Microcredentialising has been described by the EU’s vocations training authority as a “megatrend”. The Australian Government’s National Microcredentials Framework says that "technological change coupled with rapid transformation brought by Covid-19, has elevated the potential for microcredentials to rapidly upskill and reskill the workforce."

One of the first empirical studies of the impact of microcredentials has found their impact to be less transformative, more nuanced than the hype suggests, but nonetheless a valuable ‘signal’ for an employer of an employee’s ability to do the job.

What are microcredentials?

As the Australian Microcredentials Framework says, there is no accepted definition of the term and the microcredentials ecosystem is disparate, lacking a consistent definition across higher education, vocational education, and industry. This largely reflects that the concept of microcredentials grew organically out of the internet, and continues to be primarily driven by private providers, large and small. Microcredential courses range from a course on cybersecurity offered by the UK’s Open University and Cisco to courses to become a dog walker.

The proposed EU directive on microcredentialing defines it in the following terms:

‘Micro-credential means the record of the learning outcomes that a learner has acquired following a small volume of learning. These learning outcomes have been assessed against transparent and clearly defined standards. Courses leading to micro-credentials are designed to provide the learner with specific knowledge, skills and competences that respond to societal, personal, cultural or labour market needs. Micro-credentials are owned by the learner, can be shared and are portable. They may be standalone or combined into larger credentials. They are underpinned by quality assurance following agreed standards in the relevant sector or area of activity.’

The Australian Microcredentials Framework defines microcredentials as having a minimum learning period of 1 hour but less than the learning times of diplomas and undergraduate certificates.

Why microcredentials rather than TAFE?

Microcredentials are seen to have a number of advantages over traditional more formal ‘long course’ vocational education training (including delivered in an online setting).

Any education qualification helps reduce employer uncertainty in a labour market: employers face uncertainty about candidates’ abilities, especially candidates who are new to the labour market and therefore lack references from previous employers. Formal university or TAFE qualifications mitigate the need for an employer to invest in its own in costly screening procedures to work out if someone is qualified for a job.

However, a problem is that the institutional education system can be slow to respond to rapid changes in skill demands in the labour market, especially with technological change. Also, formal nation-based qualifications may also be less effective in transnational and remote hiring situations that have surged during the pandemic.

From workers’ perspective, microcredentials are said to ‘democratise’ education. In particular, high hopes are held that microcredentialing can assist disadvantaged groups who remain locked out of formal education, despite measures to improve educational opportunity. As the proposed EU Directive says:

‘Micro-credentials can also be used as part of targeted measures to support inclusion and facilitate access to education and training and career opportunities for a wider range of learners. This wider range of learners includes disadvantaged and vulnerable groups (such as people with disabilities, the elderly, low-qualified/skilled people, minorities, people with migrant background, refugees and people with fewer opportunities because of their geographical location and/or their socio-economically disadvantaged situation). Microcredentials can also be used in targeted ways to address challenges within education and training systems and labour markets, including gender and other discriminatory stereotypes (e.g. concerning study choices and within education practices and materials), to support smoother school-to-work transitions.’

More broadly even than that, microcredentialing is seen as consistent with treating education as a lifelong human right. The EU sees micro-credentials as playing a key role in helping to achieve the 2030 target of 60% of all adults participating in training every year. The proposed EU directive describes microcredentialing as ‘both lifelong and ‘life wide’ and takes place in different settings (at work, at home, among people who are already in work, and among those not currently in work).’ The Australian Microcredentials Framework also identifies as one of the 5 defining principles of microcredentialing that it should support ‘lifelong learning [which] is increasingly important given the growing reskilling and upskilling need caused by industry disruption, but also given the dislocation and mental health challenges that such disruption may cause.’

That’s a mighty agenda for microcredentialing. Does it deliver?

How was the empirical study conducted?

Researchers from the Oxford University’s Internet Institute undertook a study on the effects of a voluntary microcredentialing scheme on an online freelancing labour market, with the assistance of a major (unnamed) online freelancing platform. The study used a random sample of 46,791 workers across 467,455 projects in total.

The advantage of studying online freelancers is that the whole cycle of a freelance project is conducted on the platform: the online placement of the advertisement by the employer, the qualifications of the applicants, the interviews undertaken by the employer of any short-listed applicants, the qualifications of the successful applicant and finally the billing details of the work undertaken.

Many online freelancing platforms also offer freelancers the opportunity to take skill microcredential tests, which are computerized tests administered as multiple-choice quizzes and scored automatically. On the studied platform, over 300 different microcredentials are available on skills such as programming languages, graphic design techniques, and office software packages. The tests are highly technical, quizzing test takers about very specific facts within their skill areas. Once a microcredential test has been successfully completed, the freelancer’s profile shows that they are certified.

The researchers used a ‘fixed effects test’ to essentially study the ‘before and after’ impacts of the sample population undertaking an online microcredential test:

‘In the fixed effects event study design, we compare a worker’s labor market success during a short 14-day window before completing a microcredential test to labor market success during a 14-day window after the test. Under the assumption that the unobservables remain constant over the 28-day period, we can subsume them into event fixed effects (with one fixed effect for each time the worker completes a microcredential).’

The outcomes of the study

The key conclusion of the study was as follows:

‘..a microcredential increases workers’ earnings [but] this effect is not driven by increased worker productivity but by decreased employer uncertainty. The increase in worker earnings is realized through an increase in the value of the projects won rather than an increase in the number of projects.’

The financial benefits for the freelancer weren't huge, but they were material enough given we are talking of microcredentials. The study found that an additional microcredential results in an average earnings gain of 8.9% over the next two weeks. This effect is mainly driven by an increase in project value, which increases 9.7% following microcredential completion. Transformed into dollars, this corresponds to a $30.15 per-project return on completing a credential.

However, the study also found that the value of a microcredential decreased the more experience the freelancer already had – the increase in project value is up to 1.5 times greater for new entrants with no work history on the platform than for average workers. Hence, the researchers’ view that the microcredential was more important for the ‘signal’ it sent the employer about a freelancer with more limited experience than the increase in productivity which the microcredential gives the freelancer (because otherwise the fixed effect should be consistent across both inexperienced and experienced freelancers).

Perhaps more striking is the study’s finding that while the value of individual projects went up after microcredentialing, the number of projects won was only minimally impacted:

‘we find that microcredential completion also leads to a 5.5% increase in the number of projects initiated within the next 14 days, but this is a relatively small effect in practical terms; the point estimate implies that workers win one new project for approximately 63 microcredentials completed.’

This finding has obvious implications for the touted benefits of microcredentialing assisting educationally disadvantaged groups entering the workforce. The researchers posit that:

‘This suggests that microcredentials function as a partial substitute to verified past work experience. However, microcredentials’ marginal effect on the number of projects initiated remains very small for new entrants. This may be because microcredentials can attest to hard skills but still leave considerable uncertainty about candidates’ soft skills, such as communication, timeliness, and trustworthiness. References from previous employers appear to be more effective at conveying a holistic picture of candidates’ skills. As a result, microcredentials are not very effective at helping candidates with no work history to win their first project. This limits microcredentials’ usefulness in reducing entry barriers to new workers.’

The lesson seems to be that microcredentialing is not a low cost way of ‘shifting the dial’ on educational and employment disadvantage and that there is no substitute for an in-person, well-resourced and openly available vocational training system.