What Are Skills and Occupation Taxonomies and Why Do They Matter for Your Next Job?

Do you want to know what to study to access better job opportunities? Do you already have a job but feel you need to update your skills or change direction?

Today, there are platforms that help identify the most in-demand occupations, the skills they require, and the training programs that facilitate access to them. These tools rely on data science, which makes it possible to process large volumes of information from job vacancies, sector studies, surveys, and other sources.

But how can we consistently organize and compare the skills required for each occupation? A key tool is occupations and skills taxonomies. In this blog post, we briefly explain what they are, why it is important to promote their development in Latin America and the Caribbean, and how the IDB supports countries in the region in designing and implementing them, adapted to their productive realities. 

Occupation and skills taxonomies make it possible to identify, organize, and compare jobs using a common language and shared standards. They are typically presented in a hierarchical structure, which helps visualize different levels and the relationships between categories.

The following figure shows a representation of occupations and skills within a specific sector. Each group of occupations combines skills shared with other sectors, along with skills that are specific to each group and to each occupation. 

Globally, two systems stand out as references for taxonomy development: O*NET (United States) and ESCO (European Union).

• O*NET was developed in the 1990s by the U.S. government and provides detailed descriptions of more than 900 occupations, including data on required skills, abilities, and knowledge. O*NET marked a paradigm shift by focusing on occupational profiles, understood as sets of skills and knowledge necessary to adapt to changing labor market conditions.
• ESCO (European Skills, Competences, Qualifications and Occupations) was created by the European Union around 2010. It offers detailed information on knowledge, skills, and professional qualifications of member states, facilitating international comparison and educational and labor integration in Europe.

Both systems use complementary methodologies (analyst reviews, surveys, job description analysis) to map occupations, distinguish specific and transversal competencies, and track their evolution in response to technological and organizational changes. In addition, their data have been used to analyze automation risk, skills gaps, labor transitions, and the impact of artificial intelligence on work. 

The region has national occupation classifiers, generally based on the International Standard Classification of Occupations 2008 (ISCO-08) from the ILO, which serve a statistical function and allow job organization, although they are usually limited to general descriptions and do not include details on skills or competencies. On the other hand, many countries have developed national qualification frameworks, which facilitate mobility and recognition of degrees and certifications, but tend to be less agile in capturing emerging labor market demands and do not offer the level of granularity provided by skills taxonomies.

In recent years, countries such as Chile, Colombia, Costa Rica, and Uruguay have made progress in building their own taxonomies, adapting international models and developing methodologies to incorporate local and sectoral data. The figure shows a summary of their objectives, the models they are based on, the type of governance, and their sustainability. 

Labor markets in Latin America are undergoing transformation due to digitalization, energy transition, population aging, and growing demands for inclusion. These changes create new occupations and modify the skills required for existing jobs.

The potential of taxonomies multiplies when integrated with data science and artificial intelligence (AI) tools. These technologies accelerate trend identification, anticipate changes in skill demand, and improve the efficiency of labor intermediation and vocational training services. However, their adoption poses challenges in terms of data quality, interoperability, privacy, and equity, requiring robust regulatory frameworks and specialized technical capacities.

In this context, the development of occupation and skills taxonomies has become a strategic priority to improve employability and the efficiency of employment services in Latin America and the Caribbean. Here at the IDB, we support countries across the region in this process by assisting in the design and implementation of taxonomies tailored to their productive realities, strengthening institutional capacities, and promoting their integration with education, vocational training, and employment policies.

To learn more about how we support countries in the development and use of occupation and skills taxonomies, we invite you to download the full publication.