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Hollywood Actors and Economics 101

Larry Elder

By Larry Elder

Published April 23, 2015

 Hollywood Actors and Economics 101

Welcome to Hollywood, where dreams become real — and where logic, reason and economics 101 become dreams.

Take the current battle over the minimum wage. In Los Angeles County, the minimum wage is $9 per hour. Theater actors, however, can be paid as little as $7 a performance, and an actor can even work long rehearsal hours with no pay. Three decades ago, L.A. County actors sued their union for an exception to union wages for theaters with 99 seats or fewer seats.

Why do these stage actors work for so little? They want to work. By working they improve their skills, stay sharp and or perhaps have a chance to get spotted by an agent. Some say simply having something to do is better than just sitting around and waiting for a casting agent to call.

Actors Equity, the national union, wants to change this.

According to The New York Times: "The union, seizing a moment when organized labor is having some success pressuring low-wage employers to pay higher salaries, says many of this city's small theaters — which currently pay actors nothing for rehearsals, and stipends as low as $7 per (hour for) performances — should start paying California's minimum wage of $9 an hour." But then a very Republican thing happened — 66 percent of the union members voted against a higher minimum wage. Their rationale was simple. A higher minimum wage means fewer plays get performed. Fewer plays means fewer opportunities for actors and therefore fewer opportunities to gain experience, stay in practice or possibly get discovered. But the union's national council ignored this advisory vote and ordered, with some exceptions, a $9 per hour minimum wage.

When it comes to their own lives, these actors understand the law of economics: Artificially raise the cost of a good ?- in this case the price of an actor in a stage play ?- and you reduce the demand for actors.

Meanwhile, last year actor Kevin Spacey lobbied Maryland lawmakers to extend their tax credit program. He films his Netflix series, "House of Cards," in Maryland. That state offers generous tax credits and relaxed union rules, so that the Netflix series earned more money than would be the case if they filmed, for example, in Hollywood.

In Maryland, a production company can claim a credit on their income taxes equivalent to 25 to 27 percent of the costs of their film or TV production. If the credit is larger than a company's tax liability, the company can receive a refund from the state. "Maryland has capped the total value of credits it offers," writes the Washington Post, "with the amount varying by year but averaging about $12.5 million. Ten productions have been approved for credits since 2012. But the vast majority of the $62.5 million in funding has been allotted to 'House of Cards' ($37.6 million) and 'Veep' ($22.7 million)."

Hollywood studios aggressively seek tax credits and other benefits when determining where to shoot a television series or movie. When a shoot takes place other than Hollywood, studios call the out-of-state production a "runaway production." Brilliant marketing. Hollywood says, "We don't want to shoot outside of California, but, you see, our hands are tied. We have no choice. The production 'ran away' from us, lured by text credits and generous union rules." When a manufacturer, however, decides to move a facility to a different location ?- to take advantage of tax breaks — critics call this "outsourcing."

When it comes to politics, the Hollywood community votes for the party that seeks to raise both the minimum wage and taxes on the rich. The foundation of wealth redistribution is imposing higher and higher taxes on the so-called rich.

Yet after pulling the lever for the tax-hike party, the Hollywood community demands tax breaks for its own industry. A higher minimum wage is an article of faith for Democrats, whose party believes that society "exploits" poor workers. Democratic Party chair Debbie Wasserman Schultz says: "A raise of the federal minimum wage is one of those common-sense proposals that is both good for the economy and good for the country. ... This is a good first step to show we are committed to helping Americans who work hard and play by the rules. And as we tend to this core American value, we will expand the middle class, which will always be the backbone of this nation's economy. These principles are essential to Democrats like me, but they do not have to be exclusive to Democrats. We would welcome Republicans to join us in the achievement of improving wages and creating new momentum for the U.S. economy."

Another Hollywood denizen, Pat Sajak, the host of "Wheel of Fortune," recently offered a different perspective on the minimum wage. Sajak tweeted, "When I had minimum wage jobs, my goal was to better myself, not to better the minimum wage."

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Larry Elder is a best-selling author and radio talk-show host.

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