“Runaway production” is the Hollywood version of job flight, in which manufacturers look for cheaper production costs in less developed parts of the world. In the case of motion pictures and television, foreign governments attempt to attract producers by offering subsidies.

They are succeeding in doing so. The Milken Institute cites figures showing that from 1990 to

AFL-CIO President John Sweeney addresses the organization’s 24th Biennial Convention, dedicated to the everyday heroism of America’s workers. Behind him stand Joseph Conzo, an EMT and AFSCME member; Bonnie Tobalske, a member of the Fire Fighters Special Rescue Team; UAW member Mary Phillips; culinary worker Anne Woods, and sheet metal worker Joe Rabito. Photo by Bill Burke/Page One.

1998, the percentage of U.S.-developed productions shooting in foreign countries nearly doubled, to 26.5 percent, with 82 percent of those productions shooting in Canada.

The losses are staggering. The Screen Actors Guild and Directors Guild of America issued a joint report showing that direct production expenditures lost in the U.S. due to runaway production were $2.8 billion for 1998, up from $500 million in 1990. If the picture is broadened to include businesses directly related to the film industry, the total economic impact increases from $2 billion in 1990 to $10 billion in 1998. According to the report, the equivalent of 60,000 full-time jobs have been lost in the last three years alone.

The shows going abroad aren’t only movies-of-the-week. The Center for Entertainment Industry Data and Research points to significant growth in the production of features in the $5 to $50 million, mid-budget range in Canada, dispelling the perception that only low-budget productions are moving there. The CEIDR found that after the Canadian government introduced new tax subsidies in 1998, 31 percent of independently-financed movies and 39 percent of studio-financed films shot in North America were made in Canada, even as studio-financed productions shot in the U.S. decreased by an unprecedented 43 percent.

Two principal strategies to counteract this economic hemorrhaging are currently being advocated. The first approach is to offer wage-based tax subsidies to production companies that set up shop in the United States. This would mean amending the Internal Revenue Code so that the companies would be able deduct some of the wages they have paid in the U.S. This approach would focus attention on keeping jobs here, and it is favored by the IATSE and the majority of industry trade groups, most notably the Motion Picture Association of America — representing the studios — and the Directors Guild of America. A bill that would establish these credits, S.1278, is currently under consideration in the U.S. Senate. It would subsidize shows with wages budgeted from $200,000 to $10 million, and cover 25% of qualified wages up to $25,000 per employee annually. It is estimated that such subsidies would cost taxpayers up to a billion dollars a year.

The other approach is a countervailing tariff. This would force production companies to pay the U.S. government a surcharge that exactly matches the subsidies granted outside the United States, thus negating the drawing power of the foreign subsidies. The tariff is supported by the Film and Television Action Committee (FTAC), a group of industry workers who strive to keep production in the U.S., as well as by the Screen Actors Guild, Teamsters locals 391, 399 and 592, Studio Utility Employees local 724 and a general manufacturing group called the Made in the USA Foundation.

But other industry groups, including the IATSE, the DGA, the MPAA and the Producers Guild, argue that motion pictures are not eligible for such tariffs, because they are services, not products. The United States International Trade Commission (USITC) is expected to deliberate on the legality of Canadian subsidies soon, in response to a December filing by the FTAC. If the USITC finds the subsidies to be illegal, discussions will begin with the Canadian government to remove them. If that effort fails, the USITC will then consider countervailing tariffs. A petition supporting these efforts is available at www.ftac.net.

Ultimately, increased union organizing and prudent political jujitsu will begin to level the playing field. But globalization is irreversible, and harmonizing all the forces involved will take decades.

SAG/DGA Report | Center for Entertainment Industry Data and Research Report
Entertainment Industry Development Corporation | Senate Bill S.1278
United States International Trade Commission (look for docket 701-TA-427) | Film & TV Action Committee

The AFL-CIO Convention: American Labor Gathers Political Muscle

At the biennial convention of the AFL-CIO in December, John J. Sweeney was decisively re-elected to another four-year term as president. “We have set the stage — through our organizing, political and mobilization structures — to win greater economic and social justice and re-empower working people in this nation,” said Sweeney.

Since Sweeney was first elected in 1995, the AFL-CIO has grown to 13.2 million members. Unions have become the single largest grassroots force in electoral politics. Nearly 5 million more union members voted in 2000 than in 1992, and the percentage of voters who are union members increased from 19 to an astonishing 26 percent over the same period of time. In 2000, the AFL-CIO elected more than 2,500 union members to office, with promises to double that number over the next election cycle. The federation built bridges to our communities with more than a thousand “Labor in the Pulpits” sermons and dozens of college teach-ins.

“We are the only force in America that doesn’t drift in the wind,” said Sweeney. “That’s because we are the wind. Working families are the wind no matter what the political climate. We are unshakable in our belief that workers should receive a fair share of the wealth we help create.”

AFL-CIO Press Release 12/05/01 | Sweeney’s Convention Speech 12/03/01
Convention Video Library

Hoffa Watch

While the AFL-CIO forges ahead, clearly delineating its differences with the Bush Administration, one of its most prominent constituent groups may be considering a different course. Veteran labor reporter Harry Kelber warns that Teamsters president James P. Hoffa may be putting together a deal in which President George W. Bush would end the 12-year federal oversight of the International Brotherhood of Teamsters, in exchange for Hoffa’s enthusiastic support in the 2004 election.

All this is reminiscent of Hoffa’s father’s relationship with President Richard Nixon. In 1971, Nixon ordered James R. Hoffa’s release from a 13-year prison term for jury tampering and fraud. Later, FBI records revealed that Nixon had received illegal campaign donations from the Teamsters in exchange for a presidential pardon.

Labor Educator 12/4/01 | Teamsters for a Democratic Union "Hoffa Watch"

Bush’s Social Security Commission Recommends Privatization

In a strident interview in the Financial Times last June, Treasury Secretary Paul O’Neill said that the government should do away with a number of bedrock government programs, including Social Security. Six months later, President Bush’s Social Security commission presented a three-pronged set of recommendations that does little to reassure an aging, anxious population.

The three approaches advocated by the panel share several features. They all call for voluntary, private investment accounts; they try to improve the program’s fiscal stability; and — in two cases — they attempt to provide more help to retirees who had low wages throughout their working lives. An analysis of the commission’s draft proposals by the Center on Budget and Policy Priorities notes, “All three plans would reduce traditional Social Security benefits,” and adds, “None of the three plans appears to restore long-term balance to Social Security.”

Opponents of social security investment accounts maintain that a volatile stock market cannot alleviate Social Security’s impending financial crisis. “Privatization has no relevance to solving Social Security,” said Representative Robert Matsui (CA), ranking Democrat on the Ways and Means Committee’s Social Security subcommittee. “Privatization is a gimmick for some on Wall Street to feather their own nest.” Paul Krugman of the New York Times added, sarcastically, “private accounts would indeed strengthen Social Security, if they were accompanied by sharp benefit cuts and huge financial injections from unspecified sources.” AFL-CIO President John Sweeney had even harsher words. “The President’s Commission to privatize Social Security officially endorses a radical plan to dismantle Social Security. The drastic recommendations will bankrupt our nation’s most effective family protection program and jeopardize the future of the federal budget.”

Financial Times | Washington Post 12/11/01
The Center on Budget and Policy Priorities | New York Times 12/28/01
AFL-CIO Press Release 12/12 /01