{"id":910,"date":"2013-06-27T16:21:41","date_gmt":"2013-06-27T23:21:41","guid":{"rendered":"http:\/\/www.artsjournal.com\/worth\/?p=910"},"modified":"2013-06-27T16:21:41","modified_gmt":"2013-06-27T23:21:41","slug":"cost-disease-wages-and-skills","status":"publish","type":"post","link":"https:\/\/www.artsjournal.com\/worth\/2013\/06\/cost-disease-wages-and-skills\/","title":{"rendered":"Cost disease, wages and skills"},"content":{"rendered":"

\"the<\/a>Cost disease is often cited as an economic phenomenon that poses particular challenges in the arts, especially the live performing arts.<\/p>\n

In a nutshell, here is the theory: productivity is defined as the value of output produced per worker. Rising income over time depends upon rising productivity: if the economy is not producing more output, it cannot earn higher incomes. We earn more per person than our grandparents did because we produce more. Productivity has risen over time because we have more capital stock (machines and buildings and infrastructure) to work with, we are (on average) better educated, and we have new technologies, the latter of which turns out to be the most important in explaining growth in developed countries. But productivity growth has varied a lot across sectors. Mechanization and new technologies have meant that the output produced per worker in manufacturing, in agriculture, and in transportation, has risen very rapidly over the years. But output per person in sectors where there have not been major changes in technology or labor-saving capital has not risen so fast – think education, many aspects of health care (yes, there have been great advances in medicine, but we still need a lot of workers – nurses, physicians, technologists – to deliver health care), and live performances. Because each sector has to offer wages competitive enough to attract skilled workers, the average wage tends to rise in all<\/em> sectors even if major productivity growth is only in some<\/em> sectors. Cost disease<\/em> is defined as the pressure on organizations in low-productivity-growth sectors arising from rising wages across the economy. Elementary schools, health clinics, and orchestras are all faced with rising wages for workers who do not have rising output.<\/p>\n

I have never liked the term “cost disease”, because it is an obviously negative phrase used to describe what ought to be celebrated: average levels of productivity, and \u00a0in turn average wages, are rising<\/em>! We are getting richer (put aside the current recession and think of very long term trends). We have more income that can be used to pay for increasingly expensive schools and health clinics and orchestras (just as we find manufactured goods and transportation becoming relatively less<\/em> expensive over time).<\/p>\n

But it all depends on what people want to spend on. Hair stylists are a “cost disease” sector – not much labor-saving technological change there – but they stay in business (even as our grandparents say they cannot believe<\/em> what they just had to pay for a trim) because most of us find it worthwhile to go to a stylist rather than getting some relative to cut our hair, or to do it ourselves. And I think this leads to the interesting question: if there are a lot of “cost disease” sectors, which ones remain vibrant, and which really do begin to show signs of, well, disease?<\/p>\n

A column today by Peter Orszag<\/a> (discussed by Tyler Cowen<\/a> and by Matt Yglesias<\/a>) reports on research that shows there may be a decline in the economic value of a college degree. More and more bartenders, firefighters and cab drivers have a degree, such that skills obtained in college are not really being put to use. One theory is that to an increasing extent jobs that once required certain levels of cognitive skills are being either outsourced or automated, and an excess supply of people with those skills has led to some of them moving “down” the economic ladder into jobs once held mostly by those without college degrees.<\/p>\n

But there are skills, and there are skills. Yglesias asks “what are the skills for which there is no technological innovation that could replace them?”. His answer is any job where customers really, really want to deal with a live person (his example is the instructor for the spinning class at your local gym: a recording could<\/em> be used to lead the class but customers don’t want that – they will pay the price for a live class leader). The skill that can’t be replaced is the personal – how to get along with customers, communicate in a friendly way, lead them to enjoy the live experience. These are not skills which are not necessarily gained in a college degree.<\/p>\n

And now for a sweeping statement about live performance. There are technological substitutes. We can listen to recordings (which over time have come available at lower prices and higher sound quality) instead of going to a live concert; we can watch television (ditto) instead of attending a play. Live music and theatre do have cost disease, and the means of survival for these live arts is to provide an experience that people really want to have, for which the electronic substitute is sometimes just not enough. The problem is not<\/em> that audiences can no longer afford to attend the symphony or the theatre. Remember, cost disease only exists because incomes have risen<\/em>. The problem is whether that is where they want to spend their money; something about the live-ness of the event has to make it worth it.<\/p>\n","protected":false},"excerpt":{"rendered":"

Cost disease is often cited as an economic phenomenon that poses particular challenges in the arts, especially the live performing arts. In a nutshell, here is the theory: productivity is defined as the value of output produced per worker. Rising income over time depends upon rising productivity: if the economy is not producing more output, […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[26],"tags":[],"class_list":{"0":"post-910","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-issues","7":"entry","8":"has-post-thumbnail"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p3dIW5-eG","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":1673,"url":"https:\/\/www.artsjournal.com\/worth\/2014\/11\/orchestras-and-cost-disease\/","url_meta":{"origin":910,"position":0},"title":"Orchestras and cost disease (Updated)","author":"Michael Rushton","date":"November 4, 2014","format":false,"excerpt":"At The Clyde Fitch Report Duncan Webb has an interesting piece that looks into the future, and he sees chronic cost disease: I first read Baumol and Bowen\u2019s The Economic Dilemma of the Performing Arts some 20\u00a0years ago, almost 30 years after it was first published in 1965. The theory\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"It's not lupus","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/11\/cost-disease.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":2195,"url":"https:\/\/www.artsjournal.com\/worth\/2017\/05\/cost-disease-in-the-arts-what-does-it-mean\/","url_meta":{"origin":910,"position":1},"title":"Cost disease in the arts: what does it mean?","author":"Michael Rushton","date":"May 4, 2017","format":false,"excerpt":"Professor William Baumol, one of the greatest living economists, has died at the age of 95. Alan Krueger did an interview with him here, and Tyler Cowen has written often about him, here. Readers of artsjournal.com know him best for his conception of cost disease, done jointly with William Bowen.\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"this costs *how* much?","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2017\/05\/barbershop.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2017\/05\/barbershop.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2017\/05\/barbershop.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2017\/05\/barbershop.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2017\/05\/barbershop.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":1091,"url":"https:\/\/www.artsjournal.com\/worth\/2014\/03\/do-we-need-more-nutcrackers\/","url_meta":{"origin":910,"position":2},"title":"Do we need more Nutcrackers?","author":"Michael Rushton","date":"March 6, 2014","format":false,"excerpt":"Matt Yglesias thinks there could be benefits for the economy\u00a0if we had a little more Christmas. Maybe he is being tongue-in-cheek, but for what it's worth I will take him at face value: The real economic case for Christmas is\u00a0macroeconomic. There's an old Keynesian saying: It takes a lot of\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"think of the overtime we could earn!","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/03\/rudolph.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/03\/rudolph.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/03\/rudolph.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/03\/rudolph.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/03\/rudolph.jpg?resize=1050%2C600&ssl=1 3x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/03\/rudolph.jpg?resize=1400%2C800&ssl=1 4x"},"classes":[]},{"id":1909,"url":"https:\/\/www.artsjournal.com\/worth\/2015\/12\/does-the-creative-class-matter-for-regional-growth\/","url_meta":{"origin":910,"position":3},"title":"Does the creative class matter for regional growth?","author":"Michael Rushton","date":"December 12, 2015","format":false,"excerpt":"In a recent post, Richard Florida looks at the growth in the 'creative class' in US metro areas since the year 2000. The biggest increase is in what was, in 2000, a city not known for creative class workers, Las Vegas. Indianapolis, Portland, Salt Lake City, and Cincinnati also post\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"got any bright ideas?","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2015\/12\/strings.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2015\/12\/strings.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2015\/12\/strings.jpg?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":2830,"url":"https:\/\/www.artsjournal.com\/worth\/2023\/02\/keyness-grandchildren\/","url_meta":{"origin":910,"position":4},"title":"Keynes’s Grandchildren","author":"Michael Rushton","date":"February 15, 2023","format":false,"excerpt":"John Maynard Keynes's \u201cEconomic Possibilities for our Grandchildren\u201d was first published in The Nation and Athen\u00e6um in two parts, October 11 and 18, 1930 (it is reprinted in his Essays in Persuasion). In it, Keynes tries to put to one side the contemporary fluctuations and uncertainty in the world economy\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2023\/02\/keynes-and-grant.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2023\/02\/keynes-and-grant.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2023\/02\/keynes-and-grant.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2023\/02\/keynes-and-grant.jpg?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":1999,"url":"https:\/\/www.artsjournal.com\/worth\/2016\/03\/time-has-come-today\/","url_meta":{"origin":910,"position":5},"title":"Time has come today","author":"Michael Rushton","date":"March 1, 2016","format":false,"excerpt":"At the Washington Post, Philip Kennicott looks at changes in how people work and play, and implications for cultural organizations, especially museums. I'm not sure all of the claims made by people he cites add up. First, from Elizabeth Merritt, of Center for the Future of Museums. Kennicott writes: A\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"still the same","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2016\/03\/time-clock-punch-276x300.jpg?resize=350%2C200","width":350,"height":200},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts\/910","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/comments?post=910"}],"version-history":[{"count":0,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts\/910\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/media?parent=910"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/categories?post=910"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/tags?post=910"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}