Joe Fuller: How does an overnight shelf stocker become a systems administrator, or a national guardsman, a software engineer? While the employment picture in mid-2022 is rosier than it was a year ago, good jobs offering career paths and decent living standards remain harder to come by, especially for workers without college degrees and those mired in low-wage work. At the same time, employers continue to complain that the skills gap prevents them from filling key positions. The nonprofit sector has generated promising schemes to address that mismatch, but which ones have the potential to succeed at scale while advancing diversity, equity, and inclusion?

Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m your host, Harvard Business School professor and visiting fellow at the American Enterprise Institute, Joe Fuller. I’m joined today by Connor Diemand-Yauman and Rebecca Taber Staehelin, co-founders and co-CEOs of Merit America. The nonprofit preps adults who don’t have four-year college degrees for careers in high-skills fields. Its one-on-one coaching model and other supports have helped more than 80 percent of its enrollees complete programs that qualify them for good-paying jobs. And the results are impressive—an average income increase of almost $19,000 per graduate. We’ll talk about what it takes to provide upward mobility and how skills-based hiring is replacing the traditional reliance on degrees as a catch-all qualification. We’ll also discuss Merit America’s ambitious goal of serving 100,000 low-wage workers and catalyzing $1 billion in increased earnings by 2024. Welcome to the podcast, Connor and Rebecca.

Rebecca Taber Staehelin: Hi, Joe.

Connor Diemand-Yauman: Thank you. Great to be here.

Fuller: Tell us a little bit about how Merit America came about. What was the animus behind it, and how did you come together to start it?

Diemand-Yauman: At Merit America, we are building a new pathway for millions of low-wage Americans to help them get new skills and careers. But to illustrate what we do, we’d like to actually start by sharing the story of just one. Sandra was working in a salad shop full time; she was putting overtime in every week. She was promoted to manager, and yet she was struggling to support herself and her young daughter. She was hardworking. She was talented. But she didn’t have the time or the money to go back to school. And Joe, actually, I’m curious, if you were in Sandra’s shoes and you wanted to get ahead, what would you do?

Fuller: Well, that’s a question, fortunately, I haven’t had to face. But depending on whether this was a big national chain or a one-door restaurant, I’d be looking to my employer to try to provide some opportunities for me to engage in their corporate learning system and try to add some new skills or approach my supervisor about what other opportunities are available. Of course, if she was already promoted the manager, the next step up is probably a fair stretch for anybody to accomplish.

Diemand-Yauman: Absolutely. And it’s challenging too when you are in one of these positions, and you’ve hit that ceiling, and what’s best for you is to pursue a different career track, because in that sense, the incentives aren’t typically aligned with employers and with the employees. And unfortunately, we haven’t had a clear answer as a country for what do we do for folks like Sandra, even though there are tens of millions of hardworking Americans, the majority of whom are Black and Latinx, who are stuck in low-paying jobs, just like her. That was really the founding impetus for Merit America.

Taber Staehelin: And, Joe, you asked how we met and the background behind that. Connor and I met because we had both started our careers in education. We knew we wanted to build careers in education, and it drew us to working at Coursera, the largest online education provider, believing that online learning could be a really important tool and pathway to help folks like Sandra get from where they are into a family-sustaining career with upward mobility. And yet we saw that the vast majority of folks who were using new platforms like the Courseras of the world were typically those who had already done pretty well. They had college degrees, they had stable jobs, they were working on that next big promotion. They weren’t trying to figure out how to go from working at a grocery store, driving for Uber, into a really steady career.

Fuller: What did you see was lacking? What was necessary to get to the next level of productivity and to be able to reach this population that Sarah represents?

Taber Staehelin: We for centuries have had a workforce system that’s designed around getting unemployed folks into their first job. We don’t have a workforce development system that’s really designed to help folks get from their first job into a real career, to develop skills and access more and better career opportunities over time. So that was the first thing we saw, is the lack of programs that worked for low-wage workers. And where there were things that were working, they typically were not designed to scale. They were designed to work really well with a specific employer and a specific community. They weren’t designed to meet the needs of 53 million Americans who are stuck in low-wage work.

Diemand-Yauman: And then you think about the program itself. What needs are we meeting at Merit America? And they come down to three main buckets: Helping people who don’t have the time, who don’t have the money, and who need some additional support. And again, if you think about Sandra’s case, she’s a single mom. She can’t leave her job. She doesn’t have the luxury to step away for an immersive bootcamp. She can’t leave her home in the evenings. Who’s going to watch the kid? In terms of money, she can’t take big financial risks. She has a young dependent. She already took on debt for another training program, so she can’t spend thousands of dollars for a new one. And she definitely can’t do that with her current salary. And then finally, with support, even if you assume that Sandra had the time and she had the money, how does she know what she’s going to take? I mean, there have never been more programs in our ecosystem, never been more training opportunities or online courses. How do you know what is good and what is predatory? How do you know what track is going to put you on a trajectory for a new job that is going to pay a family-sustaining wage and what isn’t? It’s a dizzying selection out there. And then, even after you get into the program, how do you navigate the program, itself? How do you help Sandra stay engaged and committed, given everything that life has thrown at her?

Fuller: Well, those certainly are very consistent with the themes we found in our research here at our project. Those are certainly the barriers that we’ve identified in our research to people getting on pathways to a more lucrative, more sustaining careers and more interesting careers. How do you help someone like Sandra overcome those barriers? What are the design elements of your program at Merit America that account for all these impediments that make it so hard for someone to re-path their career?

Taber Staehelin: What we hear and what I know your research has shown is they are looking for programs that are focused on in-demand jobs. They’re not seeking out education for the sake of getting a credential, for the sake of furthering their very, very long-term pathway. The second thing is they need programs that are fast, that they can do in a matter of months, not years. For someone like Sandra to earn a BA at this point in her career not only would be incredibly difficult—and often we see with our learners, the vast majority of them have actually had a negative experience with higher ed and are not interested in returning—but it could take six to eight years to earn a part-time BA. They’re looking for something that is flexible, that works with their work schedule, their families, a global pandemic, whatever else life throws at them, but also supported. So they’ve got folks who are with them, peers to really help get through any program and any learning that they’re going through. And then lastly, they need something that is financed based on success and does not require taking out debt upfront. Again, we’re talking about folks who on average are making $25,000 a year. The vast majority have some higher-ed debt already. They’re not looking for just another way to get more in debt with an uncertain outcome. And so that’s what we’ve really designed at Merit America, programs that are focused on in-demand roles, they’re fast, they’re flexible, but supported. And they’re financed based on success. At the end of the day, the simplest explanation of Merit America is online learning with best-in-class coaching and wraparound support to help low-wage workers get great new careers at scale.

Fuller: Let’s talk about the latter, the coaching and the wraparound support, because we know that people screw up their courage, try to get on a pathway, and that so often the absence of support—either to offset some impediments they’re learning or just encouragement and guidance—lacking that they fail. And of course, once you’ve tried that a couple of times you start giving up. And so what specifically did you do to give Sandra the type of support she needs to stick with it?

Diemand-Yauman: Something that we are, I think continually surprised by is how many of our learners talk about the mindset shift that came as a result of working with their coaches, and how so many of our learners have been told and believe coming into our program that they aren’t ready for something like this. They don’t have the skills they need. They aren’t deserving. And working with a coach to, over time, retool them, to rewire their brains to believe that they are, that they are ready, that they are competent, that they do have relevant skills. And that that mindset not only helps them get through the program, but also is so crucial when they get into the job market. And we actually start working with them on applying for the new job.

Taber Staehelin: Just, I think it’s important to add, they often have not succeeded in higher education. So they feel like they have failed. They hear the statistics, and they hear what we’re trying to do and realize that they didn’t fail higher ed, higher ed failed them. Higher ed was never going to work for someone who was trying to balance so many jobs at such outrageous costs—of the actual money and the opportunity cost of working while learning. It’s the chance to echo to them that you are talented, you are capable, and there’s no reason why, in just a matter of weeks—because again, we are a short, fast program. We’re talking about a 14-week program to get folks into great new jobs, part time—they can go from where they’re to a new career.

Fuller: So the word “coach” is going to call up different images in people’s minds. There’s the coach that is literally trying to teach you skills. There’s the coach that the kind of the rah-rah, you can do it coach. There’s the empathetic coach. There’s the coach that can coach you on associated life issues. Who are your coaches, and how do you prepare them for this?

Diemand-Yauman: Well, it really is different for each learner. That’s the complexity and that’s the difficulty of the work that we are trying to do. It is why it is not as simple as, “Well, let’s just create an app that’ll train 10,000 truck drivers to become data scientists.” You’re working with people. You’re working with people who have unique challenges, who have unique backgrounds, unique interests and motivators. And so that requires a coaching team that is as diverse and talented and dynamic as the learners that they’re working with. Now, luckily at Merit America, because we prioritize the coaching function, we’ve been able to attract some of the best coaches across the country. One coach is focused on getting folks through the program. It’s about skills development, persistence, grit, ensuring that you are doing the assignments, that you are retooling your mindset to be successful. We also have our technical coaches. We have coaches who are actually coming in and, “Hey, I have this question around coding, Java development. How do I do X, Y?” And then the third coach, Joe, is the coach that focused on job placement. How do you actually get into a job? How do you apply to 100 jobs and get your resume ready to get that one offer that we’ve shown that learners need to do to be successful?

Fuller: Let’s go to the other side of the transaction, which is the employer. You use phrases like “in-demand, good paying jobs.” How do you validate that? How do you cultivate those relationships? How do you understand what those employers are going to accept as a program-learning background that qualifies your candidates for that job?

Taber Staehelin: Yeah, absolutely. And so when we started out, one of the most important principles of Merit America was that we would not wed ourselves to a specific job from the outset. We always knew that we would be picking the tracks, the careers that we focus on based on the data, based on the real-time data of what is in demand. And so very tactically, what we did is we worked with Bridgespan, and we did an upfront analysis that we refresh regularly, where we filtered for “show us jobs that are in demand” as in, there’s tons of demand and not necessarily enough supply of workers. They offer a starting living wage, upward mobility. They’re recession proof or at least recession resilient. And they’re accessible to folks who don’t have a college degree, which doesn’t mean that they’re not predominantly employing folks who have college degrees, but there’s some meaningful subset of workers who don’t have a college degree. And it’s likely that there’s some degree inflation going on there, a thing you might know a thing or two about, and not a real requirement that you need four-plus years of higher ed learning in this area to get the job. And so we put all those filters on, looking at 40 million annual job postings and identified 12 areas, 12 different areas, career tracks that collectively have over 3 million annual postings. So this really confirmed our hypothesis that you can start by focusing on a pretty narrow set of fields. You don’t have to offer 200 different programs in order to build some that is scalable, that can reach hundreds of thousands and millions of learners where they are and help them get ready for the jobs that are a good fit and in high demand.

Fuller: Bridgespan, of course, is the wing of the consultancy Bain & Company that works with social entrepreneurs and philanthropies to enhance their achievement of their mission, sharpen up their theories of change. Now, you are instilling those skills based on data about what jobs are available in that region, how well they pay. What about validating those jobs as pathways to further advancement, as opposed to, I’m just making that one stair step to a higher paying job, but now I’m going to be stuck in a better position, but still stuck? And are you directly feeding talent into companies? Or are you taking the candidate to the point that you’re going to start equipping them for a job interview, but there’s no prebaked understanding with an employer that a Merit America cohort’s coming out with these skills, and they’re moving directly into a job with that company?

Diemand-Yauman: Great questions. To your first, yes, upward mobility—that’s one of the top criteria that we use to select good jobs. So are these jobs upwardly mobile? Do they pay a living wage? Are these jobs accessible for folks without bachelor’s degrees? Are they less susceptible to economic disruption, global pandemics, zombie apocalypses, whatever comes next. So all of those formed the very tight filter that Rebecca referenced. And career mobility is one of the most important things. Rebecca and I were talking with a learner the other day, and we asked them, “How are you liking your new wages that you have in this job?” And Nick is the learner’s name. He said, “The wages are great, but what I like even more is that I’m not bored anymore. I have a real career that I can build over time and something that is interesting and stimulating.” To the second question around working with employers. Yes, we are working with some of the largest employers in the world—Amazon, Infosys, JPMorgan Chase—who are working with us to hire our learners and, in some cases, where we are actually working to train their incumbent workforce for new opportunities, in addition to working with SMBs—small to medium-size businesses—across the country to help them with their hiring and talent needs.

Fuller: Well, one of the things that impressed me when I first started understanding Merit America was that you were actively engaged with employers and understanding their needs. Many, many, very well meaning, and often well-funded social entrepreneurs interested in this space, essentially view the employer as a variable at the end of an equation, as opposed to an active entity that has opinions, needs, needs to be engaged with. But also many don’t measure their results. And I know that you’ve done work with Professor Ben Castleman at UVA to understand the economic impact. Can you share with us a little bit about his findings?

Taber Staehelin: Sure. We are definitely the biggest fans of Ben Castleman. We recently released just a few months ago in March of 2022 our first analysis, looking at over 1,000 graduates and what the outcomes were for Merit America. And what Ben and his team found was that 80 percent of our graduates had a positive wage change—going from $24,000 salaries before Merit to over $50,000 after, so more than doubling their salaries. Again, what we set out to do in the first place, which is make that jump from the working poor to the first rung of an upwardly mobile career path, where our data showing actually those wages are only increasing as time goes on. And what we’re so excited about—this is not just the validation that the model is working and has early traction—but the potential to set a new standard in the workforce and training space of what really matters. For so long, our programs have measured success—our programs being our country’s programs—by how many people participated, how many people graduated, and maybe how many got a job. But it never took into account how long were they in the job? What was the salary of that job? How did the wages change over time? And so our big goal is to drive over a billion dollars in wage gains in the next three years. With the recent data, we are more than tracking toward that. We’ve done close to 120 million for learners served to date. And we see this as something that we would love to see replicated across the whole system.

Fuller: The most important feedback you can get from an employer is that they’re hiring your people and those people are succeeding your jobs. What other type of input and feedback are you getting from employers? And is it causing you to think more broadly about other things you could do or enhancements for the program that’ll make it all the more effective?

Diemand-Yauman: The most powerful signal we can get from employers is, are they hiring our learners? And can we upsell and grow those accounts over time? You’re right. The less sexy, but equally important, input to our work is what we referenced earlier with the data that we use upfront, that guides our entire content strategy. Working closely with employers and partners like Bridgespan to understand are these the skills and the roles that you are actually hiring for? And for those that can predict and have real forecasting, are these the roles that you think will persist over time? Those have been the most powerful inputs from employers to date.

Taber Staehelin: A huge part of the work with employers is de-risking hiring nontraditional talent. It’s the thing that we hear as one of the barriers to having done this work for so long is that at the end of ... a CEO can commit to, “I want half of our workforce to be without BAs and BIPOC and all these great commitments. But at the individual recruiter and hiring manager level, they’re being forced to either hire someone who looks nothing like someone they’ve ever hired before, or wait another day, that’s their option. It’s just, “Just wait one more day.” We know at the system level, it’s not going to be another day. It’s going to be months. Those months will have a cost to them. So that’s something that we’re really proud of that we’ve been able to build a brand and a pipeline where folks understand the benefits of that sort of investment in their work.

Fuller: Our research certainly validates that, that there are a lot of very well-meaning, very sincere steps taken by companies at the corporate level, for example, to eliminate degree requirements, sort of pledge better performance on diversity, equity, and inclusion. But then it comes down to a hiring manager who needs a role filled right now with someone who’s going to be productive and going to stick around. And guess what? Even though there’s no corporate mandate that you hire someone with college degrees, I just feel safer hiring someone with a college degree, or I feel safer with somebody who shares an educational experience. You mentioned that you’re beginning to do some training of incumbent workers, upskilling people that work at some large companies. What’s the difference between taking somebody like a Sandra that’s trying to jump shift from a certain level in a certain industry to a new level of earnings, power, and growth potential in a different industry, versus working with somebody who already works at a JPMorgan Chase or an Amazon?

Diemand-Yauman: Our main upskilling partnership is actually with Amazon, and they’re leading a fascinating program called Career Choice that is focused on the fulfillment center workers. And most of these roles are actually outside of Amazon. It is an out-skilling play. Now, interestingly, we also have a hiring partnership with Amazon, and some of those learners do end up getting hired back into Amazon, but it is primarily focused on preparing that frontline workforce for new careers outside of Amazon.

Fuller: I think that’s one of the really innovative and exciting programs in corporate America right now. And you can see companies like Amazon, but also companies like Disney, who are recognizing that they have a large number of certain types of jobs and a very high ratio of frontline workers to supervisors. So there just aren’t that many opportunities to advance and, therefore, if they’re going to create better opportunities for those workers—and, frankly, reduce their turnover—they have to adopt programs like the one you’re working with them on give those people a prospect of when they do make that jump shift is to a quality job. And they’re just not leaving for a job that’s two bus stops closer to home and 25 cents more an hour, but they’ve learned something at Amazon to go on to have a household-sustaining income. Now, there was a recent announcement from Google in which you were a beneficiary of some of their philanthropy—another company that’s been doing awfully interesting things in this space in conjunction also with Social Finance, run by alumnus of our school, and also Year Up is somehow involved. Tell us about that event and what you’re going to do with those resources.

Taber Staehelin: We created a learner success-sharing program with the tenets that you do not pay a dime up front, but if and when you get a job above a salary threshold, $40,000 or $50,000, depending on the track, then you pay back a small monthly fee for five years up to a cap. For folks listening, this is not an income-share agreement. We did a lot of investigation of income share agreements and decided they were not right for our model and for our population. But it is a flat amount that you pay if you have a successful outcome. If at any point you lose that job or can’t sustain that, it stops, and it’s very time-capped. As an example in our IT program, you get a job above threshold, you’ll pay $95 a month for up to five years up to $5,700 total. The brilliance of, and the amazing support that Google and Social Finance are providing is providing the financing to allow that product. Learners, again, don’t pay anything up upfront, they pay if they’re successful, but training programs like Merit can have some upfront cash flow that is de-risked by Google, that allows for getting the funding we need upfront to serve learners. And then when learners pay back, they’ll pay back into the fund instead of paying back directly to Merit America.

Fuller: And each of your partners in that endeavor have been guests on this podcast, historically. I want to shift the focus a little bit. The private sector is more and more acutely aware of the need to upskill and the need to broaden the catchment area they look at for certain types of skills, particularly in digital areas where demand is just consistently outstripping the ability of supply to match that. But we don’t seem to see the same type of dynamism in government, which always strikes me as a bit peculiar because, of course, government has a vested interest, not merely in opening up more talent pipelines to bring diverse and talented people into their workforces. but of course, the objective of most governments is to enhance the income potential of citizens. Have you been engaged with government at all? Is that an area that you’d aspire to eventually pursue?

Taber Staehelin: I live in Maryland where our governor recently announced that they will be removing the college degree requirements from all public-sector jobs, which I think is fabulous. But I think, as with most things, government is probably five to 10 years behind corporates. We actually tend to work more with government on overall policy change that would support entities like Merit America in the work that we do more than themselves as hiring partners, where the conversations are earlier, but still very promising.

Diemand-Yauman: Yeah, I mean, there’s so much dialogue going on right now about loan forgiveness, which we think is phenomenal and exciting and super necessary. How can we have a similar level of interest in the discussion around those 53 million workers, and folks who are talented, who are hardworking, and yet have been shut out from this maze of obstacles? And could you imagine a policy where in addition to getting $10,000 in loan forgiveness, you have $5,000 that you can invest in an upskilling program like Merit America, where you can go from $24,000 to $50,000 per year. I mean, that is the ultimate forgiveness for exposing them to a broken system.

Fuller: This is the ultimate purple issue. I’ve spoken to political leaders that I think probably otherwise couldn’t agree on the weather’s nice today, or some other obvious thing, who are very, very closely echoing each other in terms of their objectives and their understanding of the problems, which is a source of great encouragement. You began to allude to some of the types of changes you might like to see. Are there two or three that you think are the linchpin changes, that if we could see changes in the Higher Education Act or some program by which you earned loan forgiveness by pursuing something like Merit America, what are the ideas you’re most excited about and that you’re trying to advocate getting policy makers to embrace?

Taber Staehelin: I think, as a global principle, what we are most excited about is the potential to have federal, state, and local funding move from focusing on inputs to outcomes. Today in the US, the federal funding for workforce is just a few billion dollars. I know that sounds like a lot, a few billion dollars, but in the grand scheme of the federal government, it’s not that much money. And yet we spend over $150 billion annually as the federal government on higher education. And the only distinction between the two is higher education is defined by number of hours and degrees conferred for those hours, whereas workforce is more thought of as this, short dynamic thing that helps you get a job. And so what we would love to see happen at all levels of government is the recognition that, if we can begin measuring programs by the results they produce, by those wage gains, by the wage gains versus the cost—what is that social return on investment for the program—and then open up the aperture so that any program that meaningfully drives wage gains, that exceed the cost of doing so, can be made accessible to learners through funding and so much more.

Fuller: Well, it’s been really interesting to hear about Merit America’s development and how quickly you’re growing and that billion-dollar wage gains goal. If you think about the organization five or 10 years from now, what are your aspirations for Merit America? And if you’re measuring success and income outcomes for the people you’re serving, how are you going to measure success for the institution more broadly over the course of the next 10 years?

Diemand-Yauman: One of the reasons why we’re so excited about the Google fund is that the measurement standard that they are using is the same measurement standard that we have used here in Merit America, showing that you can create these larger institutional funds and vehicles that are focused on outcomes that matter to the learners that we’re serving. Can you actually look at wage gains? Can you look at real job quality and not just any placement? And it is an easy jump to make from the Google fund and seeing how that was structured to thinking about how that could influence the broader sector, other nonprofits, and policy to reward the good actors and invest where we’re seeing movement for the learners in the way that matters to them most. And that is living more dignified lives, supporting their families, and building careers over time.

Taber Staehelin: We think a lot about making a third way the norm for folks like Sandra and the 53 million low-wage workers, just like her, where we know as a country that higher ed has been on the table as an option, even though it has failed so many folks. The other only real option has been to work your way up and hope that you land at an employer where you can succeed. And so creating a third way, where you can go through Merit America or programs like Merit America, and without quitting your day job, without spending a ton of time, and without taking on massive debt, taking on any debt, you can have a transformative experience that sets you on a new career path—so really creating this as an option that works for the many, many people who have been left behind.

Fuller: Well, Connor and Rebecca, co-founders and co-CEO of Merit America, it’s been so interesting to have you on our podcast, and we’re going to look forward to tracking your progress and hope you fill up that billion-dollar wage gains thermometer that you presumably have in the lobby of your offices.

Diemand-Yauman: Thank you so much, Joe.

Taber Staehelin: Thank you so much.

Fuller: We hope you enjoy the Managing the Future of Work podcast. If you haven’t already, please subscribe and rate the show wherever you get your podcasts. You can find out more about the Managing the Future of Work Project at our website hbs.edu/managingthefutureofwork. While you’re there, sign up for our newsletter.