Hollywood Blindsided by L.A. Minimum Wage Increase

By James  Hirsen 

Copyright James  Hirsen

Los Angeles recently became the largest city in the nation to raise the minimum wage from $9 to $15 an  hour.

Opponents of the increase have been concerned about the negative economic impact that the wage hike will likely have on L.A. businesses, particularly those that are operating under the dazzling dome of the entertainment capital of the world,  Hollywood.

Supporters of the landmark salary expansion continue to claim that the move will have little effect on the entertainment industry, arguing that most workers in Hollywood are already paid far more than the newly established hourly  rate.

Veteran entertainment attorney and Los Angeles film czar Ken Ziffren told The Hollywood Reporter that he believes the measure will have “no material effect” for those who are or are not members of a union in  Hollywood.

“Even if people are non-union, I believe they are all well over the cap,” Ziffren  said.

State Senate President Pro Tem Kevin de Leon, a Democrat who pushed through legislation with the intention of providing more tax incentives to the Golden State’s film industry, tried to downplay the impact of the new law. He told the trade magazine that “people who work in production in Los Angles are not at minimum wage, but slightly higher. But as I negotiated the Hollywood tax credit last year, our goal was always to make sure that these jobs didn’t flee to other  states.”

However, de Leon provided a liberal tell of sorts regarding the left’s general attitude toward small business overhead, when he let loose with the following statement: “If because of the minimum wage they decide to move to another state … don’t come  back.”

One Hollywood Reporter source, who is described as a “longtime Hollywood veteran,” told the periodical that “the only segment of the industry where a significant number of people will benefit is in adult  films.”

Many supporters of the Los Angeles minimum wage increase appear to be unusually shortsighted in their prognosis of the local economy. Hollywood productions that operate within the city limits typically maintain a heavy reliance on a sizable number of small and medium-sized businesses, which are integral in the ultimate creation of entertainment content and product. Such businesses include caterers, dry cleaners, prop services, nurseries, restaurants, and various retail outlets, among so many other establishments and services. These attendant businesses will most certainly be affected by the new wage levels, but how damaging the effects will be remains  unknown.

Los Angeles has been experiencing a loss of revenue for a while now, due to the flight of film and television production projects to more business friendly locales across the U.S. and to other countries such as Canada, where lower taxes and reduced regulations beckon studios. The escalation in the cost of goods and services in Los Angeles will put the city at a significant disadvantage relative to its business rivals in competing locations, and as a result L.A. stands to lose even more of its historic local  production.

According to Variety, Julie Jackson of Jackson Shrub Supply, a company that has provided greenery to the entertainment industry for almost 80 years, predicted a dire outcome, stating, “We just started getting production to come back to California, and now could face them leaving us yet again, and perhaps permanently this  time.”

“Costs are going to go up,” Stuart Waldman, president of the San Fernando Valley-based Valley Industry & Commerce Assn., told Variety. He added, “It just makes L.A. a little less film friendly, a little more difficult. If someone can get catering for cheaper in Louisiana, do they make that decision to shoot  there?”

Beacon Economics was hired by the Los Angeles Area Chamber of Commerce to conduct a study of the minimum wage increase and its effects. Founding partner Christopher Thornberg believes that the exiting of businesses is a likely concern for the  city.

“You end up hurting city competitiveness and city tax revenues,” Thornberg  said.

What is likely to happen is that companies servicing Hollywood could theoretically move to neighboring municipalities such as Culver City, Glendale, or Pasadena, places that do not have the higher minimum  wages.

In a society based on a capitalistic model, it is important that wages be set in the same manner in which prices are determined, by the intrinsic market forces of supply and demand. When the price of labor is artificially inflated, a disturbance occurs, which then sets off a series of repercussions, the results of which are layoffs of existing workers and fewer employment opportunities in the community, particularly at the all-important entry  level.

Situations, in which government mandates of this type are imposed from without, rarely, if ever, end well. While claiming to have the best of intentions, politicians, union leaders, and others who have promoted and/or voiced support for the Los Angeles minimum wage measure, particularly during these tenuous economic times, have set in motion something that has the potential to cause serious damage, not only to the industry and the community, but sadly to the individuals who live, and hope to continue to work, in the City of  Angels.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.