By increasing diversity we can transform the economy

View the interview at YahooFinance here.

Transcript Below

JULIE HYMAN: Our next guest says that we need a sort of new Works Progress Administration. A WPA, as it was known back in the 30s, to help get people back to work. That the PPP is not enough. This is actually something that Mark Cuban floated on our program last month as well. Michael Rosenbaum is joining us now. He is CEO of Arena, which is a company that uses predictive analytics to enhance recruitment and retention – so all about getting people back to work. Michael is joining us now from Baltimore. Why do you think we needed a new WPA? We have seen some progress in the economy already, an uptick in consumer spending, for example. What would it look like?

Julie Hyman

MICHAEL ROSENBAUM: Thanks so much for having me, Julie. As we see ourselves bouncing off the bottom a little bit, we start thinking about, when can we get back to normal? When can we get back to where we were in January, in February… But a much bigger issue is, where we were in January/February wasn’t good. Where we were prior to COVID still left huge swaths for our economy – and huge swaths of our workforce – in places where folks couldn’t pay the bills. Where folks don’t have economic growth, where folks couldn’t find pathways to dignity. 

Our economy has been shifting for a long time. I’ve been working on these issues for 20 years. I started a company before Arena, called Catalyte that identifies folks who are undervalued by the labor market who would be great software engineers. Arena is dealing with informational asymmetries in the labor market. In healthcare, it is deployed into organizations whose applicants are 17% of the US healthcare workforce. Across those two markets we see situations where industries are growing, and jobs where there are opportunities to move forward into the middle class. And yet, huge swaths of our labor market don’t have access to those jobs.

We aren’t great at hiring, and we as individuals are not necessarily great at finding where we’re going to be happy.

There are lots of reasons for that. One is that we aren’t great at hiring. And we, as individuals, are not necessarily great at finding where we’re going to be happy. But the other issue is that we don’t have the structures in place for folks to become apprentices, for folks to move into the jobs where they can thrive. And when we think about how much money we’re spending – you think about PPP spending over $500 billion, the stimulus package as a whole spending north of $2 trillion. If we think about who is still on unemployment, you’re talking about north of 20 million people. If we just said, “Every single one of the people still on unemployment, we are going to hire at $15 an hour plus benefits. And we’re going to give everyone $10,000 for mentorship or apprenticeship.” Using that, we’re going to help folks move from from the industries where they were working – perhaps hospitality, perhaps retail, places where the jobs may be shrinking – into jobs where folks can make six figures, where folks can move into the middle class. 

If we can do that, then we can transform how our economy is put together, and we can build something better on the other side of this than we had before.

Diversity and Inclusion

Adam Shapiro

ADAM SHAPIRO: I want to bring in the headlines of today because we are in a revolutionary change regarding race – Should there be intentional inclusion within that kind of program for people who historically have been disadvantaged? And also, at the private sector, should employers stop having people put their names, gender, racial characteristics, even the schools they graduated from, and it should only be experienced based when they apply?

ROSENBAUM: Thank you for asking that question. I love it. A couple of data points just in terms of the second point you brought up, that there is tons of implicit bias in hiring and promotion. We talk about it a lot. There is a very important piece of research that came out of HBR north of 15 years ago, where researchers took the exact same resume and put different names on top. They found that black Americans were half as likely to get a call back, with the same resume, just with a different sounding name. And so that’s one of the classic pieces of research on this point. In our businesses, we see it significantly. We apply a whole set of roles to inform how we look at demographics of folks who are in an applicant pool compared to folks in a pool who are offered jobs. There are a whole host of solutions, I would say that your suggestion is a little bit of a non-tech way to do it. A bunch of technologies exist today that didn’t even exist five years ago, that actually makes this much easier to do. We can make much more accurate predictions about the likelihood that an individual is going to achieve an outcome in a job, without relying on a resume. Resumes correlate heavily with class, race, and gender and have a whole host of implications to that. In my first business, Catalyte, we found that when we were identifying folks who’d be in the top 2% of all software engineers after receiving training, the demographics mirrored almost exactly the demographics of the metro area, and half of individuals who would be in the top 2% of all software engineers didn’t have a college degree.

Skilling Up

Rick Newman

RICK NEWMAN: Hey, Michael. I just want to ask a different question. You’re addressing a giant chronic problem, it’s the lack of proper skills in the country. There’s really been no appetite in Washington to do much about this, but some states and cities have addressed it. What can individuals do to find opportunities to take advantage of the kind of stuff you’re doing? I mean, is there a clearinghouse online? Or if you’re somebody who knows you need this, and you don’t want to wait around for some government program, what can you do?

ROSENBAUM: There are actually a bunch of things that have really accelerated. I’ll give you an example from our work at Arena, which is deployed primarily into healthcare for folks who are interested in healthcare jobs. Arena has a website called arena.io/candidates, where you can go, spend five to eight minutes on that website. We’ll collect some data and we will predict the likelihood that someone will achieve an outcome in a job that’s within 10 miles of their home. Hiring managers are using the same predictions to make hiring decisions. So that’s just one example in healthcare. There are a bunch of other initiatives that have been rolling out. There’s one rolling out this week from a company called Guild. There’s an Onward USA that’s been picked up by a bunch of governors, primarily in the West, as a clearinghouse. I would suspect over the next few months – as we realize that many folks who have been on unemployment and furloughed are not actually going to end up back in the jobs where they had been before – that these kinds of clearinghouses will increase and we’ll get increased footprints in a way that will allow folks to find jobs where they’ll thrive. 

But the limitation is still, what if I need two years of training as an RN? That’s a different kind of story. If I don’t have any savings and I don’t have a mechanism of making it those two years of learning to be an RN or four years to be an RN… That’s something that’s very hard for the private sector to do on its own. And yet, you think about what it costs for 20 million people, you’re talking about $900 billion. $900 billion could just put every single person on a payroll – pay every single person, and give everyone the resources to develop the skills to move into other jobs. It’s actually less than half of what we’re otherwise spending, essentially, to protect equity values in the form of these other stimulus efforts.

JULIE HYMAN: Michael Rosenbaum, interesting perspective, especially in that last point, thank you so much, you’re the CEO of Arena and you’re joining us from Baltimore, Maryland. Thanks so much.