Baumol's cost disease, formulated by economists William Baumol and William Bowen in the 1960s, explains a phenomenon where wages increase in jobs that have experienced no or low growth in labor productivity. In manufacturing, productivity can increase significantly through technological advancements, allowing more output with the same or fewer workers. However, in the performing arts, the nature of the work requires the same number of performers and time to produce a quality performance. A Beethoven symphony requires the same number of musicians and roughly the same duration to perform today as it did centuries ago. Therefore, productivity gains are minimal or non-existent. Meanwhile, wages in the performing arts must rise to remain competitive.
The implications of Baumol's cost disease extend beyond the performing arts to other labor-intensive sectors like healthcare, education, and public services. These sectors face similar challenges where productivity improvements are hard to achieve, and where competitive wage pressures necessitate higher labor costs. This dynamic can lead to a growing financial burden on these sectors, requiring society to make choices about how to fund and sustain essential services and cultural activities in the face of rising costs. In the performing arts, this often means relying on a greater share of subsidies, donations, and grants to bridge the gap between increasing costs and the revenue generated through ticket sales.
This should be required reading for any aspiring arts manager.