The stimulus package we need to produce long-term prosperity for all
On August 7, 2020, Arena’s CEO Michael Rosenbaum spoke with Cheddar news anchor Nora Ali about the jobs report and the economic policies and stimulus package that we need to move millions of unemployed Americans into jobs today with career growth tomorrow. Transcript below, full interview at this link.
NORA ALI: Let’s now bring in Michael Rosenbaum, former White House economist and the CEO of Arena. The July jobs numbers are out, 1.76M jobs added.
ALI: A couple of other numbers I want to read to you: government jobs added 301,000, hourly earnings for all private workers up 0.2%, factory jobs added 26,000. What is your reaction so far to these numbers?
MICHAEL ROSENBAUM: There’s no question that these numbers are a little better than we were hoping, but they are still devastating. When we think about how many people in the United States are still unemployed, a little under 20 million people are still unemployed in this country, it’s still worse than the Great Recession. That is devastating across the economy.
Rosenbaum: At the same time, there are bumps around the economy. There are places where there is hiring. Arena’s technology predicts the likelihood that someone’s going to achieve an outcome at a job, primarily in healthcare. Arena is deployed into organizations whose applicants are about 17% of the US healthcare workforce. We’ve seen, since the middle of March, our clients hiring about 10% of their employment base that they had in the middle of March. So, while there are millions and millions of jobs being destroyed, at the same time there is hiring going on.
ALI: Michael you mentioned the great recession in that case when we saw improvements in jobs numbers that led us to believe that we were on the recovery. It feels like that is not the case. Right now, the way that we interpret macro data is quite different because of this larger global health crisis. So how should we consider lagging indicators like a jobs report as we do think about what recovery looks like going forward?
ROSENBAUM: We’ve been really focused on what’s happened over the last few months. There’s no question the shock related to COVID-19 has been unprecedented and the speed with which jobs have been destroyed — only some of which have come back potentially temporarily — has been faster than we’ve seen in the past.
But when you think about the broader trend lines, the kinds of issues that we’re dealing with, frankly, we’ve been talking about for decades. We’ve been talking about things like automation destroying jobs, robots creating or destroying jobs. These trend lines in the economy and in the labor market have been accelerating over the last several decades. We’re just seeing this in a massively accelerated sense over the last few months. And so the problem to solve, is not only how do we deal with this short term shock that is devastating and destabilizing to our society in our economy, but also more generally what does the other side of this look like?
Specifically, how do we think about building an economy that actually can grow in a broad-based way on the other side of this, and a labor market that can grow in a broad-based way on the other side of this?
ALI: Well, Michael, what is your hypothesis as to what that can look like? You mentioned automation which presumably creates cost efficiencies for corporations. What does that mean for reskilling employees, adding more value in terms of services? How do you suggest corporations consider automation and creating additional jobs for the workers that are now out of those jobs?
ROSENBAUM: I think there are a couple pieces to it. One is some basic informational issues: you know the work that I do in the private sector relates to matching individuals with jobs, where the employer may not realize someone will be great at a job and individuals may not realize they’d be great in a job. And so there’s that piece but that actually is only a small part of the broader issue.
The broader issue is, how do we think about each individual in our economy, in our society, figuring out where someone will thrive? And how do we create pathways to economic mobility?
When we think about the stimulus talks, for example, and how much money we’re spending on stimulus. If we think about every single person who’s unemployed in the United States — so a little under 20 million people — if we employ every single person at $15 an hour plus gave health benefits plus gave everyone $10,000 a year for apprenticeship, mentorship, and training to be able to up-skill. They can move into a role that might be growing like tech or healthcare — it would cost us something like $900 billion.
So we’re disagreeing about spending a trillion dollars vs $3 trillion in a stimulus package when, for less than either package, we could just employ every single person, create economic stability and help folks move into roles where there can be growth long-term.
ALI: Michael, that seems like a pretty optimistic long-term view. I’m glad you laid out that scenario, but looking a little bit shorter term, some of the sticking points between Democrats and Republicans: Democrats want to continue having that $600 a week payment, Republicans want to lower that as to not disincentivize work. What kind of empirical evidence do you have in your research that might suggest that these kinds of benefits might disincentivize work? What are the values of each of these perspectives?
ROSENBAUM: We don’t see proof in our data about disincentivizing work. Arena is deployed across a relatively significant portion of the healthcare labor market. We also apply that same technology in hospitality and retail and other jobs that might be shrinking. As folks are let go from a job, they come to our platform and we predict the likelihood they’re going to thrive in a job within some radius of their house.
There is no question that we’ve seen a significant number of folks come to that platform, and that number has increased over the last month. I think the core question is, ‘Is the reason for an increasing number of folks coming to the platform because of the potential end of additional benefits, or is it – and I think this is more likely – that when this all first happened in March, the premise was this was going to be short-term? So a very significant portion of the number of folks who were let go from jobs thought they were going to go back to those jobs in a couple of months. The longer this goes on, the more we all realize that those jobs may not be coming back, or won’t return for an extremely long period of time. And so, I can’t prove which one of those it is. Evidence suggests it’s more of the second than the first.
But fundamentally, while we need to create social safety nets so that we don’t fundamentally devastate the entire economy right now, if we don’t think in a stimulus package about what our economy needs to look like going forward, not just next week, but in a year, two years, five years from now, then we’re going to miss a huge opportunity to restructure our economy in a way that can create broad-based prosperity and GDP growth long term.
ALI: Michael, I want to get your take, generally, on what is driving market sentiment.
ALI: We did see the US add more jobs than expected. Futures are paring their losses, the Dow is down just about 30 points… I understand that your research focuses on trying to understand and put data against human behavior. What is driving human behavior from a quantitative perspective, the NASDAQ closing at a record high, we’re seeing a lot of pain still across economies and jobs lost…What do you think investors are truly focusing on right now?
ROSENBAUM: Well, you all are the experts in the public markets, but I can tell you that when we think about the opportunity we have in front of us – to fundamentally restructure our economy in a way that deals with structural issues we have had for decades upon decades – I’m incredibly optimistic about what we might be able to see going forward. And I think the more folks realize the significance of that, the more they realize the opportunities to unlock prosperity, the more positively they see long-term prospects for the economy. If I’m an investor, that is incredibly heartening to me.
Yesterday, Jim Rankersley wrote a piece in The New York Times about research that came out in Econometrica at the end of last year about two academic from Chicago and Stanford. They found that 40% of the GDP growth that happened in the post-war period, 1945 to 1965, came from the removal of structural barriers that had prevented several groups of people from moving into the labor market. Specifically, women, minorities, and folks who are immigrants. 40% of total GDP growth had actually occurred because of those slight reductions in those barriers, allowing these folks to come into the labor market.
We can restructure the labor market today to deal with the fact that such a huge swath of our economy is undervalued for reasons that aren’t rational. Huge swaths of our economy deal with bias, both based on things that are repugnant like race, but also biased on things such as credentialing. Does someone really need a college degree for all careers? If we can restructure in a way that unlocks each of our individual ability to move into jobs where we can grow and thrive, the amount of economic activity that can be unlocked by that restructuring is so massive that I’m incredibly optimistic that long-term GDP growth can be far above what we’ve seen over the last few years.
NORA ALI: Well said, Michael, thank you so much for your time and insight today.