If real wages rise with the general level of labor productivity, then service workers will experience increasing real wages even if these increases occur because of declining costs of manufactured goods. Doug, is absolutely correct that the new economy mania implied that services of all kinds could be transformed by revolutionary technology. Wal-Mart showed how this could be true for certain aspects of retailing. Replacing talk psychology with pharmaceuticals might be another example. But some kinds of services still seem resistant to technological transformations.
On Sat, Feb 05, 2005 at 09:24:06AM -0800, Devine, James wrote: > Baumol's theory doesn't say anything about wages [including benefits] except > to assume that they are equalized between sectors (adjusting for skill, etc.) > or follow the same general trend. With wages equalized, the reasonable > assumption that the service sector sees less productivity growth than the > goods-producing sector means that unit labor costs (wage divided by labor > productivity) in the service sector rise faster than in the goods-producing > sector. Thus, with mark-ups on unit labor costs constant, prices in the > service sector rise relatively. > > Going beyond Baumol, this suggests that the pressure to cut wages would be > greater in the service sector, because it would counteract the relative rise > in prices. > Jim Devine [EMAIL PROTECTED] http://myweb.lmu.edu/jdevine > > ________________________________ > > From: PEN-L list on behalf of Michael Hoover > Sent: Sat 2/5/2005 6:18 AM > To: [email protected] > Subject: [PEN-L] Baumol's 'Disease'? > > > > according to william baumol, declining prices for produced goods in a > 'high-tech' economy will - at some point - cause wages in > labor-intensive services to increase... > > is above correct formulation, if not, what is... > is baumol's disease an economic 'law'... > > thanks in advance for comments... michael hoover > > > -------------------------------------------------------------- > Please Note: > Due to Florida's very broad public records law, most written communications > to or from College employees regarding College business are public records, > available to the public and media upon request. Therefore, this e-mail > communication may be subject to public disclosure. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
