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The principal aim of this article is to provide a historical overview of 25 years of competence policy in the European Union, highlighting connections between past and current initiatives and outlining possible scenarios for the decade to come. The article presents the social investment turn in social policy as the critical political background against which the emergence of a competence strategy in European Union education policy should be analysed and understood. The competence strategy, it is argued, finds its roots in a renewed attention at the European Union level for harmonising educational outputs and labour market demands. While trying to produce a schematic history of the emergence and change of the competence strategy, the article does not seek to offer strict definitions of competence itself; instead, it conveys the nebulous and context-dependent nature of the concept. [ABSTRACT FROM AUTHOR]