Is Nevada’s Labor Shortage Actually Just a Wage Shortage?

It’s long been said that good workers are hard to find.

But some business owners are reporting it’s difficult to find any workers right now. An apparent worker shortage is happening across the state, forcing some businesses to reduce operating hours as a result.

In May, in Carson City, Mom and Pop’s Diner, located directly across the street from the Nevada State Legislature, posted a sign reading: “Closed Tuesdays. We can not find kitchen help to work. As most people know, when you’re getting more money on unemployment than when you work, why work?! Sorry, Owners of mom and pops.” In June, in Las Vegas, Lotus of Siam, a popular Thai restaurant, temporarily closed one of its two locations because of staffing issues, adding in its announcement on social media: “P.S. YES WE ARE HIRING!”

Clark County Commissioners Tick Segerblom and Jim Gibson held a press conference earlier this week to promote a large job fair happening this Friday at the Las Vegas Convention Center. One of their underlying messages: You should be looking for a job now; don’t wait until September when federal unemployment benefits end.

“People have to be accountable for themselves,” Gibson was quoted as saying.

But the reality isn’t as simple as blaming the extra $300 per week being doled out by the federal government through expanded unemployment benefits, say Nevada economists.

Getting back to work

“The decision for individuals to work or not work is kind of a complex one,” says Jeffrey Waddoups, chair of the economics department at UNLV, noting factors like childcare, transportation and health. “It made sense for people before the pandemic to go. They had daycare, everything setup. That whole system had taken a while to evolve and it was kind of humming along. When the pandemic hit, key elements of that system stopped.”

Putting everything back into place will take time.

“It’s like you had this big machine working and then it shuts down,” continues Waddoups. “You can’t just turn it back on and expect it to be full speed. It’ll take weeks. It might take years. Who knows? It’s going to take time.”

Considerations for returning to work are both logistical and personal.

A more infectious Delta variant is spreading and is now the dominant strain of covid-19 in the United States. While nowhere near the pandemic peak last year, Nevada has seen a surge in covid-19 cases and hospitalizations. The state currently has one of the highest number of new cases per 100,000 residents. Contributing to that is Nevada’s slowing vaccination rate, which the state is attempting to address through a promotional lottery and concentrated outreach into key communities.

In Nevada, 54% of the population 12 years and older have received at least one dose of a covid-19 vaccine, according to the state’s official covid data tracker. That’s 46% of the total population.

If you remove people ages 12 to 17 — they are only eligible for one of the three available vaccines and have only been eligible since early May — the percentage of adults who are partially vaccinated jumps to 62%.

But Nevada has lifted all capacity restrictions, no longer requires facemasks and has declared itself fully open for business.

“A lot of the jobs where workers have been paid low wages are risky and that risk has increased,” said Waddoups. “It used to be fine to go to a $10 an hour job when there wasn’t the risk of getting covid and dying. Now you have $10 an hour, maybe a little more, and there’s this risk you’ll get covid from serving people.”

Data from the Nevada Department of Employment, Training and Rehabilitation clearly shows that the lowest wage workers were impacted the most by the pandemic shutdowns.

DETR Chief Economist David Schmidt says the average wage in Nevada shot up 10% in 2020 — not because everyone who retained their job was suddenly making significantly more, but because the mass layoffs were concentrated in the lowest paid industries, like food service and hospitality. Those departures from the workforce made that significant of an impact.

Nevada’s unemployment rate peaked around 30% last spring, rivaling nationwide rates during the Great Depression.

The seasonally adjusted unemployment rate in May 2021, the most recent data available, was 7.8%. That represents a slight improvement from 8% in April but is still significantly above the national unemployment rate of 5.8%.

The Las Vegas area kept the statewide unemployment rate elevated with its rate of 8.9%. The Reno and Carson areas reported unemployment rates of 4.5% and 5%, respectively.

Schmidt acknowledges those rates are higher than anyone would like — especially considering Nevada had reported an all-time low unemployment rate of 3.6% just prior to the pandemic — but says they are within the realm one might expect during a recession. During the Great Recession more than a decade ago, unemployment peaked at 13.7%.

“Friction” in the pairing of workers to employers and specific jobs is to be expected given the circumstances, he adds.

Early research suggests the expanded federal unemployment benefits — that extra $300 per week some business owners and conservative politicians have taken aim at — isn’t having a pronounced impact on the worker shortage nationwide.

Schmidt says that in Nevada the accommodation industry is seeing a slower return to work than the food service industry, which on average pays less. If the workers shortage were simply an issue of finances, you’d expect the opposite to be true. According to DETR, there were approximately 126,000 workers in food services and drinking places in May. That was up from 78,600 in April.

He also notes that only the lowest paid workers — those who make roughly $600 or less per week — would be collecting more on unemployment now than they earned previously. That’s because the standard, state unemployment benefit doesn’t match your lost income dollar for dollar.

Schmidt says there is no shortage of other factors that may be contributing to today’s labor pool, which might best be described as being in transition. Some people may be pursuing education or training for a new, better paid career. Some dual income households may be realizing life is less stressful with one stay-at-home parent. Aging Baby Boomers may be deciding not to return and simply retire, bucking their pre-pandemic trend of remaining in the workforce later in life. Workers who previously held entry-level positions may now be moving upward to replace those older mid-level managers who’ve left, again pushing the worker disruption to the lowest wage spots.

“It’s always more complicated,”says Schmidt. “We have a workforce of 1.5, 1.6 million people with all sorts of unique stories and experiences and employers and jobs.”

About wages

Whatever is driving that friction, in the short term the balance of power appears to have shifted to workers. They have options.

Many employers have tried to woo workers with signing bonuses, perks or gimmicks. Some major national employers, including McDonalds and Chipotle, have publicized raising their starting or average wages.

Raising wages is seen by many as the obvious solution to the worker shortage.

As of July 1, Nevada’s minimum wage is $8.75 per hour for employees who are offered health insurance and $9.75 per hour for employees who are not offered health insurance. That’s equivalent to $18,200 or $20,280 in gross pay annually, if you work a full 40 hours per week, which many in the lowest paid industries aren’t scheduled for by their employers.

“There is a shortage of $10 an hour workers,” says Waddoups. “There might not be a shortage of people willing to work for $15 or $20 an hour.”

Vegas Chamber Vice President of Communications Cara Clarke says the organization has always advocated that the best way to raise wages is through a competitive marketplace — as opposed to raising the minimum wage.

“I’ll raise my wages because I need to do that to find quality workers but there is a limit to what you can do,” she says. “Because you have to meet your bottom line. You can’t suddenly increase costs, because you have customers that will think ‘holy cow’ and other costs are going up right now in consumer goods.”

Since the onset of the pandemic, businesses have dealt with supply shortages. For one reason or another, everything from lumber and chlorine tablets, to microchips and boba have become more difficult for consumers and businesses to purchase. Then, there were increased safety costs, such as having to buy personal protective equipment or modifying spaces with plexiglass.

“You have to absorb those and generally pass it along to your customers,” adds Clarke.

That is easier to do when you are a major employer like Amazon with scalability on your side. Smaller businesses, especially those in industries with thinner profit margins (like restaurants), are feeling the strain of the worker shortage and have fewer options available when competing with other businesses.

Clarke doesn’t blame expanded unemployment, saying that while it has had an impact, most understand it will be a temporary one. She sees a bigger issue of mismatched worker skills and a need for more training to align with the needs of workers.

Elected officials at the state and federal level have made grand promises to help get people back to work. Nevada is once again promising it will diversify its economy beyond tourism. But there’s been little movement toward making wages a major part of that discussion.

Waddoups believes the upward pressure on employers to raise wages may lead to noticeable wage growth in certain industries, and preliminary data suggests that may be happening nationwide. But any benefits from rising wages could easily be outdone by rising housing costs.

“I’ve been around to see some things happen — 9/11, the Great Recession,” he says. “Once we got through it, it just didn’t seem like there was much. No real big shifts in the way we do things. … Maybe a little shift. Prices will go up, profits might go down a bit. But we’ll basically be doing the same.”

In December 2019, legislative fiscal analysts reported that wage growth had yet to reach the pre-Great Recession peak achieved in 2007. Nationally, wages and salaries per employee already exceeded its previous peak by 7.1%. Nevada was still down 4%.

Waddoups points out that, if adjusted for inflation and the increase in productivity per worker, the U.S. minimum wage in 1968 is the equivalent of $23 an hour in today’s dollars. In other countries, like Australia, fast food workers today make roughly equivalent to that amount per hour.

“Why can’t we pay workers the equivalent…?” asks Waddoups. “It was sustainable then. If you ask if it is sustainable now, my answer is yes. Not as much money will go toward profits. Prices might be a bit different. But yeah.”

He continues, “Just because we have a situation here where less skilled workers are paid extremely low wages doesn’t mean it has to be that way.”

But change won’t come naturally through the pandemic. Waddoups says it could potentially come through more focused efforts, such as workers recognizing the existing shift in power and organizing into unions or joining unions to demand more of their employers.

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