The United States is facing a defining workforce challenge: low labor force participation. The U.S. labor force participation rate peaked at 67.3 percent in March 2000 and now stands at approximately 62.5 percent. Returning to the high-water mark would add more than 10 million Americans to the labor force, which is enough to fill every open job in the country. Even a one-percentage-point increase would bring over 3 million people back into the workforce.
Nationally, more than one in ten young people aged 16–24 are disconnected from both school and work, while many adults face barriers to reentry due to credential opacity, benefits cliffs, or misalignment between education and employer needs.
Low labor force participation and skills gaps are especially acute in manufacturing, construction, and other skilled trades, where for every five workers who retire, only two replacements enter the workforce. By 2030, an estimated 2.1 million skilled trades jobs could go unfilled, with potential economic losses reaching $1 trillion annually.
In sectors such as shipbuilding, nuclear energy, aerospace, and artificial intelligence, closing the skills gaps is not only an economic imperative, but also a matter of national competitiveness and national security.
To tackle this growing crisis, the U.S. Department of Education is launching the Connecting Talent to Opportunity (CTO) Challenge, a state-led national competition and capacity-building initiative, which officially launches today, January 13, 2026. This challenge will help states design, build, and scale integrated Talent Marketplaces that connect learning to employment and make skills visible, verifiable, and portable.
What the CTO Challenge Is Designed to Do
The CTO Challenge is a national call to action for states to build stronger, more connected education-to-workforce systems through interoperable Talent Marketplaces. These marketplaces integrate credential registries and Learning and Employment Records (LERs) and leverage artificial intelligence to connect job seekers, employers, and education and training providers through skills-based job descriptions.
At their core, Talent Marketplaces allow skills to be translated, transcribed, and transacted as machine-readable, industry-recognized competencies. By making learning count wherever it occurs – whether through degrees, certificates, apprenticeships, military service, or on-the-job experience – the CTO Challenge will support skills-based hiring, expand access to high-quality career pathways, and strengthen labor force participation. Talent Marketplaces are designed to save employers time and money during the hiring process, and Talent Marketplaces also make postsecondary education and training more affordable for Americans by allowing individuals to translate and transact skills they have already earned towards advanced standing in training and education programs including registered apprenticeships.
What Is a Talent Marketplace?
Under the CTO Challenge, a Talent Marketplace is defined as a publicly available platform that include the following integrated components:
- LERs to allow individuals to develop and share verified, portable resumes;
- Credential registry to make degree and non-degree credentials transparent and to link them to verified competencies;
- Skills-based job description generators to enable employers to define jobs based on required skills rather than proxies such as degrees alone; and
- Artificial intelligence tools to connect learners, workers, employers, and education and training providers.
Together, these components form the infrastructure for a national skills currency, enabling education and workforce systems to speak a common language of competencies.
How the Challenge Works
The launch of the CTO Challenge marks the beginning of a multi-phase national competition and capacity-building effort.
Participating states will:
- Engage in informational webinars and technical briefings;
- Assemble interdisciplinary teams spanning education, workforce, industry, and technologists; and
- Develop action plans that demonstrate strong collaboration, governance, and interoperability commitments.
As the Challenge progresses, semi-finalists and finalists will receive:
- Tailored technical assistance;
- Direct engagement with technologists, standards bodies, and employer partners; and
- Participation in a national community of practice to share lessons learned and scalable solutions.
The CTO Challenge will award up to $15 million in prizes, incentivizing innovation while supporting system development, long-term sustainability, and statewide adoption. The goal is to surface the strongest, most scalable Talent Marketplace models that expand opportunity, improve transparency, and strengthen national labor force participation.
Who Can Participate
The CTO Challenge is intentionally state led. Governors serve as the official eligible entrants, reflecting the need for executive-level leadership and cross-agency coordination.
Required state team members include:
- The State Perkins state agency or the Adult Education and Family Literacy Act (AEFLA) state agency to serve as fiscal agent;
- The State Workforce Agencies;
- The State Workforce Board; and
- Employers.
States may apply as:
- Novices, building a new Talent Marketplace from the ground up, or
- Scalers, enhancing and expanding an existing system.
Building a Future Where Skills Open Doors
With nearly two million unique credentials offered by over 130,000 credential providers nationwide, the need for transparency, interoperability, and shared standards has never been greater. The CTO Challenge provides states with a structured pathway to integrate degree and non-degree credentials, advance credit for prior learning, enable skills-based hiring, and help learners and workers clearly communicate what they know and can do.
The CTO Challenge is helping to build a future where verified skills open doors, career pathways are clear and accessible, and every learner and worker can succeed in a rapidly evolving economy.
To learn more and receive updates, visit www.cto-challenge.com and sign up for updates, or contact the Challenge team at team@cto-challenge.com.
