Nevada’s shrinking labor force — the view from inside small business

Daniel Honchariw

In the aftermath of the 2008 subprime meltdown, Nevada’s unemployment rate skyrocketed.

By 2011, statewide unemployment had grown beyond 13 percent. Prior to that, the state’s unemployment rate had never exceeded 10.9 percent, a high reached 30 years before, during President Reagan’s first term in office.

As of July 2016, Nevada unemployment was down to 6.5 percent, according to new data from the Bureau of Labor Statistics. At face value, that suggests the economy has improved markedly from the recent historical lows.

However, a new analysis by the Nevada Policy Research Institute questions the extent to which the drop in nominal unemployment truly signals an economic recovery.

A key factor behind any apparent reduction in the state’s unemployment rate actually appears to be a mass migration out of the state’s labor force. More Nevadans than ever are neither employed nor willing to look for work. Thus the labor force participation rate — below 63 percent — is the lowest on record.

Businesses across the state are feeling the effects of that diminished labor force. Their experiences contradict the conventional wisdom — that Nevada’s still-elevated 6.5 percent unemployment rate means a large, accessible supply of people are seeking work.

Notwithstanding generous starting wages of $15 per hour in some cases, employers nevertheless have struggled to attract and retain qualified workers.

Jeff Ecker, who operates Paymon’s Mediterranean Café at two locations in Las Vegas, sees a major difference between people seeking work in the years following the 2008 collapse versus those seeking work after previous recessions.

“Generally, the applicants have been much less qualified, less experienced than we’ve seen in the past,” said Ecker. He manages 36 to 38 personnel at each location.

“The overall presentation and professionalism among applicants has also suffered. It’s common now for applicants to walk in the door with poor hygiene, wearing sandals — just totally unprofessional and seemingly unaware or apathetic to it.”

Sam Chamberlain, vice president of D&D Roofing and Sheet Metal in Sparks, agrees.

“The labor pool is severely diminished,” he said. “It’s becoming more and more difficult to find qualified employees.”

D&D Roofing has been in business for 39 years and normally maintains a staff of about 140 employees, he says. The company offers starting wages of $14 per hour for employees with no prior construction experience, and $15 per hour for even minimally-experienced employees.

Yet hiring in recent years has been an ongoing issue.

 “Even when we recruit and hire people,” said Chamberlain, “they tend not to be around that long. We turned over 80 employees in 2015 alone.”

Ecker, too, notes the revolving-door dynamic.

“Not only is the [labor force] participation bad, but many people that apply don’t show up for interviews and most newer hires don’t give advance notice when quitting. It’s virtually an epidemic here in Las Vegas,” he told Nevada Journal.

Were it not for several well-tenured employees hired before the recession, Paymon’s — which specializes in Greek, Italian, Persian, Middle Eastern, Indian and Vegetarian dishes — would be under even more pressure.

“In the past, we would post a position and get dozens of qualified applicants,” Ecker says. “Now, if we post a vacant cook position, for example, we’re lucky to get one or two applicants. And they usually aren’t even fully qualified.”

Chamberlain notes that after some employees successfully complete their first week of work at D&D — which comprises an informal training period — they then fail to show up for their second week of work.

“It seems like people want to be hired only to leave soon after so they can reap unemployment benefits,” he said. “Most shocking,” Sam continued, “is that upwards of 50 people we hired didn’t show up at all.”

Some kind of vicious circle appears to be at work, hazards Ecker.

“When people drop out of the work force due to retirement, loss of confidence, laziness, etc., it creates a very bad situation for business, causing less-than-desirable applicants to be hired, which then causes customers and staff to suffer.”

“It’s a double-edged sword,” he worries. “We’re paying higher wages for worse talent than before.”

Though statistics strongly indicate a changing labor force dynamic in that sense, opinions regarding the perceived cause of the current labor market’s shortcomings are numerous.

In terms of skilled construction labor, as relevant to D&D Roofing, the problem might be partially attributable to a perceived shortage of public vocational instruction.

Chamberlain has observed that adolescent vocational programs seem to have been phased-out over recent decades in lieu of more liberal arts-centric public school curriculums.

“When I was young,” he recalls, “technical courses such as woodshop were the norm. Now, public education seems to prioritize other, less practical skill sets.”

In terms of the broader labor supply, however, the fact that a growing number of Americans rely on public assistance has led some to conclude that suggests the rise of a culture of entitlement. Critics of government welfare argue those programs reduce the relative benefits of employment.

A 2013 Cato Institute report favors this argument. According to its report, “the current welfare system provides such a high level of benefits that it acts as a disincentive for work.”[1]

For Nevadans, Cato determined that the hourly wage equivalent for those receiving public assistance was more than $14 per hour (relative to a single-parent household with two children).

Because this hourly rate well exceeds Nevada’s current $7.25 minimum wage — $8.25 if the employee doesn’t receive qualifying health benefits — it encourages some to believe they are better off relying upon public assistance rather than the fruits of their own labor, out in the jobs marketplace.

Ecker’s observation that this seems to apply most prominently to younger, “millennial” workers appears to be supported by Bureau of Labor Statistics reporting that the labor force participation rate among American youth (16-24) is only 60 percent.

Nevada’s Department of Employment, Training and Rehabilitation, in its July 2016 jobs report, notes an associated trend — an increasing proportion of Nevada’s labor force is comprised of older workers.

In 1995, workers 45 and older made up just 39 percent of the state’s labor force; in 2015, they accounted for 44 percent.

Governor Sandoval, in the aforementioned DETR jobs report, writes “our unemployment rate is still too high and we will continue our efforts so that more businesses can create jobs and every Nevadan who wants a full-time job can find one.”

The trick, apparently, would be to make all capable Nevadans want a full-time job.

Daniel Honchariw, MPA, is a public policy analyst at the Nevada Policy Research Institute.

[1] M. Tanner & C. Hughes (2013), “The Work versus Welfare Trade-off: 2013,” Cato Institute, executive summary

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