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Background: Digital transformation has become a systemic driver of economic restructuring, reshaping innovation systems, labour markets, and skill demand worldwide. In transition economies, employment and productivity effects of digitalization remain uneven due to persistent skill mismatches, weak innovation ecosystems, and misalignment between education systems and labour market needs. Objectives: The paper aims to examine how digital transformation affects employment outcomes in a transition economy by analysing the role of digital skills and education job alignment as key mediating factors. It seeks to explain why the benefits of digitalization remain unevenly distributed across sectors and worker groups despite rising educational attainment. Methods/Approach: The study employs a quantitative, cross-sectional research design based on primary survey data collected from 150 employed individuals across multiple sectors. Descriptive statistics and binary logistic regression are used to assess the relationship between digital skill proficiency, perceived labour market barriers, and career advancement outcomes within an innovation systems framework. The results indicate that insufficient digital skills constitute a significant barrier to career advancement regardless of formal education level. Higher digital skill proficiency substantially reduces the likelihood of experiencing career constraints, while the perceived benefits of digitalization are concentrated in technology-intensive sectors, revealing pronounced structural and sectoral heterogeneity. Conclusions: The findings confirm that digital transformation delivers inclusive labour market outcomes only when supported by adequate human capital and well-functioning innovation systems. Strengthening digital skills development, lifelong learning, education and labour market alignment is essential for ensuring that digitalization translates into sustainable employment growth and innovation-driven competitiveness in transition economies.