training programs are investments in human capital, it is important to evaluate them by their outcomes, not just by the number of people who take part.

Educational institutions and policymakers can track indicators such as the share of students who receive training relevant to their fields of study, the rates at which graduates move into suitable jobs, how long it takes them to find work, and how well the skills they acquire match employers’ requirements.

They can also assess whether programs reduce the time needed to train new employees, improve job retention, and widen students’ access to career opportunities, especially in underserved areas.

Any improvement in these indicators should not be attributed to training alone. Outcomes are also affected by the state of the economy, demand for jobs, wage levels, and the sectors in which graduates work.

Systematic measurement, however, helps identify the most effective programs and direct resources toward initiatives that deliver tangible economic and social value.

Smarter investment starts before hiring

Career guidance highlights an important aspect of economic efficiency: the issue is not just how much is spent on education, but how successfully it turns knowledge and skills into real value.

Early training, career guidance, and collaboration between schools and companies cannot guarantee that every student will choose the right path on the first try. But they may reduce information gaps and improve the match between people’s abilities and labor-market needs.

At the same time, closing this gap alone is not enough without productive jobs, fair access to opportunities, and organizations capable of making use of new skills.

An economy loses not only when someone cannot find a job, but also when they work in a job that does not make use of their abilities, or when an employer has to spend a long time searching for skills that could have been developed more effectively.

From this perspective, career guidance should not be seen as an extra service for students, but as part of the human-capital investment system—a system aimed at raising individual productivity, improving business efficiency, and maximizing the return on education spending.

The better the connection between what young people learn and what the economy needs, the greater the chance of turning education from a cost borne by society into an investment that generates lasting value.