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IN THIS ISSUE – “Any Green Shoots or Bright Spots Emerging Yet?”
CAPITAL ISSUES
- COVID Surge Forces Legislature to Postpone Return from Recess
- State Budget Must Absorb $70 Million from Capitol Protests
- Big Election Action in CA? Dozen Ballot Measures
NATURAL RESOURCES
- Environmental Group Grades State Agencies
- House OKs $200M to Help Fix 2 SJV Canals
- Temperance Flat Dam Falling Flat
- Emissions Law Restricts Housing Supply
- Petroleum Supply Dips at Fastest Pace Ever
HUMAN RESOURCES
- Remote Work Changing Nature of Work Forever
FOR THE WEEK ENDING JULY 10, 2020
Capital News & Notes (CN&N) harvests California legislative and regulatory insights from dozens of media and official sources for the past week, tailored to your business and advocacy interests. Please feel free to forward.
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COVID Surge Forces Legislature to Postpone Return from Recess
LA Times
The California Senate this week joined the Assembly in deciding not to return from its summer recess next week, citing the continued spread of the coronavirus, which has now infected several staffers and members in the Legislature.
Both houses are scheduled to resume July 27.
The decision was announced on the same day that a second Assembly member, Republican Tom Lackey of Palmdale, acknowledged through a spokesman that he has tested positive for the novel coronavirus.
“Assemblyman Lackey has been hospitalized since Sunday for COVID-19 complications. He is receiving excellent treatment at Palmdale Regional Medical Center and anticipates a full recovery,” George Andrews, the assemblyman’s chief of staff, said in a statement.
Erika Contreras, the secretary of the Senate, wrote: “After careful consideration of the increase in COVID-19 cases in the Capitol community and throughout the state, the Senate has made the decision not to return to session next week, July 13-19. We will continue to monitor the public health situation.”
The decision comes as the number of coronavirus cases in California has surged in recent weeks, with hospitalizations up 44% in the last two weeks.
Six employees of the state Assembly, including Assemblywoman Autumn Burke (D-Marina Del Rey), have tested positive for COVID-19, resulting in the lower house deciding to delay its resumption of legislative meetings indefinitely. It is the second time since the pandemic began that legislators have called a break due to concerns over the virus.
“The Assembly will remain in recess,” said Assembly Speaker Anthony Rendon (D- Lakewood). “We have taken this decision, as we did in March, to protect members, staff and the public from exposure, and it comes in light of recent news of positive coronavirus tests in the Capitol.”
Rendon told legislators that his office is developing a schedule that will allow pending bills to be heard but minimize the number of days that lawmakers are in the Capitol building, which is undergoing a deep cleaning.
The decision to delay returning to session tightens the window for the state Legislature to act on more than 700 of pieces of legislation before an Aug. 31 deadline.
One Senate staffer tested positive last month, while two employees who work in district offices have confirmed cases of COVID-19.
The letter from Contreras states that all Senate employees are expected to continue working remotely, while just one staff member may go into each legislator’s district office to perform “essential functions.”
“As has been our practice since the beginning of the COVID-19 crisis, Capitol and [district office] phones should be transferred to cellphones and answered during regular work hours, to continue providing resources, assistance and service to constituents,” the Senate secretary advised.
She said overnight travel will not be approved “except under compelling and unique circumstances” approved by the secretary of the Senate.
State Budget Must Absorb $70 Million from Capitol Protests
Sacramento Bee
Months of protests at the state Capitol and elsewhere in California have now exceeded $70 million in law enforcement overtime and other costs and that number is expected to increase as more figures are compiled, newly released documents show.
The price tag for policing and cleaning up after protests in Sacramento against police brutality in the past month now top $40 million and are mounting, according to figures provided to The Sacramento Bee in response to public records act requests.
Documents show that Sacramento police have spent an estimated $2.1 million in overtime and another $100,000 in other services and supplies responding to protests since the May 25 death of George Floyd, the Minneapolis man whose death while being detained by police there spawned worldwide demonstrations. Those figures do not include damage estimates to vehicles and police buildings, the department said.
The Sacramento Sheriff’s Office estimates it spent more than $1.3 million in overtime and other expenses responding to protests through June 18.
Those costs are in addition to the $38.2 million the California Highway Patrol said it spent on overtime through mid-June, a figure that is expected to increase because of continuing protests, including one Saturday in which a statue of Junipero Serra in Capitol Park was torn down.
Another $24.5 million was spent deploying the National Guard to protect sites in Sacramento and elsewhere in California, and more than $1.9 million was spent removing graffiti, boarding up and replacing windows and providing support services for waste removal and other items, according to the state Department of General Services.
Nearly $1 million in overtime and meal costs also was spent by the CHP to respond to protests in May against Gov. Gavin Newsom’s stay-at-home order responding to the coronavirus crisis.
To date, the total spent on George Floyd and COVID-19 protests tallies more than $70 million and does not include amounts spent in cities outside Sacramento by local law enforcement agencies. The CHP is still compiling a tally of costs in response to a request from The Bee.
https://www.sacbee.com/news/local/article244027037.html?#storylink=cpy
Big Election Action in CA? Dozen Ballot Measures
CalMatters commentary
Four months out from November’s election — and just three months until mail voting begins — outcomes of virtually all major California races are preordained, including a win by the Democratic presidential nominee, assumedly Joe Biden.
The big action will be 12 statewide ballot measures that may differ widely in subject matter, but have a common theme: do-over.
All but two of the measures would re-fight old battles, including the proposals most likely to grab the spotlight, Propositions 15 and 16.
The former is a clash that’s been brewing since 1978, when voters passed Proposition 13, California’s iconic property tax limit.
Public employee unions want to undo Proposition 13 and their initial effort is Proposition 15, removing some taxation limits from commercial properties such as office buildings and shopping centers. It would raise as much as $12.5 billion a year and with those high stakes, $100-plus million likely will be spent by proponents and opponents in the commercial real estate industry.
Proposition 16, placed on the ballot by Democratic legislators, would repeal Proposition 209, a 1996 measure that banned the use of race, ethnicity or gender in governmental actions, including college admissions. The debate over “affirmative action” has gathered new energy with the Black Lives Matter and other protests about racial disparities.
Proposition 19, a legislative version of a previously unsuccessful measure backed by the California Association of Realtors, also revisits Proposition 13 by allowing homeowners over 55 to buy new homes and transfer taxable values of their old homes to the new ones.
Another big do-over, sponsored by law enforcement groups, would change parts of two previous ballot measures (Propositions 47 and 57) that eased up on criminal penalties. Proposition 20’s backers say 47 and 57 freed too many criminals who commit new crimes.
Proposition 25 is another criminal justice measure in the midst of a fierce debate over cops’ treatment of non-white Americans and another do-over. Backed by bail bond agents, the referendum would repeal the Legislature’s landmark elimination of cash bail, which reformers said discriminates against poor defendants.
Proposition 22 is also an effort to undo a legislative decision, in this case, Assembly Bill 5, which cracked down on employers who used non-payroll workers, such as ride-hailing services Uber and Lyft. They and their allies want to exempt themselves from AB 5’s provisions, but face stiff opposition from labor unions.
Two years ago, Los Angeles housing activist Michael Weinstein couldn’t persuade voters to eliminate curbs on local rent control ordinances and he’s back this year with Proposition 21, a somewhat softer version, but still opposed by landlords.
Proposition 23 is another revival of a measure rejected by voters. Backed by a healthcare union, it would impose staffing levels and other operational rules on clinics that provide dialysis care to those with defective kidneys.
Two years ago, privacy advocates dropped a ballot measure aimed at protecting Californians’ personal data in favor of legislation, but they dislike the results and have a new proposal, Proposition 24, that would go further.
Sixteen years ago, California voters approved a $3 billion state bond issue for stem cell research. The money has all been spent and researchers drafted Proposition 14, a $5.5 billion bond for the California Institute for Regenerative Medicine.
Those are the 10 do-overs. The remaining two measures, Propositions 17 and 18would change state voting rules, allowing felons to cast ballots and allowing 17-year-olds to vote in primary elections if they would turn 18 by the November election.
Let the battles of information and misinformation begin.
https://calmatters.org/commentary/dan-walters/2020/07/2020-ballot-measures-taxes-crime-data-jobs/
Environmental Group Grades State Agencies
Sacramento Bee
A California environmental advocacy group urged the state’s air pollution regulator and agriculture department to do more for minority communities in an annual report card it published last week.
That report card, compiled by the California Environmental Justice Alliance, issued environmental justice grades to eight agencies, with a statewide C average.
Six agencies received what could be considered a passing grade, A- to C-. Three of those six — the Geologic Energy Management Division and Departments of Pesticide Regulation and Toxic Substances Control — went from failing grades in 2018 to passing grades last year.
The agencies the advocacy group evaluated have national reputations as environmental policy leaders. The Air Resources Board, for instance, is locked in court battles with the Trump administration over its authority to enforce state environmental standards.
The watchdog group advocates for low-income and minority communities that sometimes bear the brunt of air and water pollution, such as near ports, refineries or agricultural facilities.
According to the advocacy group, California regulators’ environmental justice track record — albeit improved under Gov. Gavin Newsom — is “mediocre.”
“While there have been many improvements to process … the outcomes in our communities are still far from equitable, so we continue to push the Newsom Administration to do more to address environmental injustices in California,” alliance Policy and Political Director Katie Valenzuela told The Sacramento Bee.
The alliance criticized the Air Resources Board’s implementation of a 2017 law that requires the state to improve data collection and monitoring, and to adopt emissions reduction strategies for pollution-burdened communities.
But according to the advocacy group, the agency has “refused to proactively assert regulatory authority” in local air districts by failing to require tangible emissions reductions or assessments of health risks.
In response to the report, Air Resources Board spokesman officer Alberto Larios said that the regulator is “disappointed” in its grade given its work to implement the law and its adoption of other environmentally just policies.
“CARB is proud of its early successes in … [developing] first-in-the-world measures directly benefiting communities,” Larios said. “The program will continue to build on its early successes, resulting in significant emissions reductions that improve the health of communities that so badly need it.”
One other agency received a failing grade from the advocacy group: the Department of Food and Agriculture, which got a D- for its 2019 performance and was not evaluated in 2018.
The advocacy group is critical of the department’s support for methane digesters, a technology that uses livestock manure to produce methane for renewable energy.
The department and the Air Resources Board have allocated tens of millions of dollars in grants to help dairies purchase the equipment, which the agriculture department says will prevent 12.9 million tons of greenhouse gas emissions from entering the atmosphere. The Air Resources Board considers them to be an efficient technology in reducing methane emissions.
The advocacy group counters that the digesters effectively sustain dairy operations in poor communities, where the industry “threatens water and air quality in some of the most vulnerable regions of the state.”
The watchdog wants the department to defund dairy digesters altogether and reallocate that money towards “less harmful and expensive approaches to reducing methane production.”
The agriculture department said it is mindful of feedback from the communities where it has supported methane digesters.
“Community based organizations, social justice and environmental advocates were included in … work groups that have helped shape the successful program we have today,” the department said in a statement. “CDFA values their input and is committed to continuing engagement to address concerns and improve our programs to achieve the highest possible environmental outcomes.”
Other agencies that received a grade include:
- Coastal Commission, B
- Department of Pesticide Regulation, C
- Department of Toxic Substances Control, C-
- Geologic Energy Management Division, C
- State Water Resources Control Board, B+
- Strategic Growth Council, A-
CEJA also put these four agencies on its watch list:
- California Department of Water Resources
- California Energy Commission
- California Public Utilities Commission
- California Natural Resources Agency
https://www.sacbee.com/news/politics-government/capitol-alert/article244029427.html?#storylink=cpy
House OKs $200M to Help Fix 2 SJV Canals
Fresno Bee
South San Joaquin Valley farmers have a reason to celebrate this week: Democratic leaders in the House of Representatives appropriated $200 million to fix the Friant-Kern Canal.
The bill also includes funding to repair the Delta-Mendota Canal and for two Northern California reservoirs.
“This bill represents the full federal share of what’s needed to fix Friant-Kern, and it will take a big bite out of other major water problems afflicting the Valley,” said Rep. T.J. Cox, a Democrat who represents portions of Fresno, Kings, Tulare, and Kern counties.
But there’s a bigger chunk of money — $250 million — needed to fulfill the entire project.
The canal has sunk 12 feet in a 33-mile-long stretch near Porterville due to subsidence — a phenomenon where the ground literally sinks because of groundwater overdraft, accelerated during the last drought of 2012-2016 . This “kink” in the canal causes it to operate at 60% of its typical capacity, significantly reducing what water contractors get for farm irrigation.
It creates a negative feedback loop — farmers receive less river water through the canal; they then pump more groundwater to make up for the deficit, thus contributing to greater overdraft and subsidence, causing the canal to sink even further and deliver less water.
The Friant-Kern Canal was completed in 1951 and was created in response to concerns over groundwater overdraft and subsidence in the 1930s and ‘40s. It carries San Joaquin River that’s stored behind Friant Dam to farms and a handful of communities in Madera, Fresno, Tulare, and Kern counties.
Impacted water districts are located in southern Tulare and Kern counties. Lindsay and Strathmore are the only communities that rely on the Friant-Kern Canal in the southern stretch for drinking water, so they must lean more on their groundwater wells to make up when deliveries are lower than anticipated.
In December 2019, the Trump administration jump-started the repair process by having the Bureau of Reclamation examine the project’s environmental impact. Public comments on the draft environmental impact statement ended in late June; a final environmental report is expected in September.
The funding announcement comes on the heels of the release of a final feasibility study on the cost of repairs for the project.
“This is a big step, and it’s further evidence that the Friant-Kern Canal capacity correction project is viewed as a high-priority project and, thankfully, one that hasn’t been politicized in our hyper-political climate,” said Jason Philips, CEO of the Friant Water Authority which represents the majority of Friant-Kern water users and is responsible for the operations and maintenance of the canal.
The feasibility study pegged the cost of the project at $500 million. Under the WIIN Act — a major water infrastructure bill passed in 2016 — up to $164 million of any federal funds provided to the project must be reimbursed by Friant Water Authority users over a 40-year period.
Approximately $40 million of the project funds could come from the San Joaquin River Restoration Settlement, leaving a $250 million funding gap which must be filled by the state, local governments or user fees.
Using taxpayer funds to fix the Friant-Kern Canal problems is fraught with controversy. Some say farmers, who dug deeper wells to keep their crops alive during the last drought, are directly responsible for subsidence and impacts to the canal and should pay for the repairs.
The Sustainable Groundwater Management Act, passed by the California Legislature in 2014, required farmers and cities to reduce groundwater pumping over time — or put more water back into the ground. The first round of required groundwater sustainability plans were submitted to the state at the end of January of this year — but a preliminary review by researchers at the Public Policy Institute of Californiafound that most Valley plans were far too optimistic, given current water supplies.
Essentially, if the alternative water supplies that so many local agencies are relying on to make up for lost groundwater pumping do not materialize, farmers and irrigation districts will likely continue to do what they’ve always done — keep pumping. Under the law, local water districts have until 2040 to get their groundwater supplies back to sustainable levels.
Efforts to garner state funding for the project have been unsuccessful. In 2018, California voters rejected Proposition 3 — including $750 million in bond proceeds to help finance repairs for the canal.
In 2019, state Sen. Melissa Hurtado, D-Sanger, introduced SB 559, requesting $400 million from the state budget for repairs to the canal. The bill was passed in the Senate last year and has until Aug. 31 to pass out of the Assembly.
Will the federal support for the repairs cause California-based skeptics to change their minds?
If state or local funds can’t be secured this year, the feasibility study suggests that the repairs may still begin as early as 2021, focusing on the most urgent portions of the project.
https://www.fresnobee.com/fresnoland/article244087082.html#storylink=cpy
Temperance Flat Dam Falling Flat
SJV Water
An investment analysis that looked at how much it would cost water users to build and operate the proposed Temperance Flat Dam northeast of Fresno without government funding was finished earlier this year and quietly passed among water districts, which just as quietly asked the federal government to shelve work on the project.
A small group, made up of agricultural water districts and some cities, was assembled by the Temperance Flat Authority to participate in the investment analysis done by Stantec.
The group has still not made the analysis public as it was purposely kept in “draft” form exempting it from disclosure under the California Public Records Act.
SJV Water, however, obtained a copy.
The basic storage costs were staggering, according to the analysis.
If users simply stored their share of high-flow San Joaquin River behind the dam, it would cost them about $9,000 an acre-foot during the 50-year capital cost repayment period, dropping to $7,000 per acre-foot after repayment.
Emissions Law Restricts Housing Supply
Central Valley Business Journal
As California deals with an ongoing housing problem, a 2013 law designed to curb greenhouse gas emissions could make development in small towns more difficult. The law took effect this week.
Senate Bill 743, passed during then-Gov. Jerry Brown’s tenure, changes one of the environmental impact assessments from traffic impacts to calculate the number of miles residents travel for work or play. What is called vehicle miles traveled (VMT) has the potential to affect small towns whose residents are often reliant on commutes to work by adding high development fees to new homes and commercial development.
“SB 743 is going to have harmful or negative impacts on Valley housing and economy,” said Christine Kai, deputy director of the Fresno Council of Governments.
The goal of SB 743 was to curb urban sprawl and encourage infill development. California’s Office of Planning and Research established a goal of reducing driving miles by 15%. The Fresno Council of Governments took on the task of working to identify tracts throughout the county based on how much driving goes from or through the area. Baseline averages are established for comparison and future projects that require environmental review would have to do VMT analysis. Projects that exceed reductions would have to find ways to mitigate driving whether by public transportation, bike lanes or walking paths.
“For a big metro area, 743 does what it is supposed to,” said Kai. “For smaller cities, they tend to travel a little longer.”
In Clovis — ranked No. 1 in the Central Valley and No. 10 in terms of population growth throughout the state, according to the California Department of Finance — growth has been at the “fringes” of the city, said Dave Merchen, city planner.
New communities have popped up in the south and north of town, but new job opportunities haven’t exactly followed geographically, said Andy Haussler, director of economic development for the City of Clovis.
Infill development in the city, like in other cities, is costly because most of the time property is already developed. Costs associated with demolition, new infrastructure and rebuilding make it difficult to repurpose. Part of SB 743 reduces governmental fees for infill development. But projects can still be costly.
“You put that together and it starts getting pretty expensive pretty fast,” said Haussler.
At the same time, the California Department of Housing and Community Development has been increasing housing targets for regions throughout California. While these targets are based on density and zoning, the State has been active about tracking housing production, said Kai. In 2019, Gov. Gavin Newsom’s administration sued the City of Huntington Beach for its inability to reach low-income housing goals. The City of Clovis was also put on notice by the Governor’s office for not issuing enough permits for low-income housing units.
Many regions received housing targets doubling or even tripling previous goals, said Kai. When housing targets come out early next year for Fresno County, she anticipates those numbers to be higher as well.
For new housing developments, this could increase housing costs.
The Office of Planning and Research recognized that for rural areas without mass transit, 15% reduction goals may be difficult. The City of Fresno adopted a 13% reduction and other smaller cities may be able to adopt reasonable thresholds, said Jerome Keene, senior planner at QK, Inc.
But the goal of SB 743 was to discourage cities from continued sprawl, said Keene. Fringe development would become tougher than infill-style development.
For developments in areas identified for high VMT, mitigation methods have to be implemented. But those methods aren’t always clear. One method may be paying into fund programs. Others will increase developmental impact fees.
“There isn’t a set of VMT impacts that couldn’t at least be mitigated on paper, the question is how expensive is it going to be,” said Merchen.
Regional VMT maps are scheduled to be released by the Council of Governments in the coming weeks, but developers feel that it will add more fees.
“With limited methods of public transportation around the Central San Joaquin Valley, we fear the only feasible mitigation measure may be increased fees, and that might not actually be feasible at all,” said Brandon De Young, executive vice president with De Young Properties.
“If early estimates of fee increases are to become a reality,” De Young went on to say, “it could cripple the local housing industry and raise housing prices in a market where affordability is already a major concern.”
Small communities throughout the Valley have seen the highest growth. Mendota, Kerman and Fowler rounded out the cities experiencing the highest growth in the Central Valley, but may not necessarily have the available jobs to sustain that growth. Residents commute to larger urban areas for jobs. In Sanger, ranked No. 7 in terms of population growth in the Central Valley, retail space is in high demand, where they are nearly out of space for new development, said Tom Navarro, community development director for the city.
A new annexation near Highway 180 and Academy Avenue will broaden out the city limit and allow for new retail growth. But because of the area’s penchant for tourism miles going toward Sequoia National Park, it could very well be labeled a “hot spot” for VMT, Navarro said.
Additionally, most of the growth for Sanger has been in single-family homes, which does not help VMT mitigation.
For higher density urban areas, housing projects could be exempted from governmental fees. But in lower density, smaller communities, those fees could be increased.
“SB 743 was designed to help expedite development in urban core areas, but that doesn’t extend to rural communities,” said Kai.
In response to what many governments as well as the Building Industry Association view as burdensome regulations around the assessment, which takes effect July 1, 15 governmental agencies, including the Fresno County Board of Supervisors, joined the Building Industry Association of Southern California in drafting letters to Gov. Gavin Newsom to delay or repeal SB 743.
Others are requesting less drastic measures.
“The state is not very clear in their guidance,” said Kai.
“Those need to be reviewed before those guidelines are effective. We are asking the state to pause and ask stakeholders what needs to be done.”
Petroleum Supply Falling At Fastest Pace Ever
Wall Street Journal excerpt
U.S. crude supply is falling at its quickest pace ever, easing a global oil glut and spurring a swift recovery in fuel prices.
Yet oil’s push back above $40 a barrel as drivers return to roads isn’t enough for beleaguered shale producers, which until recently were the driving force behind a transformation of the global energy industry. For many of them, prices haven’t risen far enough to help ease the strain of debt taken on during boom times. And the need to cut output in the face of pandemic-hit demand means they can’t pump their way out of trouble.
Weekly U.S. output recently fell to 10.5 million barrels a day, down from a near-record of 13 million barrels a day from late March, government data show. With companies from Chevron Corp. to Continental Resources Inc. shutting in productive wells in response to the coronavirus, the slide marks the biggest 11-week drop on record in figures going back to 1983. In percentage terms, the decline is the biggest since the 2008 financial crisis, when U.S. oil output was less than half of what it is now.
The tumble in domestic supply and record output cuts from the Organization of the Petroleum Exporting Countries and partners including Russia are supporting oil prices after they collapsed earlier in the year.
Even with the recent rebound, oil prices are still well below where they started 2020, and many investors still expect a wave of bankruptcies and industry deals that overhauls the U.S. energy sector.
“I don’t think that $40 oil is enough to turn around the shale industry,” said Andy Lipow, president of Houston-based consulting firm Lipow Oil Associates. “This price is still not enough to cover all the debt and costs that have been incurred during the boom.”
Domestic crude output has since risen back to 11 million barrels a day, but some analysts expect supply declines to persist moving forward.
As a result, U.S. crude has risen to $40.65 a barrel and its highest level since early March, paring some of its 2020 decline after starting the year above $60. Prices briefly turned negative in late April due to a global glut.
The rebound remains tenuous because coronavirus cases continue to climb in many large fuel-consuming states including Texas, California and Florida. Adding to the energy industry’s woes: Prices for natural gas recently hit a roughly 25-year low, with the pandemic sapping demand for the power-generation fuel.
The turmoil is rippling through the sector. A recent Deloitte LLP analysis found that shale companies, such as Occidental Petroleum Corp. and Concho Resources Inc., could have to impair or write down the value of their assets by as much as $300 billion. The industry burned through tens of billions of dollars annually in recent years to increase production, and many companies took on hefty amounts of debt.
Analysts are now debating which companies with lower costs will make it through the crisis. Many expect a bifurcation between that group and firms with too much debt to survive.
“I would call it a transformation,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management. “You will continue to see bankruptcy and continue to see consolidation.”
North American oil-and-gas producers, pipeline operators and oil-field-service companies have more than $240 billion in debt maturing over the next five years, according to Moody’s Investors Service.
Denver-based Whiting Petroleum Corp. became the first major shale bankruptcy of the pandemic earlier this year. Industry pioneer Chesapeake Energy Corp.filed for bankruptcy protection on June 28, and analysts say more producers likely will follow.
The oil-price rebound “has maybe given a little bit of timing breathing room but ultimately hasn’t really changed the economics of some of these assets,” said Scott Sanderson, a principal in Deloitte’s oil-and-gas strategy and operations practice.
Remote Work Changing Nature of Work Forever
Wall Street Journal excerpt
Alain Dehaze knows a lot about jobs, and he’s not sold on remote work.
The 57-year-old Belgian has insights into the world of work as head of Adecco Group, ADEN 0.33% one of the world’s largest providers of temporary employment, outplacement services, headhunting and retraining services.
Many companies have recently trumpeted the promise of working from home as demonstrated during the coronavirus pandemic. Mr. Dehaze sees the benefits but also risks.
“Remote work is unfortunately creating a social distance that we should not have,” said Mr. Dehaze, though he sees no return to workplace normalcy until a vaccine is widely available.
Adecco has studied a dozen leading economies’ responses to the health crisis, aiming to identify policies that yield superior results. To jolt economies back to life, governments must invest about 10% of gross domestic product—and do it quickly, Adecco concluded.
“It’s a question of money, but it is also a question of how fast you put the money in the economy,” said Mr. Dehaze, who sees Germany and Switzerland forging a relatively fast recovery from the pandemic.
He recently spoke with The Wall Street Journal by video from Adecco’s mostly empty headquarters in Zurich. Here are edited excerpts.
WSJ: Do you see any green shoots or bright spots emerging yet in labor markets?
Alain Dehaze: It is clear this Covid situation has and will accelerate digitalization. We see, for example, that all e-commerce and related services have accelerated tremendously. We had Christmastime at Easter in e-commerce because traditionally Christmastime is the peak. For one of our largest customers in the world, we recruited 16,000 people in Europe. And we did this without any physical touch. Everything digital.
WSJ: How do you think employers and workers will look at remote work once people can go back to offices?
Mr. Dehaze: There are very positive aspects regarding remote work. You don’t have to commute, so you save time and money. For some, it is very convenient to work from home. But for many others, it’s a nightmare. There is the question of the quality of broadband infrastructure, computer screens and separation between private life and work.
Then there is the question, Who will pay for all the digital infrastructure work needed? Who will take the benefit of time and money saved not commuting—the employee or employer? And there is the third part, which, for me, is very important: What about the culture—the social proximity—you have in a company?
WSJ: Social distancing and company culture don’t mix?
Mr. Dehaze: I don’t like this term social distance. I prefer physical distance, because that’s what we need. The question is physical distance versus social proximity. By being with colleagues, you align, you share a lot of things. You cultivate your values, you cultivate your purpose. If you are permanently alone, I don’t know how you can cultivate this.
It’s like friendship and love. You cannot cultivate friendship and love only from souvenirs, from memory. You need presence, you need to nurture. And with culture, it’s also about nurturing through experience. This social proximity will remain important.
WSJ: Training and retraining—are there any patterns emerging during the pandemic in terms of areas or skills that are most in demand?
Mr. Dehaze: We decided to organize free online courses every Friday at General Assembly [an Adecco subsidiary specializing in jobs-skills training], and it was incredible. In a couple of weeks we had 230,000 subscriptions. What was high in demand? It was what we call digital-marketing capabilities, like search-engine optimization, Google analytics, everything around social media, everything around data science, but also business intelligence and so on.
We have committed to reskill five million people by 2030, and we hope this Covid situation will be an accelerator.
WSJ: Is demand mainly for digital skills? Are there other areas?
Mr. Dehaze: It’s a hybrid. On one end, yes, digital skills are extremely important—everything around data science, especially—but also soft skills: empathy, emotional intelligence, collaborations, creativity.
WSJ: And people need to have the mind-set that they’re in a constant state of reskilling.
Mr. Dehaze: Yes. And I think this will be constant. Upskilling and reskilling will be absolutely necessary to remain employable and attractive in the labor market because, due to the acceleration of technology, people are losing around 40% of their skills every three years. It means after less than 10 years, you are obsolete on the skills side.
WSJ: Can or should governments play a role in this?
Mr. Dehaze: One key tool is what we call the individual personal account. It was created in Singapore. You have the same concept in France and almost the same in Brazil. It is the opportunity for every worker to have his or her personal training account. You receive money from the state, from companies—depends how you want to structure it. You can also put money in this account yourself, so that when you need upskilling and reskilling, you have a budget at your disposal.
Hopefully, this crisis will encourage governments to move on that type of scheme because we see upskilling and reskilling as a kind of protection for every worker. Today, many countries have a protection system regarding illness, retirement and unemployment. Countries should treat reskilling and upskilling the same way.