New BeginningsReinventing Nevada’s Workforce After Shutdown

 

On March 20, Governor Sisolak ordered all nonessential businesses to close as Nevada followed shutdown orders, attempting to slow the spread of COVID-19. Overnight, the travel and tourism engine shutdown. For the first time ever, casinos closed their doors.

During the first week of shutdown, nearly 3.3 million Americans filed for unemployment benefits. The Department of Employment, Training and Rehabilitation (DETR) which manages Nevada unemployment claims and had been receiving 10,000 new claims per month, received 90,000.

“We basically had nine months of activity in one week,” said Heather Korbulic, director, DETR. “We’ve averaged about 10,000 claims a day since then. This is a surge no one could have predicted.”

In April the national unemployment rate hit 14.7 percent, the highest rate ever. In May it fell to 13.3 percent. By the end of May, Nevada’s rate was over 30 percent.

“During the Great Recession, the worst point in terms of previous modern Nevada economic history, our unemployment rate got to almost 14 percent – 13.9 percent,” said Jeremy Aguero, principal, Applied Analysis. “What we’re seeing today is roughly double what we saw during the worst period of the Great Recession.”

Disruption Forces Change

“It’s not a surprise to anyone that Nevada has experienced historic disruption,” said Korbulic. “What we know about disruption is it always forces change.” This time change is impacting the workforce as well as businesses and industries.

Nevada has weathered economic downturns from September 11 to the Great Recession, but Korbulic finds the current crisis closer to the Depression.

“This blows away the Great Recession,” Korbulic said. “Nevada has the highest unemployment, the highest ever recorded anywhere, a surge that couldn’t have been predicted. But while it’s scary to make comparisons to the Depression, there are differences between the eras.” Today there are safety networks, work-from-home technology, and federal stimulus packages.

On March 27, Congress passed the CARES Act – Coronavirus Aid, Relief and Economic Security Act, a nearly $2 trillion stimulus package, followed by PPP, the Paycheck Protection Program, designed to get money directly to business owners. Administered by the Small Business Administration (SBA), its loans can be forgiven if business owners use them to keep employees on the job.

“You have people employed today because these banks stood up and made the program work, flaws and all,” said Joseph Amato, district director, Nevada District Office SBA. Funds were implemented through banks; in Nevada, regional and community banks stepped up.

Data from Applied Analysis shows about $4.1 billion flowed into Nevada. More than 35,000 businesses received access to loans at an average of $117,000, but one in four workers still ended up displaced.

Unemployment benefits and last paychecks became issues as the economic crisis deepened. “I hate to use the word panic but obviously things were shut down so quickly for employers, they had to make the decision if they were going to keep employees on, furlough or lay them off. That was the first wave,” said Shannon Chambers, labor commissioner, Nevada Department of Business and Industry.

The next decisions involved reducing hours, reducing pay and layoffs. Workers who had been laid off and not received their final paycheck in the mandated three business days began contacting the office.

As the economic and health crisis deepened, employees whose employers had been deemed essential began to call, asking if they had to go to work, afraid because of the stay home orders and the declaration of a public health emergency.

Defining the Challenges

The shutdown and the virus that caused it are just two of four interconnected challenges that shape the current workforce. The first challenge, the public health crisis itself, leads to the second, the economic crisis as businesses shutter, temporarily or permanently, and consumers stay home.

The third is fiscal. With nonessential businesses shut down, state and local governments lose revenue at the moment there are increased demands for government services.

The last crisis is predicated on the first three. Legal issues businesses may face when reopening. Some states are making COVID a presumptive Workers Comp claim and state legislators are considering bills to require landlords to reduce rents by 25 percent for anyone affected by the virus. Nothing is certain yet, and nothing warrants overreaction, said Aguero. Legislators are simply trying to determine what programs might be needed.

“So many of the rules associated with Worker’s Comp, safety, unemployment, benefits administration, return to work, all those issues, the processes have changed to accommodate the pandemic and whether they’ll go back to their original form or not has yet to be determined,” said Bill Rosado, owner, ManagedPAY, which handles human resources details for employers.

Time will tell if changes become permanent, though changes dealing with health controls will likely be adopted by health departments.

Normal isn’t Here Yet

When casinos closed their doors, they were forced to layoff a huge number of workers.

“The workforce will have to be rehired at the capacity which accommodates business needs and the demands of the business in question,” said Korbulic. “Especially with the casinos we will probably see a long, slow momentum and as it builds, the workforce will build with it.”

“The best businesses out there positioned themselves smartly to anticipate what they believe sales and revenue are going to be for the balance of this year and into the next,” said Amato. They’ll bring back employees as the economy stabilizes.

Businesses were effected in many ways. Some shut down. Some had partial operations. Some were unaffected. “It’s those in the middle you want to save, and they’re going to have to be versatile in the way they approach the new, post-COVID frontier,” said Amato.

SBA is preparing to support businesses with its express loans program. “We’ll do everything we can to help businesses realize the requirement of survival at this point, which is scaling, timely hiring and working within the limitations they have based on sales and revenue.”

Survival may cause companies to change their business model, what goods or services they offer and hire workforce to accommodate the change, or they may scale back on headcounts.

“We saw that in the 2001 disruption, along with immediately following September 11. We’ll see changes to direct employment or contracting outside services,” Korbulic said.

Reopening nonessential businesses doesn’t guarantee employees will be comfortable returning to work. Or even available to do so. There’s also the question of how many employees to rehire.

“Our clients are telling us they’re just not sure who to bring back, how many employees to bring back, what hiring will look like, so they’re planning on bringing in temporary employees to bridge the gap and see how this plays out over the next couple months,” said Jason Bruckman, vice president, Eastridge Workforce Solutions.

Bringing back their own employees as temps is an attractive idea – no training required – but most won’t.

“There’s a level of uncertainty of what business looks like,” said Bruckman. Bring back employees too quickly, and if experts are wrong about how fast the economy rebounds, they’ll have to lay them off again, incurring administrative costs and damaging morale. Employers also have to decide how fast to bring on additional employees to meet new client demands.

It will take time to reemploy the workforce. Just how long depends on how well the virus is managed and on good public health policies.

Meanwhile, DETR is identifying employer needs, observing companies’ use of technology, looking for changes in operations and diversification in industries, and building programming around what workers will need in order to find employment in the new landscape.

“We really think things are going to unfold in a case by case manner, and that it depends on the specific industry and how they respond to the new landscape,” said Korbulic. “DETR is preparing to train and connect employees in this new workforce.”

A handful of industries are thriving, like e-commerce, delivery and distribution. Amazon, along with other e-commerce companies, is hiring. Organizations that distribute or manufacture products that are in demand continue to grow. Medical device and life science companies are growing.

The Workforce in the Workspace

As businesses reopen, there’s speculation about whether they’ll reopen in traditional work environments. Open offices where employees work together will probably change. Employers may form teams who only work together, each team in the office on specific days to avoid cross-contamination.

For some employers, switching to remote work was a nightmare. Jarrod Lopiccolo, CEO, Noble Studios, heard horror stories of business owners scrambling to purchase 50 laptops to get their teams up and running as the shutdown happened.

Noble is a Reno-based digital marketing agency. They already had remote employees in the U.S. and the UK. They were equipped with laptops, conference calls and webinars.

“We’ve never done it all at once, but we’ve been really effective in terms of keeping communications with our teams and with our clients. We’ve actually seen an uptick in communications with our clients, building meaningful connections with them because we see them on Zoom. We’ve really seen a productivity increase in our business while working remote,” said Lopiccolo.

In April 2019 Zoom was a little-known conference call platform. By the end of April 2020 it had exploded to 265,000-plus corporate customers, four times what it had the year before, and first quarter 2020 revenue more than doubled first quarter 2019.

Some employees like working remote because it means their employers trust them. Others like avoiding the commute or cooking healthy meals. A survey of Noble Studios employees revealed they’d prefer a hybrid schedule – flexible schedules that allow both office and remote work. That plan is in the works.

One southern Nevada trend is to not have a corporate office, said Mary Beth Sewald, president, Vegas Chamber. Companies lease space per meeting or event. “It’s a way to build more efficiencies and save money.”

Sewald’s found video conferences and webinars are replacing travel. She used to travel to conventions and meetings with Nevada delegates, but wonders how that will change if folks find they can be as effective in a video meeting without flying four hours across the country. She added, “That’s going to be an efficiency more and more people find palatable and attractive.”

Employers have questions about managing employee productivity with remote situations, and Bill Rosado has fielded questions about cyber security, both with using teleconferencing programs and with remote employees having access to nonpublic corporate information.

Not everyone wants to work remote, said Bruckman. Maybe the internet connection isn’t fast enough. Maybe one member of a couple working from home is enough. Maybe there are young children in the house making it not conducive to productivity.

But while remote might not be for everyone, it seems possible the traditional 40 hours in the office and adhering to strict guidelines is a thing of the past. Businesses have had to adapt to a more flexible workforce. It was coming anyway. The COVID crisis just sped up arrival.

Locating the Future

During the Great Recession, many companies having downsized chose not to rehire or to rehire sparingly. They moved forward with lean headcounts, rehiring when conditions stabilized, or not at all.

Post-COVID some employers may run lean to avoid rehiring just to layoff again if there’s a spike of cases. Others may be unable to rehire because employees have found other jobs or choose to stay home. Restaurants, at 50 percent capacity, may offer reduced hours and/or pay, causing workers to rethink returning.

Aguero described three categories of returning workers. The first would return quickly to waiting jobs. The second group would return when the economy finds a new sense of normal and businesses determine how much consumers will consume and how much they’ll pull back. The third may find their jobs have been automated and no longer exist.

Not everyone is anxious to rejoin the workforce. Some are more anxious about the virus. In a survey of Noble Studios personnel Lopiccolo learned 65 percent were comfortable returning in July, later than he expected but now the date scheduled for returning.

New Worlds

“This disruption created an almost overnight pivot to a more nontraditional landscape of how work is done, and that really brings opportunities for a more diversified workplace and a more diversified workforce,” said Korbulic. “It expands opportunities for individuals and businesses to break the Monday through Friday 9 to 5 mold.” Changing up “normal working hours” allows workforce participation from individuals who couldn’t make those hours work.

“A workforce must be prepared to quickly change gears to support the business’s needs,” said Melissa Amaon, president, Southern Nevada HR Management Association. Some industries that were able to mobilize their workforce to work remotely are considering keeping their workforce remote where practical.

That shift in traditional work environments lends itself to a new industry. This new industry helps businesses develop skills necessary to working remote including virtual training platforms, customer service call support, data entry, record processing and virtual estimating for contracting. Those are all areas where employers will either need to hire skilled employees or train their own.

“Also in southern Nevada we may see an emerging ancillary marketplace that supports the areas where we found gaps during COVID-19,” said Amaon. There will be a need for suppliers of cleaning products and services as well as IT companies specializing in setting up secure remote worksites.

Employers just starting remote work might look for ways to manage employee performance, collaboration, changes in “office” culture and customer acceptance of changes. “I would guess that as much as 15 to 20 percent of the workforce that were able to work remotely as a result of COVID-19 will be offered the option to continue in the mode, at least as part of their regular schedule,” said Amaon.

Business as Usual

What does reopening the state mean for the workforce? Depends on what happens with the virus. Whatever that is, it doesn’t seem likely to happen quickly.

“Our models are predicated on the expectation that a vaccine and treatment will be available in the first quarter of 2021, and will be widely available by the end of first quarter 2022,” said Aguero. “Modeling it that way, we’re expecting about 60 to 90 days of hovering along the bottom where we are [at the beginning of June], followed by somewhere between an 18 and 36 month recovery cycle,” with that timeline kicking into gear with the state reopening from stay home orders.

“It will take a while for our economy to get people to come visit,” said Rosado. “Since gaming effects our economy so much, I think it’s a slow reopening, a slow growth plan for most of our industries, and that it will be tied closely to how the hotels do.”

“I expect to see the resolve of the state of Nevada’s businesses and employees on full display,” said Aguero. “Nevada is Battle Born. This is who we are and we’ve been resourceful and resilient through any number of economic challenges. September 11 was supposed to be the end of our economy, in the Great Recession we were ground zero for a housing crisis that gripped the nation, and now here we are again. It won’t be easy, I think it’s going to be remarkably challenging, but I think Nevada doesn’t shy away from challenge and will once again prevail.”