WGA's epic battle against commoditization

How labor unions preserve pricing in the world's largest market for freelance creative talent, and why it matters for half of the American workforce.

This is the second in a series of articles about the 2023 Writers Guild of America strike, which is the world’s first organized labor action against the rollout of generative artificial intelligence. I plan to post five more articles on this topic. Subscribe today to read them all.

To understand the unique bargaining clout that the Writers Guild of America enjoys, we need to consider how the movie production business works, and the special role played by the labor unions.

There are two chapters of the Writers Guild, east and west. My comments focus on WGA West. There’s no doubt that the struggle and the stakes in New York are just as great, but I no longer live in NYC, so I’m focused on what’s happening in LA.

Visitors to Los Angeles tend to miss the fact that this is a union town.

At first glimpse, LA is all about surface appeal: the sunshine, palm trees, blondes, beaches, fake boobs, perfect teeth, neon signs, theme parks and fancy cars. Glamor, sex appeal, giant billboards over Sunset Strip.

Most visitors fail to notice the powerful hidden mechanism that drives the booming local economy.

Behind the glittering artifice lies the most sophisticated freelance marketplace in the world. Every year thousands of episodes of TV shows and hundreds motion pictures are produced in LA. This work is financed and released by studios large and small, but very few of the creative people who work on those projects are full time employees of those companies.

Most of the new ideas come from freelance workers. Most of the productions are created by freelance crews. How these disparate groups come together to create magnificent stories that inspire audiences is a fascinating study in self-organization and autonomous leaderless networks.

Los Angeles is the largest market for independent creative talent in the world.

Independence is the magic ingredient that allows the creativity to thrive. Hundreds of thousands of freelance creative people jostle daily, each competing to come up with the next great screenplay, single, or hit show.

If these creative pros were on the payroll at a company they would probably turn into hacks who churn out predictable fare that hews to the company line and adheres to brand guidelines and marketing mandates. But they don’t.

Independence is the key ingredient. Creativity is a delicate thing, quite easy to stifle. This is where union protection comes into the equation.

If not for the unions, the market for on-demand creativity would be dominated by the big media companies. For the past three decades, the studios and networks have engaged in a ceaseless orgy of mergers and acquisitions. Ostensibly, these firms have consolidated to achieve the necessary heft to compete as equals against tech giants and enormous telcos. But conveniently for them, the end result is supersized media conglomerates that enjoy concentrated buying power for creative talent.  

Under normal circumstances, this concentration would destroy the writers’ ability to command high fees. When lots of sellers compete to offer their wares in a marketplace that is dominated by a handful of big buyers, the result is commoditization.

Sellers who lack the power to set high prices tend to race for the bottom, slashing their prices to beat the competition.

But in LA the screenwriters are not cutting their own throats to get a gig. Instead, they have walked off the job in protest. Their objective is clear: they intend to defy the concentration of buying power and reverse the trend of devaluing labor.

LA is populated by tens of thousands of professionals at the peak of their game who vie fiercely for gigs. These workers make a good – and sometimes excellent – income by plying their craft on short term projects with no guarantee of repeat work.

How do they accomplish that without competing on wages?

In the biggest freelance market in the world for creative services and crafts, the union provides the backstop that enables creative artists to earn a decent base income. Then the talent agents go to work on behalf of the top-tier creative artists, extracting even higher fees above union scale. The combined effect blunts the studios’ power to compress creative fees.

Instead of fighting amongst themselves in a race to the bottom, the individual creative professionals have banded together: collectively they have changed the compensation game to a race to the top.  Who can earn more? Which agent can extract a better deal? 

In deal after deal, the agents aim to ratchet up incremental gains, and the net effect is to reinforce the earning power of all creative professionals in every category. Generally, this works. Entertainment industry freelance workers enjoy relatively high pay and good working conditions. They can own a nice home and look forward to a comfortable retirement with excellent health care.

(In 1975, that last sentence could have been written about nearly any unionized profession in the US, but today most labor unions are a shadow of their 1970s-era heft).

In union(s) there is strength.

LA’s creative workers enjoy these benefits because nearly every task done on a film set is unionized.

If the studios had their way, writers would be paid a pittance. Indeed, in previous centuries, that was the case for most writers and artists. Until modern mass media evolved to promote the mass-scale production of goods, writing wasn’t an especially lucrative profession. It was a vocation.

What makes it possible for thousands to enjoy this bounty is the interlocking strength of multiple unions. The unions work in concert to extract commitments from the studios. Thereafter, the unions continue to police the workplace to ensure safe conditions and reasonable pay for well-defined tasks. 

Most workers in LA’s sprawling freelance entertainment production sector are members of a union. These include the well-known guilds for independent artists. In addition to the WGA, there are the Screen Actors Guild and American Federation of Television and Radio Artists (SAG-AFTRA) with 160,000 members, and the Directors Guild (DGA). And several others.

Every movie star that you can name is a member of at least one guild and sometimes two or more.

Those beautiful people who hand out the Oscars on the Academy Awards show? All union labor.

It is the best-looking union workforce on the planet.

The star-studded guilds are buttressed by less glamorous but much larger collectives that represent the “below the line” workers, such as the grips, gaffers, cameramen, carpenters, electricians, costume designers, script supervisors, and truck drivers.

These workers make the equipment move, they build vast sets, they design and sew wardrobe, handle props and hairstyles, tie into the electrical grid, and bring the light and shadow that illuminate the story. Collectively, they create visual stories that enchant billions of people around the planet.

Despite the advent of digital technology and special effects, motion picture production remains an intensively physical process with lots of equipment to move around. Principal among the national labor unions are the International Alliance of Theatrical Stage Employees (IATSE) with 140,000 members and the Teamsters Union with 1.3 million members, with entertainment industry professionals including location managers and casting directors included in Teamsters Local 399.

When these unions walk out on strike in unison, they have the power to shut the whole town down. The unions derive their strength from sheer numbers of members. By working together with the Guilds, they can exert enough control to extract concessions from the huge media conglomerates.

The timing of the WGA contract negotiations, coupled with the solidarity already demonstrated by the Teamsters and Screen Actors, gives the writers the power to make extraordinary demands.

How is the WGA different from other white-collar unions?

There are white-collar unions in several other American industries. Fewer than you might expect. These include hospital nurses, airline pilots, teachers and professors. These unions exists because they enjoy similar leverage: the industry cannot function without these highly skilled workers. Typically, they are supported by a web of other labor unions such as ground crew and radiologists (sometimes), which replicates the relationship of IASTE and Teamsters to the Guilds.  

But there’s a difference. The workers in airlines and hospitals are full-time employees. They are not independent or freelance. This is what makes the Writers Guild different from most other white-collar unions. The tiny WGA is one of the strongest unions in the world for independent workers.

For writers, the battle is on today because the prospect of full automation is visible on the horizon.  They need to deal with the threat of displacement by AI right now, today.

No doubt about it: automation is also creeping into the workflow for nurses and pilots and even professors, and other white-collar workers, too. Someday, AI may begin to displace some of those workers, too, probably, but not yet. Total displacement by machines is not yet possible in those professions, partly because they involve complex operations in dynamic situations that affect human lives.

That’s why today the burden falls on the writers to take a stand against AI. For the writers, the battle is right here, today.

Soon half the workforce in America will be freelance

No other writing profession has the kind of clout to take on an entire industry. Journalists are unionized, but their employers teeter on the brink of insolvency. A strike at a single newspaper is unlikely to improve conditions elsewhere, and it might bring the whole newspaper tumbling down.

Of all the writing professions that are jeopardized by machine intelligence, only screenwriters are backed by the credible force of interlocking unions to shut down an entire industry. That provides a meaningful backstop to the WGA’s collective bargaining power to negotiate with an entire industry at once.

There’s more. To understand how this dispute is relevant to the rest of the American workforce, let’s zoom out. An estimated 62% of the 336.5 million American population participate in the US workforce. Of those, only 100 million are full-time employees. The remaining 40% of the US workforce, comprising 73 million workers, is independent, either freelance, self-employed, part-time or some combination thereof.

The trend is towards more freelancers and fewer full-time employees in the future.

That vast army of 73 million freelancers has been growing by 2 million each year for more than a decade and it won’t stop there. Current estimates suggest that 87 million workers, or more than half the US workforce, will be independent by 2027.

That’s worth repeating.

Half of the workforce in the US will be freelance in the next five years.

What’s more, these freelance workers are highly skilled. More than half have graduate degrees. Indeed the highly-educated group is the fastest-growing segment of the freelance workforce.

However, the vast majority of these freelance workers are not organized. There is no brotherhood of software developers, no federation of temp workers, nor a collective of Uber drivers.  Not that they haven’t tried. Tech firms like Amazon are notorious in their zeal to thwart union organization efforts. So is Apple.

The lack of collective bargaining is one reason why so many freelance workers live in precarious circumstances, just one illness or accident away from penury. They have no benefits, no retirement plan, no pension, no disability insurance.

Unlike citizens in every developed nation in the world (and in the majority of developing nations), US freelance workers and their families are in a uniquely precarious situation because they do not have universal health care. Instead, these workers are obliged to shell out, on average, $8000 for single coverage and $22,463 for family coverage from private insurers. The average insurance premium for a US family has increased 20% since 2017 and 43% since 2012. Beyond the annual premiums, many more fees are piled on top: the average “silver” tier of health care provides only bare-bones coverage with hefty co-pay fees for services and high deductibles for medical procedures. And the US health care consumer must do battle with an institutionalized bureaucracy that is incentivized to deny coverage.

This situation persists because tens of millions of unorganized workers lack the leverage to extract higher wages and benefits from employers. In New York, there is an outfit that bills itself  “The Freelancer’s Union” but it has no collective bargaining mandate: it’s really just a reseller of group insurance products.

Prior to 1973 in the era when labor unions were strongest in the USA, wages consistently increased in step with productivity gains. Thereafter, for the next three generations of working Americans, hourly compensation remained stagnant while productivity soared.  

Several factors combine to cause the divergence between productivity gains and wage growth, such as: five decades of neoconservative economic policy that favors employers over unions; Supreme Court rulings against labor unions that make it more difficult to organize labor; NAFTA, China, globalization, outsourcing and off shoring make it easier to move factories to low-wage jurisdictions; and increasing automation that obviates the need for human labor.

For the purposes of this newsletter, we are focused on last point: technology and automation.

The path for employers to deploy robotics, artificial intelligence, algorithmic decision-making, and other forms of automation in the workplace remains unimpeded.

Free-market fundamentalists point out that this is the reason why the US economy remains dynamic and healthy. But the benefits of automation are not evenly distributed between labor and capital. Meanwhile, the costs of automation, which include displacement, unemployment and time spent re-skilling or up-skilling, are borne disproportionately by independent workers.

Ever since John Maynard Keynes observed the phenomenon now known as “capital biased technological change” there has been an ongoing debate about how the “fair” way to divide the phenomenal profits generated by decade after decade of economic growth.

For the past fifty years, labor has been on the losing side of that debate.

These macroeconomic issues now come into sharp focus in the contract negotiation between the movie studios and the WGA.

To be clear, if the WGA prevails, it will not magically improve the fate of the 73 million freelance workers. There is no automatic spillover effect that will shore up their wages and benefits. It will be just one battle in a long struggle.

But a WGA win will demonstrate something quite useful, which is that it is possible for 21^st century workers to organize and demand a fairer redistribution of the profits of their labor. And if they gain the power to determine the pace and terms of introducing artificial intelligence, they will gain some measure of control over the rate of tech-propelled disruption in their labor marketplace.

In success, the writers might prove that it is possible to reverse the decades-long trend towards declining or stagnating wages.

And they might prove that workers are better able to determine how and when to apply automation to their tasks instead of a blunt diktat from a manager.

The WGA strike provides a timely case study of independent creative workers resisting automation and the general trend towards the degradation of the value of human labor.

Success for the WGA might demonstrate to the 73 million freelance workers in the USA how solidarity equals leverage. The WGA could provide a template, or a proof or a model, to those millions of unorganized workers.

That’s why the WGA has attracted solidarity and support from 200 organizations across the United States and from as far away as Israel, New Zealand, Germany, and India. And President Joe Biden, senators and other elected officials.

In our next edition of this newsletter, we will focus on what is at stake between the writers and the motion picture studios.