Thursday, June 05, 2008

WGA strike costs California $2.1 Billion

Miken report cites dispute as recession catalyst


June 5, 2008

The WGA strike wound up costing the California economy a projected 37,700 jobs and $2.1 billion in lost output through the end of 2008, according to a new report from the Milken Institute.

The report, released Thursday, also asserts that the 100-day work stoppage helped tip the state into recession earlier this year. It said that the strike's impact will less noticeable next year unless the Screen Actors Guild strikes - in which case, the impact will intensify and the recovery will be delayed by another year.

SAG's current contract expires June 30. It's in the 24th day of talks with the majors but has not yet set a strike authorization vote.

"Although the writers' strike ended in February, the effects are going to continue to be felt throughout the year," said Kevin Klowden, managing economist at the Milken Institute and one of the authors of the report. "The ripples created from this industry reach far into California's economic engines and the current statewide recession will further dampen the industry's recovery efforts."

The report noted that writers, actors and production staff support other sectors by pumping their wages into retail, professional services, health care and education. It calculated that wages and salaries would decline by $2.3 billion, retail sales by $830 million and total personal income (wages, salaries, self-employment, rents, dividend, interest and other income) by $3 billion

The report projected the following economic losses by sector:

  • Information, leisure and hospitality: $282.3 million
  • Professional and business services: $366.7 million
  • Trade, transportation and utilities: $311.4 million
  • Financial activities: $327.8 million
  • Education and health services: $98.6 million

Jack Kyser, chief economist with the Los Angeles County Economic Development Corp., told Daily Variety that the Milken Institute's $2.1 billion price tag for the economic costs of the strike appeared to be in the same general neighborhood as figures he issued during the strike. "Our estimated for the impact during the 100 days of the strike was about $2.5 billion and business still has not snapped back although that's hard to quantify," he added.

Kyser took issue with the report's assertion that the strike pushed California into a recession and pointed to his projection of a minimal decline in 2008 job loss of 29,600 slots statewide, or 0.2%.

An industry study issued in January estimated that if strike had lasted an additional 60-90 days, the direct amount of lost spending on TV and film production could have reached $3 billion. (Daily Variety, Jan. 24).

But UCLA economist Jerry Nickelsburg continued to offer a less dire analysis of the strike's impact, saying Thursday that it amounted to less than the $380 million in lost economic activity - a projection he issued during the strike on the basis of a five-month stoppage in part because the entertainment industry is much more diverse than it was during the last WGA strike (Daily Variety, Nov. 29).

Nickelsburg noted that cutbacks in traditional production areas led to expansion in newer sectors like vidgames and original production for the Internet and pointed to reports that venture capitalists were courting writers for a range of ventures. He contended that the estimates of larger losses may not take into account the impact of nets showing reruns, which generated residuals, and increased moviegoing.

Nickelsburg noted that fourth quarter personal income and employment did not decline in the Los Angeles region. "The economic impact of $2.1 billion is the equivalent of what happened to the region when aerospace began shutting down and that just hasn't happened," he added.