Analyst: Don’t cut Las Vegas city jobs

City Council seeks advice for its upcoming May 18 budget hearing

May 05, 2010 - Don't follow the lead of the private sector and lay off your employees — it just contributes to the economic problem.

But do follow their lead in freezing employees' cost of living allowances, longevity pay increases or step increases in salaries -- those also contribute to the problem.

That was the clear message local economic guru Jeremy Aguero gave to the Las Vegas City Council this morning after the council heard how the private sector has been dealing with the recession during the last 29 months.

The "worst-case scenario" for the council to take "would be to lay employees off, and simply allow an escalation of wages and benefits for the employees that remain," Aguero said.

However, Mayor Oscar Goodman pointed out "it takes two to tango" -- the city must deal with the contracts it has negotiated with the unions. And if the unions won't budge, then the city has no other recourse but to lay off employees, Goodman said.

"Unless our employees who are members of these collective bargaining units come to the table and recognize what we've heard this morning and accept it as the truth and change their mindset, we are at a loss of doing anything other than laying people off," Goodman said.

"Because unless they're ready to open up their contracts, unless they're ready to make the concessions, which apparently are necessary -- maybe necessary evils, but necessary -- then we have no alternative but to lay people off," Goodman told Aguero. "And that, once again, as you say, contributes to the problem. That's where our dilemma is."

Aguero, a principal analyst with Applied Analysis, a local financial advisory and economic consulting and research firm, was part of an hour-and-45 minute presentation the council heard this morning about how the local private sector has been dealing with the recession.

The council, which is trying to handle an estimated $80 million revenue shortfall, wanted the information as a prelude to its May 18 final hearing on the city's 2011 fiscal year budget.

The council approved a tentative budget in March that would cut 141 city employees and eliminate and scale back some services in the fiscal year that begins July 1.

Since that time, Mayor Oscar Goodman and the council have been trying to get the city's four unions to make concessions to help balance the budget.

But the unions have not conceded to the city's request they take an 8 percent salary cut this year and next year, plus freeze cost of living increases.

Private sector salaries fall 7.6 percent

Aguero told the council that when the current recession began in December of 2007, Southern Nevada's unemployment rate was 5.6 percent. Today, the unemployment rate stands at 13.8 percent.

During that same period, private sector employment has fallen from 834,000 to 697,000 jobs, or 137,100 positions, he said.

"We have given back better than six years of employment growth," he said. "Roughly one out of every six private sector employees have been displaced since this recession."

Those who remain in the workforce have seen their pay rates reduced, he said. In August 2007, the average private sector worker was working 37.4 hours per week. As of March 2010, that has fallen 8 percent to 34.4 hours per week, he said.

The result is an effective "underemployment" rate in the community now approaching 21 percent, he said.

The U.S. Bureau of Economic Analysis reported total private sector earnings in the fourth quarter of 2007 for Nevada of $68.5 billion. In the fourth quarter of 2009, that dropped to $58.3 billion, a reduction of $10.2 billion in wages and salaries going to private sector employees, or decline of 14.8 percent, he said.

"The average private sector employee is also earning significantly less than they did when the recession began," Aguero said.

In the fourth quarter of 2007, the average private sector employee reported earnings of $720 per week, or $37,400 per year. As of March, that has fallen by 7.6 percent to $665 per week or $34,590 per year, he said.

Although there aren't any reports about cuts made to benefits, national trends indicate there have also been cuts made to retirement, health care and other benefits, he said.