Issue #17: ATS keeps job-seekers unemployed + I'm taking a break
27 million US workers are being sorted out by automated recruiting
Headlines you shouldn’t miss
NBC Workers fear robots and automation from Covid are here to stay. But they create jobs: James Pethokoukis, an economic policy analyst at the American Enterprise Institute, argues that debates around robot taxes and the fear of robots are toxic. He believes that the economy needs more, not fewer robots and that only innovation will lead to more job creation, while stagnation will eventually hurt workers.
NEW YORK TIMES A.I. Can Now Write Its Own Computer Code. That’s Good News for Humans: A new program called Codex can write code in 12 languages and translate between them. However, Codex can’t reason like a human and is still prone to mistakes. Experts believe that it mostly serves experienced coders and enhances productivity among them.
WIRED In the US, the AI Industry Risks Becoming Winner-Take-Most: A recent study by the Brookings Institute concluded that a large share of the AI ecosystem, investment, and talent is concentrated in the San Francisco Bay Area. This might have negative consequences in the long-term as the tendency fosters group-think, reduces diversity, and shrinks the potential for other regions to participate in AI development.
CNN They will even sing 'Happy Birthday.' Robots are picking up unwanted jobs at a Latin restaurant in Texas: Some turn to robots, as restaurant owners struggle to find staff with businesses reopening after Covid lockdowns. Restaurant professional Espartaco Borga explains that a robot costs $15 per day, which allows him to pay more to his employees. The robots can perform simple tasks like delivering trays to tables and have basic interactions with the customers.
ZDNET Police are investing in facial recognition and AI. Not everyone thinks that it's going well: Police departments across the world are interested in the use of facial recognition and AI. However, many software solutions are biased, insufficiently tested, and prone to errors. Civil expert groups have started to express their concern before legislators allow the use of potentially harmful technologies.
Study of the week: Automated hiring software is wrongly rejecting millions of people
A new study by Harvard Business School and Accenture analyzed the puzzling phenomenon that companies tend to bemoan the lack of talent in the workforce while rejecting more potential workers. The study authors labeled the wrongly rejected applicant “hidden workers” and looked at 8.000 cases from the USA, the UK, and Germany.
This type of worker is a job-seeker who gets screened out due to wrongly applied in hiring software. For instance, job-seekers with a gap in their CVs of six months or more will be sorted out by the software regardless of the reason for the absence from the labor market was due to pregnancy or illness.
The study authors estimate that 27 million people in the USA alone are “hidden workers” who, despite their potential, end up with very few employment opportunities. In Germany and the UK, the authors estimate similar patterns.
The study authors recommend refreshing job descriptions and leaving out “nice to have” qualities, leading to applicants being sorted out. For instance, cases have been reported where nurses were expected to have “programming skills,” although they mainly have to fill in digital patient files.
Additionally, the authors urge companies to update the filters of their applicant tracking systems (ATS) which leads to a widening talent gap. They believe that most ATS works with “negative” criteria, which sorts out people who don’t have specific skill sets. At the same time, they lack to include applicants who, despite a lack of certain skills, offer alternative valuable experience.
According to the study, long-term unemployed have the hardest time finding a new job. But caregivers, people with health issues, and immigrants face a difficult time passing through ATS criteria. Read the full report here: Hidden Workers: Untapped Talent (hbs.edu)
So, I got called out for criticizing ATS and personality tests in recruiting
Readers of this newsletter know that I’m highly skeptical of automation and automated personality assessment in recruiting. The evidence points towards the damage automated applicant tracking systems (ATS) can do, as described in the study above.
Similarly, I’m critical of recruiting personality assessments, especially if they are based on supposed “cutting-edge” technologies that promise to deliver a personality analysis based on a text or speech sample via AI. Mostly, personality assessment startups are overselling the capabilities of their software.
So, I wrote a piece about that on LinkedIn in German. While most reactions were fairly positive and supportive, I faced some criticism. A woman with quite a following in HR circles called me out and expressed concerns that “somebody who is not a psychologist or HR expert” (me) is criticizing recruiting practices.
This rejection of criticism of ATS and automated personality assessments is something I’ve often read from HR professionals — and I find it concerning.
The issue I see lies in the technical translation of well-intended recruiting practices.
In the case of ATS, recruiters save a lot of time scanning CVs. They receive an automated solution that promises to provide reliable insights about the best possible applicant in the entire pool. Obviously, HR professionals enjoy the time-saving quality of this type of software and the prospect of making the best hiring decisions. The same applies to personality tests. I firmly believe that HR professionals mean well, and I don’t question their intentions.
What I do question is their understanding of the technical workings of software they use and its implications. People tend to overestimate the functionality of the software. They don’t double-check proposals a digital tool is making them. It’s way too convenient. And this is troubling. When it comes to hiring practices, software tools can help sort the applicant pool. Still, no company will make the best recruiting decisions if the HR personnel is not equipped with the proper digital skills necessary to understand the functions of the tools they use.
Insight of the week: Firms that invest in digital technologies provide higher wage growth
A new study conducted by the German Institute of Labor Economics IZA, Utrecht University, and the Institute for Employment Research IAB shows that companies that adopt digital technologies provide greater employment stability and increased earnings compared to companies with non-digital technologies.
However, the data doesn’t indicate the same positive trends for companies that have adopted the newest generation of technologies associated with the Fourth Industrial Revolution, like artificial intelligence, virtual reality, and 3D printing. As the number of companies using these technologies is fairly small and the advances are quite recent, the authors suggest that the full potential of AI, VR, and 3D might be unleashed in the future.
As of today, more classic digital technologies like robot arms lead to the best outcomes. Surprisingly, the authors note that the demand for workers with academic training has not been rising significantly with the adoption of digital technologies. Instead, employers seek more experts who have completed vocational training.
Recommendation of the week: The Ezra Klein Show with Tyler Cowen
Tyler Cowen is an economist, author, podcast host, and blogger with an impressive scope of interests and knowledge. On his blog Marginal Revolution he writes about economics, travel tips, politics, and science. In 2011, he wrote the book “The Great Stagnation,” claiming a troubling tendency towards minimal innovation. Cowen argues that innovation and technological progress are necessary to generate prosperity.
On the Ezra Klein Show, he discusses the current indicators that point towards the end of the “Great Stagnation.” In the podcast, Klein, and Cowen who stand politically in nearly opposite directions, with one being a left-leaning liberal and the other one a market-oriented libertarian, discuss a broad range of topics from talent allocation, innovation, the consequences of automation, and modern US politics showing how a healthy conversation should look like.
Vacation thoughts: Tech is giving hope to Bulgarians
Next week, I won’t send you a newsletter as I’m taking a short break in my native country Bulgaria. I will take time off the screen and embrace the nature of the Rhodope mountains, eat fresh fruit from my grandmother’s garden and spend time reading physical newspapers and books. Most importantly: I won’t read e-mails or check social media. Instead, I will observe what is happening here.
Bulgaria is one of the former socialist countries in Europe that experienced severely negative aftermath of the collapse of the socialist block. In the 90s, people ended up poorer than they were before. The emerging political and managerial class succumbed to wrecking corruption, which contributed to a massive exodus of the young and bright talents of the country.
For many years, I didn’t see positive developments that would keep young people in the country. Only in the last decade, I see new hope in the IT sector. Western companies like to outsource parts of the tech work to countries with a comparatively low income level and decent educational level. It is no surprise that many people work in tech in the capital Sofia and the second-largest city Plovdiv. This allows them to earn good money and develop business models they can sell internationally.
This positive dynamic creates good results: In comparison to other countries, the gender balance in tech isn’t as skewed towards men as in other places. Roughly one-third of Bulgarian coders are women — the highest female share in the EU. And as the sector is one of the most hopeful ones, there is a lot of investment and creativity, which led to Bulgaria becoming Europe’s highest digital riser in 2020, according to the Digital Competitiveness report by the European Center for Digital Competitiveness.
I’ll be observant of what is happening here. If you’re interested in learning more about the country’s development, drop me a comment or consider reading “After Europe” by Bulgarian political scientist Ivan Krastev who explains the complicated situation in Eastern Europe!
The next issue is coming up on September 27th — the Monday after Germany’s federal elections. I will include a brief overview of the digital agenda of the winning party and what the elections could mean for Germany, Europe, and the world.