Statewide Wage Hike Likely Won't Break the Hollywood Bank
"What will happen is you’ll have a smaller pool of waiters/wannabe actors to draw from," says one economist.
California is on a course toward a statewide minimum wage of $15 per hour, now that Gov. Jerry Brown has officially signed off on the move.
While economists say the hike could help low-income working families, there's also speculation it could make entertainment companies with entry-level employees slower to hire and deter some productions from filming in state.
Economist Christopher Thornberg, however, says Hollywood couldn't care less about the increase.
“There’s no way of spinning this into a negative for Hollywood," he says. "If you work for the entertainment industry and you’re making 10 bucks an hour, in a few years you’re going to be making 15 bucks.”
Thornberg’s company Beacon Economics did a study on the effects of a minimum wage increase for the L.A. Area Chamber of Commerce before the City of Los Angeles approved its own hike last year.
Entertainment and business attorney Aaron Bloom also says he doesn’t think the statewide increase will affect Hollywood at all, especially since the city of Los Angeles already took steps to raise the minimum to $15 per hour by 2020. The statewide wage increases to the same rate, but takes until 2022 to get there.
“Senate Bill 3 will have no impact on Los Angeles given the city’s own minimum wage law,” he says. “That said, I don’t think either of these laws will have much of an impact on Hollywood, since most people working in the entertainment industry, regardless of whether or not they are members of a union, make more than the minimum wage.”
"Hollywood isn’t a low-wage industry," says Thornberg. "It’s an industry that has a lot of income and pretty good margins. What will happen is you’ll have a smaller pool of waiters/wannabe actors to draw from."
Economist Kevin Klowden of the Milken Institute says the industry-adjacent jobs likely to be impacted the most are semi-skilled positions such as construction workers, caterers and support services for productions.
“It’s going to have a definite effect in terms of marginal costs,” he says. “[Employers are] going to become more mindful of how they do hours and whether they will pay anyone overtime.”
For production companies and talent agencies who pay their employees minimum wage, or close to it, Klowden says they’ll likely take a hard look at costs before adding or filling positions.
“They’ll slow the pace of hiring,” he says. “There’s still a demand, but you’re going to see companies make an assessment. If their communications break down because they don’t have enough staff, that’s a bigger loss than paying the additional wages — but it will cause people to think twice.”
It could be years before the effects of the minimum wage are fully understood, but Klowden says the financing information attached to film credit applications could be an early indicator of how much this will cost the industry.
"Companies are probably going to be applying for a larger incentive than they might have previously because their qualified wages and their qualified spend estimates are going to go up,” Klowden says. "You will also see places that might have been considered lower cost within the state, like the Central Valley and Inland Empire, lose a fair amount of that comparative advantage."
The biggest potential effect to the industry, according to Klowden, is if productions decide to pack up and move out of state where ancillary labor costs may be lower.
“They might view the wage issue as a tipping point for whether or not they film some more mid-cost productions in state,” he says. “That’s something we won’t really know until they do the math.”
When productions evaluate if they should film elsewhere, Klowden says union contracts will likely keep wages above the minimum regardless of the location.
IATSE Local 80 business representative Thom Davis agrees.
“I don’t think it’s going to have too much of an impact on our group,” he says. “Even the ultra low-budget stuff that’s shooting around town, it’s something that people will just adjust to.”
Local 80 represents motion picture grips, crafts service and warehouse workers, among others. Davis says which industry employees could be affected would typically depend more on what the production budgets are than what the position is.
“If you have a Warner Bros. feature, the rate and conditions are going to be a whole lot different than if you have a $1 million project shooting around town,” he says. “Even in those, if it were to go to $15 tomorrow, a good number of those projects are already in that wage range.”
Davis says no one ever makes the argument in negotiations that union rates should increase because the minimum wage did, but there’s a natural response to follow the norms of the larger community.
“As the minimum wage comes up, so do the wages that are above the minimum wage,” says Davis. “It does have an impact across the board and you see that reflected even in the unionized environment.”
Thornberg says that while the entertainment industry itself won't take a direct hit, the people who live and work in Hollywood will.
“Your standard person is going to end up paying more for your food, for the clothes you buy," he says. "A lot of the costs get passed through to the consumer. It will make living in Los Angeles a more expensive proposition.”
Thornberg says the small local businesses where Angelinos love to shop are going to “get hammered by this.”
“A lot of small shop owners barely make minimum wage themselves,” he says. “It’s easy to wag a finger at McDonald’s. It’s a lot harder to wag a finger at a local burger joint.”
Davis says he thinks people may be overreacting and the increase won’t be as noticeable as they’re anticipating. He also says it was a smart move for the governor to put all California cities on a level playing field.
“It’s good for stabilizing the overall economy by setting it statewide,” says Davis, “so you don’t have to worry about a business that’s across the street having an unfair advantage because of their address, even though it could be just a few feet away.”
Thornberg says the wage hike is good for the working poor, and won't kill California's economy, but it also won't accomplish what lawmakers set out to do.
“We’re pretending to help when we could actually help,” says Thornberg. “As opposed to indulging in a false solution for nothing more than a political win, how about focusing on things that do work? Earned income credits and pre-K education are proven programs that really help lift families out of poverty.”