Chapter Three - II. Baumol Effect and Cost Disease
II.I
The Baumol effect is often referred to in critiques of state management of the economy and describes the tendency of wages to increase in unproductive sectors to prevent the flight of workers who would otherwise take up work in productive sectors, sectors where wages increase in line with productivity. According to the theory, unproductive sectors become even more unproductive as a consequence of artificially inflated wages.
Yet, data shows that the inflation-adjusted salaries of teachers, doctors and nurses have increased only slightly, and increased at a considerably slower rate than salaries in the private sector.2 The fact of public sector salaries not keeping pace with private sector salaries indicates that the Baumol Effect – wage increases in unproductive sectors – is not a complete explanation for the increasing cost of services. It cannot explain why the inflation-adjusted cost of university education and healthcare has increased substantially.
II.II
Hurrying up and doing nothing, or busywork, might be rationalized as a simulation of meaningful engagement, tribulation under the weight of which a person’s character is tempered. Accordingly, the characterization of workers performing pro-social and often lower paid work as useless and inadequate is not necessarily cynical. It is just that no sooner might the white-collar so-called BS worker acknowledge his idleness than he recoils from cognizance of the fact, projecting it onto those he would feel envy at, were his own idleness to be acknowledged.3
Insofar as it is true that BS workers tend on average to be higher paid than those performing pro-social, essential work, the fact of further tribute being sought via the demonization of public sector workers implies that the cost of performing useless work is high indeed – the psychological bondage which idle time on someone else’s terms creates remains more onerous than even the physical bondage of what is traditionally conceived of as hard work.
In view of the evidence that the private sector is no less suffused by so-called BS work than the public sector, we find that the belief that the private sector is an ecosystem in which only the fittest survive, serves as a coping mechanism, as does the belief that the public sector is something like a haven for people who couldn’t survive in the wild.4
Of course, there are industries which have seen productivity gains as a result of technology, whose workers may not begrudge public sector workers their modest salary gains. They might however resent tax and spend policies, seeing it as ‘throwing good money after bad’.
II.III
I propose that a good part of The Cost Disease is attributable to what is known in the United Kingdom as office politics.5 Office politics increases more or less in inverse proportion with the degree to which members of a workplace are engaged in meaningful activity. In the absence of a rallying point in the form of meaningful work, a workplace consisting of people among whom there is more divergence in temperament, disposition and class than in most social circles, will be characterized by some combination of jockeying for control and the proliferation of control loci, even to the detriment of the organization’s bottom line.
Andrew Côté casts the Cost Disease as The Blight, in a series of Tweets, including the following statement:
“Any society faced with genuine survival pressure can't afford the Blight, or else they perish.”6
References
2. Raul, “Understanding Money. Price Changes Over the Last 20 Years Prove the Economy is Rigged”, How Much, January 28 2019, https://howmuch.net/articles/price-changes-in-usa-in-past-20-years.
3. David Graeber, Bullshit Jobs: A Theory (New York City, USA: Simon & Schuster, 2018).
4. David Graeber’s seminal work features a comparison between the rate of increase in administrators and managers at public colleges and in private colleges in the USA. Between 1975 and 2005, the former cohort grew by 66%, while the latter cohort grew by 135%.
Calculated from: Thomas D. Snyder, Sally A. Dillow, and Charlene M. Hoffman, “Digest of Education Statistics,” National Centre for Education Statistics, 2006.
Cited in: Graeber, Bullshit Jobs, 163.
5. The Cost Disease was coined by William J. Baumol, and was synonymous with the Baumol Effect, an example of cross-price elasticity of demand. Today, the term is sometimes used colloquially to refer to the persistence of low or negative productivity growth in spite of technological advances.
6. Andrew Côté, March 26 2024, https://x.com/Andercot/status/1772522174215286809 (tweet), https://x.com/Andercot/status/1772522155302867335 (thread).