blank.gif (51 bytes) Small Business
Nothing Ventured,
Nothing Gained

by D. J. Alden

omething shadowy and menacing lurks beneath Nevada’s glittery neon billboards. According to figures from the state government’s own data, Nevada’s tax revenues are down, tourism is down, mining and agriculture are in decline, and available office space exceeds the number of businesses to fill it. In addition, the passage of Proposition 5 in California may seriously impact the Nevada economy. Business analysts would add that the state’s low tax reputation is evaporating as more businesses and individuals add up Nevada’s hidden taxes, fees, and high cost of living as compared to most other western states.

Forecasts indicate that Nevada will drop from the fastest growing state to number five, behind Arizona and New Mexico. Slower growth may not be all bad, however, if Nevada has taken the challenge of diversifying its base. But this will take planning by the business leaders of Nevada in order to change the status quo. The number one question is: What kind of business climate and growth potential is going to exist as the Silver State moves into the 21st Century?

The question being asked by business and concerned individuals is where is the vision for Nevada? Where are the leaders who will take on the state’s single industry status, demand change, and remind people that without change there will be only stagnation and decline? What’s with a state which is satisfied that the number one growth job is not skilled technician, electrician or computer analyst but waiter or waitress? The statewide average wage in a service industry job is $12.91 per hour ($26,852 per year). There is nothing wrong with being a waiter or waitress. But economist Milton Friedman says such jobs do not make people economically affluent or even comfortable. Unless there is an effort to create high paying jobs and create the educational structures needed to train skilled workers Nevada will attract people with limited or no skills.

Former State Assembly candidate and long time Reno businessman Brooks Holcomb reports that in his discussions with businessmen and manufacturers one of the key ingredients in the decision to relocate is the availability of skilled or a potentially skilled work force. Having to import skilled craftsmen from other areas only adds to the costs of setting up business. He explains, "Even some of the businesses which have moved here from California are moving back because of the lack of a skilled work force … they don’t all need college graduates, but they need people who can handle the skilled crafts."

While there have been efforts to address the problem through legislation, nothing effective has been put in place. Holcomb reminds us, "There was a wonderful vocational education bill before the last session of the Legislature, AB 191, but by the time the Legislature was done it was so watered down it was ineffective." Many midwestern and southern states have incoporated high tech training programs into the high schools. Post secondary vo-tech schools are popular in these regions also.

The question becomes, then, whether or not Nevada wants an under-educated and under-employed work force dependent upon the whims of one industry which no longer holds a national monopoly. Is Nevada really interested in building a viable manufacturing sector with high paying jobs? Are Nevada’s financial institutions and business leaders interested in making venture capital available for high tech industries?

A Good Headline vs. the Truth

The good news is that Nevada has one of the fastest growing job rates in the West. Between May 1997 and May 1998 Nevada added 2,000 jobs to its 40,000 existing ones. (Meanwhile, Arizona added 11,000 jobs to 204,000 already in existence.)

Ray Bacon of the Nevada Manufacturers Association says, "We have the lowest percentage of manufacturing jobs of any Western state."

Bacon says that the low growth is due to the lack of incentives which other states offer. He adds, "There are not a lot of people who have manufacturing experience and besides, most manufacturing jobs require at least a high school diploma."

Nathan Lang, an engineering technician and CNC machinist, moved here from Georgia a year ago where he worked for a high tech company named Johnson-Yokugawa. He came west to work for a semi-conductor manufacturer in Sparks but finds serious problems. "Most people don’t realize the time and training it takes to become a high tech craftsman," he asserts. "When you move to a new area you want to know that if there are lay-offs, jobs will be available in your field. There are not a lot of high paying jobs for skilled workers anywhere in Nevada. It doesn’t seem to be attracting enough high tech manufacturing companies to make it worthwhile to move or to stay here." In agreement with that view, Brooks Holcomb finds that the small numbers of high tech companies statewide indicates a serious problem for a state which wants diversification.

Another dilemma for Nevada is the decrepit business tax structure which is likely to seriously affect the growth of the Silver State. Bacon laments that while Nevada doesn’t have an income tax it still has a tax on capital goods. "Unless you go through the hassle of applying for abatements…you wind up paying seven percent state taxes on a capital purchase." He adds, "It has become an issue with many companies."

Venturing Forth

High-tech businesses are capital intensive. Banks don’t take risks on them and they rarely can get funding through the Small Business Administration. Many other states provide venture capital loans. Larry Struve of the Nevada Technology Council and former director of the Nevada Department of Commerce said recently, "Though there is talk of diversification…there is no state investment in the cause." In 1998, Nevada had one venture capital deal worth $1 million while Utah had six venture capital arrangements worth $17 million and Arizona had eight worth $36 million.

In addition, there is no worthwhile effort to track the success or failure of economic diversification. Most states which have diversified from single industry to multiple industries keep track of such statistics. Tom Guthrie, Chairman of the Nevada Technology Council, says, "The amount of money that we are spending in this area lags far behind those states that are very serious…we are going to have to look at the major role that small business plays and we are going to have to look at high technology companies."

Conclusion

Since the state legislature seems more interested in putting together educational, tax and business packages that are little more than puff pastry, it is up to the small business sector to take the lead.

Economic diversification has been overwhelmingly successful in other regions. In places like Atlanta, Georgia leaders such as Mayor Ivan Allen, Delta Airlines’ Dave Garrett, Coca Cola’s Robert Woodruff and Georgia Tech led the way out of the economic wilderness for the entire South. But who is there in Nevada who will take on the hard core economic issues and make more than cosmetic changes?

The apparent reluctance to train skilled workers must end. An effort by business leaders to provide venture capital for high tech businesses is overdue. The overhaul of the state’s business tax structure should also be a priority. Unless there is basic change, Nevada better hope Steve Wynn has an assortment of clever resort and entertainment ideas up his sleeve. NJ

D. J. Alden is a contributing editor of Nevada Journal.


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