Once upon a time, Hollywood was the mecca of “income inequality” — that is, before those two words became dirty. Movie stars put out press releases boasting of their multimillion dollar salaries. MGM’s boss, Louis B. Mayer, was proudly the nation’s highest-paid executive.
Now, of course, “income inequality” is a catch phrase for what’s becoming a global protest — one to which even Hollywood can relate.
The entertainment industry for generations lived in a protective cocoon of buoyant salaries and benefits. Labor disputes and layoffs were vulgar things that happened in other industries, but Hollywood, after all, was a creative community that manufactured an exotic product and seemed to live by its own rules.
Insiders may have predicted a rude awakening, but few felt it would be in the form of a writers strike — the clumsily managed three-month tragicomedy that ended six years ago, and which both sides managed to lose. Last week the writers were at it again, arguing that they’ve been getting a consistently smaller slice of the pie (their contract expires May 1). This time, however, other artisans in Hollywood believe they have reason to listen.
Indeed Hollywood has become an interesting microcosm of a global economic phenomenon. The multinational corporations that own the town keep making announcements of higher earnings, interspersing them with disclosures of new rounds of layoffs. Even as the compensation packages of CEOs keep expanding, the earnings of their employees are dwindling in terms of real income.
But this is not an isolated trend. New studies indicate that a wider gap is opening up worldwide between the top earners — yes that hideous 1% — and the workers whom they sporadically employ. From 2009 to 2012, the top 1% of incomes rose by more than 30%, while the rest grew at less than 0.5%.
The New York Times noted last week that those businesses dependent on middle-income spending (including movies) were hurting nationwide. Chains like Sears and J.C. Penney or restaurants like the Olive Garden and Red Lobster are effectively fading off the map. “The current economic recovery has been driven almost entirely by the upper crust,” according to the Times. In 2012, the top 5% of earners were responsible for 38% of domestic consumption, an increase from 28% in 1995.
Trends like these have made top management, as well as their employees, jittery. Writing in the Wall St. Journal last week, Fay Vincent, former CEO of Columbia Pictures, advised corporate executives to pursue a careful code of conduct. “The less you confide in others in your organization, the better it will go for you,” he warned. Paradoxically, during his film career, and later as commissioner of baseball, Vincent was known for being open and congenial.
If these trends have the CEOs worried, they weigh even more heavily on writers, who are paranoid by nature. Having survived a harrowing strike in 2007 that changed the structure of the industry, the guild wants an improved contract this year, but says the studios and networks are threatening a rollback, the ultimate f-bomb in collective bargaining language. Management denies it’s considering this option, but in any case, the two sides will be far apart.
Writers point out that finding work in films (down 35% since 2007) has become like counting on clientele at the Olive Garden. TV writers are making fractionally more than a few years ago, but the biggest opportunities are in cable TV, where paychecks are a lot slimmer.
Hollywood writers occupy a tiny space in the economic spectrum, but their mood serves as a lightning rod for the industry. Working actors, below-the-line crew and even producers are feeling the earnings pinch. And new rounds of layoffs are looming. Moreover, due to runaway production, some 9,000 jobs have been lost locally in the entertainment industry since 2007, reports the Los Angeles Economic Development Corp.
Disney has started a new round of layoffs and Sony is committed to slashing $250 million of overhead in the coming months.
Maybe those paranoid writers have something to be paranoid about after all.