Pandemic exposes low-wage nature of Nevada’s last recovery

The industries Nevada is known for are also the industries where workers are most likely to receive more money from their unemployment benefits than they would working for their former employers.

According to a presentation by the Nevada Department of Employment, Training and Rehabilitation, the average wages for workers in the ‘accommodations and food services’ industry is somewhere between $500 and $750 per week. Meanwhile, the average unemployment insurance benefits claim paid out by the state is $360 per week. With the additional $600 per week provided by the federal government through the CARES Act, today’s unemployment insurance benefits program provides an average of $960 weekly. That will be true until July 31 when the federal program expires.

Same goes for workers in ‘retail trade’. Their average weekly wages also typically fall between $500 and $750.

For workers in the ‘administrative and support, waste management,’ ‘agriculture, forestry, fishing and hunting,’ ‘educational services,’ and ‘arts, entertainment and recreation’ industries, the difference between their typical wages and their unemployment benefits is smaller but still favors unemployment. In all of those categories, average weekly wages are just north of $750.

These industries make up a significant portion of the Nevada workforce.

Just two of the aforementioned categories — ‘accommodations and food services’ and ‘arts, entertainment and recreation’ — are bulked together under ‘leisure and hospitality’ and make up a quarter of the workforce within the state.

These industries are also some of the hardest hit in terms of job losses due to the coronavirus pandemic shutdowns.

According to DETR, Nevada had 323,700 workers in ‘accommodations and food services’ in April 2019 and 191,400 in April 2020 — a drop of 40.9 percent.

There were 146,200 employees in retail trade in April 2019 and 115,500 in April 2020 — a drop of 21 percent. Many of the workers who fall under this category were deemed essential because they worked at grocery stores or other retailers that were permitted and encouraged to stay open during the state shutdown. While some major employers provided temporary hazard pay for essential employees, for anyone whose wages are around the industry average it is unlikely that pay covered the entire gap between the unemployment benefits available today and their typical wages.

Not all industries suffered to this extent. Construction managed to gain 100 jobs year over year — a 0.1 percent increase from April 2019 to April 2020. Others had job losses but to much lower extents. ‘Mining & Logging’ dropped 4.1 percent, which is within its typical year-by-year fluctuations. ‘Transportation, Warehousing & Utilities’ dropped 3.9 percent. ‘Financial Activities’ fell 1.8 percent — mostly because of real estate and leasing jobs lost.

After highlighting in his presentation the potential to receive more money while unemployed than employed, DETR Chief Economist David Schmidt stressed to the Economic Forum on Wednesday that unemployment benefits are designed to be temporary.

“To be eligible, employees cannot refuse suitable work,” he said. “It’s important to know they can’t just sit on unemployment because they earn more money that way. The department has made it a point (to tell people this).”

Refusing to return or accept work when offered is grounds for losing unemployment benefits. Lying about it in order to claim unemployment benefits could be considered fraud, he added.

The reality that significant numbers of Nevadans may be receiving more money through unemployment than through their pre-pandemic jobs should not be entirely surprising. Back in December, when the Economic Forum last met, state analysts acknowledged Nevada has been lagging on wage growth compared to the country as a whole.

Wage growth in Nevada had yet to catch up to its pre-Great Recession peak — something that had already happened (and then some) nationally.

Now, Nevada is experiencing historic levels of unemployment that analysts believe nears or surpasses those seen during the Great Depression. Economists and historians estimate the national unemployment rate was around 25 percent during the worst part of the Great Depression. Nevada’s unemployment rate in April was 28 percent but the rate of people affected is probably closer to 35 percent, said Schmdit.

Of course, there are major differences between the Great Depression and now.

Schmidt noted that the social programs like unemployment insurance and social security that people are relying upon right now were created after the Great Depression to stop history from repeating itself with a “vicious cycle” of income loss leading to business closures leading to more income loss leading to more business closures.

“We’ve had to spend a lot of money to blunt that cycle,” added Schmidt.

In February, the unemployment rate in Nevada reached an all-time low at 3.6 percent. When the economy came to a near screeching halt in mid-March in the form of mandatory statewide closures of nonessential businesses, unemployment skyrocketed seemingly overnight.

Now the question becomes what the impact of reopening, which began in earnest in mid-May and ramped up in June, will have on employment and unemployment numbers.

“In a month, when we get data for June and see the effects of reopening, I think we’ll see dramatic changes in numbers,” says Schmidt. “We won’t get to 3.6 percent but the sharp spike will fall. It may fall to a typical recession.”

On Monday, the National Bureau of Economic Research officially declared the United States as being in a recession — not that much doubt lingered.

“‘What does it look like’ is a really good question,” said Schmidt. “It depends on how people feel. The sentiment of business and workers.”