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Rebuilding the Workforce in New Orleans

November 13, 2007
Related Topics: Growth, Candidate Sourcing, Strategic Planning, Staffing Management
T wo years after Hurricane Katrina ravaged the Gulf Coast, the signs of New Orleans’ workforce challenges are everywhere. Restaurants and retail outlets have cut back on their hours; contractors are backlogged; lines are long at banks because they lack clerks; and on some days, the mailmen don’t even show. From law firms and insurance agencies to the offices of doctors and dentists, there is a deepening shortage of professionals.

    According to the Louisiana Workforce Commission, there are more than 60,000 job vacancies in the metropolitan area, compared with 22,000 in June 2005, just before Katrina. Some of the biggest needs are in the health care, construction, manufacturing and tourism sectors, where it is estimated that another 50,000 positions will need to be filled over the next few years.

    As the Big Easy crawls back to something like normal life, human resources professionals still confront sky-high costs of living, inadequate housing, shaky public infrastructure and shortages of both skilled and unskilled workers. There is a larger issue: workers who in many cases aren’t yet ready—emotionally or physically—to come home to New Orleans. And yet, there are success stories. Companies that have gone the extra mile for their employees are seeing that faith pay off in a stable and dedicated workforce. Workforce development initiatives also are starting to take hold.

Two years after Katrina, staffing still a challenge
   From the ritzy law offices at the top of New Orleans’ biggest buildings to the dark kitchens of some of its grungiest restaurants, finding willing and able employees has been a challenge since calls came for the city to evacuate in August 2005. Although some parts of the city are recovering, many HR directors and executives say that it may still be years before the city’s labor market returns to a sense of normalcy. A 2006 survey revealed that more than a third of businesses were having trouble filling positions.

    While the Hilton New Orleans Riverside hotel reopened just a month after the storm, many of its 1,200 employees weren’t around. Director of human resources Laurie Watt says that by continuing benefits for 30 days, housing some workers and their families and increasing wages, the company was able to hold on to and attract 900 employees. The hotel is using 250 contract workers and is trying to fill another 40 positions, but is having great difficulty finding unskilled labor in the entry-level positions.

    "We’re still shorthanded and our regular team-member staff has been reduced substantially. We didn’t get a large amount of our unskilled labor back, and that’s where we’re using most of our contract labor," Watt says. The availability of skilled labor has also been a challenge for Watt, who says that the hotel is now competing with the higher wages offered by big construction companies.

    With an estimated 200,000 homes and thousands of buildings damaged, the construction boom is expected to carry on for a decade. Frances Roemer, chief administrative officer and director of human resources for F.H. Myers Construction Co., says that competition is indeed stiff within the industry. While the company is only short four workers from its pre-Katrina roster of 40, business is booming and the company is having difficulty keeping up with the work.

    "Post-Katrina, our business has grown, but it is a great trouble to find skilled employees," Watt says. "Subcontractors are also overextended, to where many of them can’t take on any additional work. So there’s a battle for them too. Everyone is competing with everyone for skilled labor now."

    The competition for workers reaches into just about every industry. Pre-Katrina, tourism generated $5 billion a year for the city’s economy and employed approximately 80,000 people. The Ralph Brennan Restaurant Group operates four restaurants in New Orleans and has only retained about 25 percent of its pre-Katrina staff. Executive vice president Charlee Williamson says that rebuilding and training 75 percent of the company’s workforce has been an ongoing challenge. With jobs in such abundance, she says that even if they are successful in hiring employees, it can be difficult to keep them around.

    "There is such widespread critical need within the industry that if one of those employees just doesn’t want to show up on a particular day, there is another job just down the street. It’s unfortunate, but it’s a reality," Williamson says.

Infrastructure, quality of life are major factors
   The underlying challenges in New Orleans’ labor shortage aren’t ones that can be fixed by human resources leaders alone. While the city’s businesses are trying to recover, many residents are still putting their lives back together, all the while coping with the high cost of living, skyrocketing crime rates and an excruciatingly slow recovery effort.

    According to the Apartment Association of Greater New Orleans, average rents have increased more than 30 percent since August 2005. Hourly workers have had great difficulty in finding affordable housing, but even homeowners are suffering at the hands of skyrocketing insurance premiums that have doubled and even tripled since the storm. When the large insurance companies pulled out of South Louisiana, many homeowners were forced to turn to the high-priced state-run Louisiana Citizens Property Insurance Corp. In the metro area, it’s not uncommon to find a homeowner paying annual premiums of more than $5,000 on a $200,000 home.

    "The whole cost of living—including housing, utilities and groceries—has all gone up. And unfortunately for some people, their salaries still aren’t enough," says Carla Major, vice president of human resources and community relations for Harrah’s Casino.

    Throughout the city, businesses in need of hourly workers have been hit especially hard. While wages in retail and restaurants have steadily leveled off, they spiked immediately after the storm not just in response to the low supply of labor but also because of the cost of living. New Orleans’ minimum wage was essentially raised to $10 an hour overnight, says Tom Pyburn, president of the Human Resource Management Association of Greater New Orleans.

    "Fast-food places had signs offering $10 an hour plus a $6,000 signing bonus. Suddenly, anyone who could flip a burger was making $26,000 a year. That became the new labor market and changed everything," Pyburn says. Pre-Katrina, many of the city’s retail and fast-food workers were making little more than the federal minimum wage—$5.15 per hour per hour at the time.

    Even with the wage increases, the working class is having difficulty making ends meet in the city. And while the cost of living may have increased, access to services people need to live—from health care facilities to legal services to schools—is decreasing. Post-Katrina New Orleans lost a large component of its professionals, and they are not returning in large enough numbers.

    Law firms, for example, are competing a lot harder for fewer attorneys.

    "You don’t find a lot of people that necessarily want to return to New Orleans now. Your recruitment pool is smaller, and when you go to the law schools, you’re competing with every other firm in the city," says Tory Nieset, director of legal personnel for Phelps Dunbar, one of the oldest continuously practicing firms in the South. Phelps Dunbar didn’t lose a single one of its 90 attorneys immediately after the storm, but Nieset says that a few decided to leave afterward.

    In some of the hospitals, there are critical shortages of registered nurses. Many doctors fled town, and those who remained are overrun with patients. Dr. Mark Peters, president and CEO of East Jefferson General Hospital, says that the area’s five main hospitals are on track to lose $135 million in 2007, with a substantial amount of that due to the increased costs of hiring contract labor.

    Pre-Katrina, Ochsner Health System had about 8,000 employees; it lost more than 2,300 people after the storm. Human resources director Wendy Willis says the company rehired almost that many people in 2006 but is still short on nurses, medical techs, pharmacy staff and even management and service professionals.

    Willis says the shortages are not just a simple loss of population from Katrina, but stem from the fact that the city’s infrastructure and living conditions still aren’t back to normal.

    "I think that people are still making life decisions about where to stay and whether or not they even want to stay here. I think the worst is moving behind us, but many people are tired," Willis says.

Successful initiatives underpinned by reputation, support
   As America watched New Orleans’ nightmare unfold on national television in 2005, one of the first signs of hope to emerge was an announcement by Harrah’s Casino that it would extend employee benefits and pay for 90 days. Harrah’s immediate show of support may have been what helped it get back on its feet so quickly. The casino—which was used by the police and military as a base at one point—reopened in February 2006, six months after the flooding, with a workforce of 1,800. That was 700 fewer than its pre-Katrina headcount.

    That loss might sound substantial, but it’s not bad considering what other hospitality businesses were seeing at that time—many restaurants and hotels lost more than half of their staff. Harrah’s Major says that the casino’s dedication to the community played a major role in retaining employees and attracting new ones. Along with extending their pay and benefits, Harrah’s also offered as much as $2,500 per employee through the Harrah’s Employee Relief Fund, as well as housing assistance and options to transfer to the company’s sister properties. Harrah’s also set up employee service centers in neighboring cities. There, workers could get such assistance as medical treatment and appointments with FEMA representatives and insurance company claims personnel.

    "It gave people a real sense of security knowing that somebody cared," Major says. "When family members and people found out about some of the things that we did for our employees, I think it was a real example of how this company takes care of its people." By standing tall in the city’s darkest hour, Harrah’s had established a strong reputation as an employer in the community.

    Other employers also made it their business to supply workers with housing. At the Hilton, as many as 200 workers were put up in guest rooms. F.H. Myers brought FEMA trailers onto its office property to house affected employees. Ochsner Health System stepped up wages and provided housing, shuttle services and child care assistance.

    Housing is no longer as acute a problem, but relationships were strengthened when employers helped workers with their basic living needs.

    "I think it really reinforces loyalty that, in times of need, others are there. It’s really a significant part of what human resources does," Ochsner’s Willis says. "When the storm hit, it was our opportunity to really step up and show that we care. Sometimes, it’s the little things that make a difference."

Working to fill the gaps
   Barbara Johnson, senior vice president of workforce and area development for GNO Inc., a public/private economic development group, says the city expects to receive investment of more than $100 billion over the next two years and that the demand for people will grow accordingly. The local labor pool has historically included the 10 parishes surrounding New Orleans, but employers are now looking beyond that, some as far as Baton Rouge and the Mississippi Gulf Coast.

    "We’re now pulling from a regional marketplace that has actually expanded and we’re really seeing that in sectors that have critical shortages, such as health care, manufacturing, construction and the hospitality industry," Johnson says.

    Many HR directors say that New Orleans will have to put more emphasis on growing its own labor pool. The city is already home to 11 universities and colleges and produces at least 50,000 graduates per year. In the past, poor job prospects, low pay and a marginal quality of life drove most students away once they graduated. The Gulf Coast Workforce Development Initiative is working to train and recruit as many as 20,000 construction workers throughout the Gulf Coast by the end of 2009.

    The Louisiana Workforce Commission is using a $38 million grant to develop a statewide plan for training, recruitment and retention efforts in the region. Shell Oil is going after under-skilled workers with training programs in the petrochemical industry, while the Louisiana Technical College System is offering free training in shipbuilding, welding, pipefitting and construction. Ochsner Health System has also had success in developing some of its own labor by ramping up training programs.

    Woody Oge, site director at Northrop Grumman Ship Systems in New Orleans, says that his company has recently put more emphasis on nurturing the local school systems. The company has about 5,400 workers—compared with 6,000 pre-Katrina—and meets with high school students to promote the skilled trades and the shipbuilding industry. Oge says the company’s apprenticeship program, which targets high school grads, has been very successful.

    "Just three months ago, we had about 100 openings and over 550 applicants. We expect that to continue next year as well, and we’re seeing a lot of interest from the schools," Oge says.

    HRMA president Pyburn says that while progress may seem slow at times, it is certain. The labor market is stabilizing, rents are starting to come down and living conditions are slowly starting to improve. Federal assistance may have failed in many aspects of the city’s recovery, but Pyburn believes that private investment is starting to show results. He points to the slow redevelopment of more workforce housing and the emergence of creative entrepreneurs. It’s also a blessing that New Orleans has had two hurricane-free seasons since Katrina.

    "I think things will get better, but it’s going to take some time," Pyburn says. "I look at the economics. There’s a lot of money that’s going to be trickling through the city and I think you’re going to see private investment bring things around."

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