Baumol Effect

Salaries rise in response to other salaries rising in jobs that experience productivity gains. For example, the ticket prices in the classical arts rise not because they can put on a concert with half the orchestra, but because the salaries of their patrons have grown. Similarly, the salary of managers grew not because their productivity increased, but because the salaries of engineers the manage grew exponentially.

See also:

  • Peter Principle, traditionally management is a promotion and therefore needs to be paid more, amplifying Baumol’s cost disease
  • Managerial Capitalism Decouples Ownership and Control

    The classic model of capitalism (bourgeois capitalism), in which the proprietor of the business fully owns and controls the business, was replaced by managerial capitalism where managers, despite owning small amounts of the company, exhibits full control over the business.

  • Remote Work Permanence

    It’s becoming clear that remote work isn’t going anywhere. A large portion of the workforce continues to work from home. Return to office stagnated. Office real estate value is plummetting.

  • The Dispassionate Developer

    Being all consumed by engineering (writing blogs, contributing to open source, giving away your time) is not good because it leads to burnout and perpetuates more people to do the same. Open source for example, is co-opted by large corporations to exploit passionate developers that provide high quality code for free and putting the training burden on the person rather than corporation.

  • The Shirky Principle

    Institutions end up perpetuating the problems they aim to resolve, either intentionally or unintentionally. For example, TurboTax addresses the issue that taxes are too complicated for individuals to handle independently and then lobbies Congress to hinder efforts to simplify tax preparation for individuals.

  • The Ringelmann Effect Shows Groups Become Less Productive as They Grow

    An inverse relationship exists between group size and productivity which shows that group effort does not necessarily lead to increased effort from the group members.