This Hollywood Writers Strike Could Have Massive Economic Impact. An Economist Explains What We Can Learn From 2007

On Tuesday, the Writers Guild of America began Hollywood’s first strike in 15 years, citing disputes over how writers are compensated. Late night shows are already going dark, but the effects of this strike will likely reach far beyond that.

The WGA’s previous strike, which lasted from November 2007 to February 2008, had a massive economic impact, even far outside the entertainment industry, according to Kevin Klowden, the chief global strategist at the Milken Institute — it may have even brought California into the Great Recession earlier than the rest of the country.

Klowden joined LAist’s public affairs show AirTalk, which airs on 89.3 FM, to discuss what lessons we might learn as Hollywood takes another pause.

Klowden says some some businesses and individuals are feeling the effects immediately. Any show that requires writers here and now are shutting down, including shows staffed by members of other unions besides the WGA.

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But if you’ve ever stayed to the end of the credits on a movie, you know there are a lot more people who are part of a production — actors, technical staff, stagehands, dry cleaners and caterers are just some of the many individuals whose work is being impacted, Klowden says.

“All of [their] plans are being put on hold,” Klowden says. “And they're stuck in essentially a no-man's land while they're waiting for some idea of what the timeline is on the strike.”

What happened last time?

Actor Rex Lee speaks on a picket line in late 2007.

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Charley Gallay

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Getty Images

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Klowden said the 2007 strike had a $2 billion impact on the California economy, particularly Southern California. The strike lasted three months and was felt by the real estate and land use sectors, as studios slowed their rentals. Nearby restaurants and service industries, and many others also took financial hits. He says the effects of the strike started becoming less noticeable only by 2009.

Many people left the state, he said, feeling that the economics of staying in Hollywood were too transitory and tenuous, and this contributed towards California’s slip into a recession.

“Now, we're not in that same situation,” Klowden says. “But we're definitely dealing with a more fragile economy because of the pandemic, and a number of people who are more marginal in their own circumstances because of the prior holds due to the pandemic.”

An impact on how people assess risk

Klowden says that disruptions like this tend to affect people’s assessments of the professional and creative risks they’re willing to take; this is compounded by the economic uncertainty brought by the pandemic.

“It makes people more reluctant and leery,” Klowden says. “In Hollywood, we're already seeing a huge numbers of decisions being made because nobody's quite sure where the revenue is coming from.”

In the U.S., labor strikes generally are up 50% between 2021 and 2022, according to the Economic Policy Institute. Klowden says this is in part because of the push to maintain the economy by bringing people back to work quickly, particular essential workers, even before people were able to feel comfortable and safe at work.

“We saw a real drop in the labor force participation rate around the country, because people looked at these jobs, especially these lower-paying service jobs, and said the risk isn't really worth it,” Klowden says.

Some people might have contracted COVID-19 multiple times, or endured a lot of stress around keeping their households afloat.

“It’s basically a tipping point situation,” Klowden says. “We're seeing a lot of people just having reached that limit, especially given the fact that wage stagnation has pretty much been going on in this country for decades.”

Listen to the conversation