Monday, August 14, 2023

Article provided by Craig Kessler, SCGA

Anyone over a certain age, and even those below a certain age, know something of Yogi Berra’s caveat about predictions – “predictions are a dangerous thing, particularly about the future.”

But if one accepts the wisdom contained in Edmund Burke’s dictum about “society being a partnership of the living, the dead, and the unborn,” predictions are less stabs in the dark than extrapolations drawn from the trajectory of current events.

If you are a regular reader of these “Updates,” you know that we have been doing a lot of the second variety of predicting in recent months – from what the aridification of the Colorado Basin portends, to the what changing weather patterns in the Sierra Nevada mean, to what bills floating in Sacramento vitiating long sacred water rights contemplate, to what the state’s acute housing shortage threatens for a game that requires large tracts of land, to what competition for precious park and green space means for a sector long characterized elite and aloof, all the way down to what a certain editorial in the Southern California News Group advocating for the resurrection of AB 1910 suggests in terms of financially interested parties taking another run at 22.3% of California’s golf stock.

To this lengthy list of challenges, allow us to “predict” one more. Labor – not so much in terms of cost, but in terms of political and social consequence.

Economists don’t agree on much, but they do agree that worker compensation as a percentage of economic productivity has declined since the federal minimum wage’s high-water mark in 1968. Some find the decline higher than others. Such is the nature of economic modeling. But assessing the validity of economic models is above our pay grade – way above. So, we’ll go with the common ground contained within them.

Wages represented a smaller share of the overall economy in 2008 than they did in 1968, although with wide variances. Such is the nature of averages. To throw in yet another aphorism (rule of three?), one must always remember that a 6-foot person can drown in a river the average depth of which is 4 feet, depending upon where he or she is standing in the river. Exactly where golf stands in that river is, again, above our pay grade, but we suspect that most reading this understand that golf was not an exception to the trends that animated the 1968-2008 aggregate decline, not in all job categories but more than enough of them to put golf operations firmly in the category of those sectors that benefitted from relatively stable labor costs.

We won’t regale you with the obvious. We’ll just note that coming out of COVID, wage floors of almost all kinds increased dramatically, whether the minimum wage that is the de jure bottom of every floor or the de facto floor represented by what it takes to fill a specific job. Golf jobs are for the most part well above such floors, but when the floor rises, everything above it goes up to some degree. Labor costs may not have gone up as dramatically as the water, compliance, material, and capital project costs endemic to the industry, but when all costs are ascendant in a sector dependent upon securing discretionary dollars from willing purchasers, there is downward pressure on the pool of purchasers. Of course, “downward pressure” isn’t a consignment to failure; it just makes success harder to achieve.

We will regale you with what you may not find obvious. Labor’s larger share of the economic pie isn’t just some COVID driven anomaly that may reverse course in much the same way golf expects some of golf’s incredible COVID bump to ease. It’s here to stay. We don’t draw that conclusion because we can predict the future. We draw it because we can predict the present.

And predicting the future requires nothing more than taking stock of a few “present” facts.

In May Senator Tom Umberg (D-Santa Ana) introduced an initiative that if it is able to secure two-thirds approval from both Senate and Assembly in the next 30 days would place on the November 2024 ballot an initiative that would enshrine in the state constitution the right to organize and negotiate with employers, including governmental employers, while invalidating laws and ordinances that violate those rights.

The Los Angeles County Board of Supervisors is poised to consider a motion by Janice Hahn (seconded by Supervisor Horvath) to direct County Staff to draft a “Tourism Worker Retention Minimum Wage Ordinance” that would require hotels that serve 60 or more guests and theme parks in unincorporated areas to be paid at least $25 an hour, rising to $30 an hour by 2028, when the Summer Olympics will be held in Los Angeles. The ordinance envisaged by Hahn’s motion parallels recent motions in Los Angeles City and Long Beach, confirming what we have come to understand about how what one large Southern California municipality does is soon echoed by others.

The Los Angeles Times attributed the following to Supervisor Hahn in last Thursday’s edition: “Too many employers are paying their workers low wages, which exacerbates poverty, homelessness, and housing insecurity. At the same time, hoteliers benefit from county investments in beaches and parks, attracting tourists to the region, and theme parks benefit from special zoning privileges, giving the county a vested interest in how their workers are paid.” The parallels to the 20 golf courses Los Angeles County leases to private operators are too close to ignore.

First reported by Politico and subsequently confirmed by multiple media outlets, a bill carried by Senate Appropriations Chair Anthony Portantino (D-Glendale) and co-authored by Assembly Member Laura Friedman (D-Burbank) and Assembly Appropriations Chair Chris Holden (D-Pasadena) will be drafted the last 30 days of the 2023 legislative session that would allow striking workers to receive unemployment benefits. Nothing of this sort has ever been part of California law, although New York and New Jersey do permit unemployment benefits for certain workers under certain circumstances. The details of the California version are not yet known, because nothing is yet in print. For those of you who may be asking, how can a bill that has never been in print, never been heard by a policy committee, and never been placed on the floor of either house of the legislature be drafted and rushed through to the Governor’s desk as this stage of the session, please now be viscerally educated as to what the “gut and amend” process is all about. A legislator need only strip all contents from a bill alive and well in the late stages of the process and replace those contents in whole with new and often completely unrelated language. No doubt, that final language will be the language the co-authors deem most likely to secure sufficient support within a Democratic Caucus that while always strongly pro-labor, was sufficiently attuned to business interests to nix an identical bill floated by AB 5 author Lorena Gonzalez (D-San Diego) in 2019. A failed 2019 effort that succeeds as a gut and amend job in 2023 would certainly tell us something significant about just how much things have changed post COVID.

These most recent “events” come on the heels of spikes in general minimum wages for all and differential minimum wages for specific sectors, e.g., hotels. Throw in a “great resignation,” record low unemployment rates, renewed inflation rates, and the fact that since the days of Miguel Contreras, Los Angeles has become the nation’s center of organizing activity, and the following “facts” shouldn’t surprise: 1) So far this year there have been 53 labor strikes in California involving 276,340 participants, 2) in 2022, there were 96 strikes with 92,527 participants, and 3) in 2021 there were 52 strikes with 64,849 participants [Source: Cornell University’s Labor Action Tracker, courtesy of the LA Times.]. All this, not to mention that 11,000 City of Los Angeles workers participated in a one-day work stoppage last week and Unite Here Local 11 continues to perform rolling strikes at the region’s hotels.

In past times these kinds of disruptions might have stimulated public antipathy. From what we know from all credible polling and reporting, the opposite is the case now. The last time Hollywood went on strike, the public had little sympathy. Today’s SAG/AFTRA and Writers Guild strike, the first time in 63 years that both have struck at the same time, has generated considerably more public support for the strikers than their studio employers. We are also informed by those same polls and media accounts that there is more coordination and cooperation than in past times among sectors like hotel workers and screenwriters that occupy vastly different economic niches.

Let’s not forget the populism that suffuses our current politics. Right leaning populism may be the much stronger of the two at the moment (it almost always has been in American history, and it is dominant right now in one of America’s political parties), but the left leaning version of it has a significant presence as well. Anything that smacks of elitism, exclusivity, dare we suggest “country club,” or the following caricature of golf we like to repeat to rattle golf’s all too often complacent cages carries the risk of running head on into both variants: Golf – too much land that uses too much water to serve the interests of the too few who have had too much for too long.

Those with great memories will remember that at the beginning of this essay we suggested that Labor’s roar, while certainly a business consideration of some consequence, was much more a consideration of political and social consequence. Golf has proven eminently capable of managing rising costs of all stripes, many of them more substantial than current labor accommodations. Golf will prove capable yet again; of this we have absolute confidence. What we do worry about, and you may have guessed by now why we penned this essay, is golf’s ability to frame everything it says and more importantly, does, in a way that aligns with the spirit of the times, or at least doesn’t overtly conflict with it and in the process, put golf squarely in the crosshairs of an irate public. An irate public gives birth to bad outcomes in the public arena.

To be fair, as well as fully accurate, golf has proven capable of crafting a fact-based narrative that places the game firmly in alignment with the environmental and conservation ethic that characterizes the spirit (and letter) of the times. And golf is proving increasingly capable of crafting a fact-based narrative that highlights the added social value/utility golf courses offer the communities in which they are located – a rapidly evolving work in progress. But the game also needs to begin working to come to terms and then align with a demonstrable tilt in favor of workers over their managers and labor over capital. Excuse the gross simplification, but we didn’t want to confuse what is really a quite simple point by cluttering it up with complication.

Securing best available outcomes in the public arena is an exercise in identifying one’s audience and speaking in a language best calculated to appeal to it.