As a parent, a school board member and an emergency department physician, I have been lucky enough (if you could call it that) to have a front-row seat in two industries that continue to grow at what many feel to be unsustainable rates. This is an interesting position to be in, and I think many who work in these high-impact fields would agree that there is an ever-widening discordance between the great need we see on the ground and the dominant political narrative of unsustainability. While the headlines tell us that we cost too much, the daily experience of front-line service providers — teachers, principals, nurses, social workers and police officers, for example — suggests that quite the opposite may be true: that to provide the services people both expect and deserve, we probably don’t spend enough.
In the 1960s, the economist William Baumol hit upon an explanation for this puzzling gap. He observed that there were different types of labor in our economy: those whose productivity could be increased, such as factory workers and retailers (General Motors, Apple, Wal-Mart); and those who provided a service that was fundamentally incompressible, such as nurses, teachers or baseball players. In a now-famous analogy, he noted that playing a Mozart string quintet required the same number of people to perform in 1960 as it did when it was composed in 1787. The economic productivity of classical musicians had not shown any improvement in almost 200 years.
What this means, according to Baumol, is that as productivity increases in one sector — say, manufacturing — wages will increase as well. This means that the so-called nonproductive industries, like education and health care, need to increase wages similarly to compete for qualified labor — but without the concomitant productivity gains, the overall cost of those industries will rise at an escalating rate. This phenomenon — of disproportionate, supra-inflationary cost increases in certain industries — is now called Baumol’s cost disease. It suggests that the cost of education and health care may not be abnormal, or even unexpected, but might be the natural effect of how we value different types of labor.
The encouraging — and also debatable — side of Baumol’s argument is that this is entirely affordable, as long as the other parts of the economy continue their productivity growth. Whether or not Vermont’s economy is robust enough to support a ripping case of Baumol’s is a debate for those with more information and perspective than I. But as the debate over education cost heats up yet again — with the governor set to convene a symposium on the issue this month — Baumol’s ideas need to be front and center. In labor-centered industries that cannot radically increase economic productivity, such as education, any attempt to significantly decrease cost carries a high likelihood of decreasing quality. This outcome should be unacceptable to any of us, given the challenges faced by our children in the coming century and the increasing socio-cultural burdens being outsourced to our schools.
Interestingly, despite the frequent and loud protestations to the contrary, our system is profoundly successful. By the available measures, Vermont’s schools are the seventh best in the world (see the government’s report titled “U.S. States in a Global Context: Results from the 2011 NAEP-TIMSS Linking Study,” available online). This is not to say there aren’t crucial improvements to make in our educational funding and delivery, but let’s at least acknowledge where we are before we get under the hood and start messing around. Because — as Baumol might suggest — you get what you pay for.
Ben Smith lives in South Duxbury. He is a school board member.MORE IN Commentary
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