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According to Baumol’s Cost Disease, in theory, workers should get higher pay because they get more productive. But an economist named William J. Baumol PhD noticed this isn’t always true; as in a paradox.
For example, musicians take the same time to play a string quartet as they did in Mozart’s day, but are paid more nevertheless. The reason is competition for labor; musicians can take other jobs. So rising wages in productive parts of the economy (eg, manufacturing) lead to higher wages in less productive sectors.
MORE: For more on the paradoxical disease, read this article; and for more on Baumol, read this one.
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Filed under: "Ask-an-Advisor", Accounting, CMP Program, Glossary Terms, Health Economics | Tagged: Baumol, CMP, competition, cost disease, economics, health dictionary, Health Economics, paradox |
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