In 1969, the Japanese-British classical pianist Mitsuko Uchida won first prize at the International Beethoven Piano Competition Vienna, establishing herself at only 20 years of age as one of the world’s premier interpreters of Beethoven’s work. Let us assume, for sake of argument, that after achieving this recognition, Uchida was able to earn $3,000 for each performance at which she accompanied a symphony orchestra on the piano. If we further assume that Uchida adjusted her concert fee every year after 1969 both to account for inflation and to give herself a modest 1.5% annual pay raise, by 2023 the cost to an orchestra to hire her for a single concert would have increased to approximately $53,000—and yet Uchida’s virtuoso performance of, say, Beethoven’s Piano Concerto No. 1 in C Major in 2023 would have been no more efficient, no more ergonomic, no more convenient, no sleeker nor more technologically advanced than it would have been 54 years earlier. Her “product” would have remained essentially unchanged, but the cost to its consumer would have ballooned nearly eighteenfold.
In the June 1967 issue of The American Economic Review, the economist William J. Baumol endeavored to describe this phenomenon of rising wages in occupations not amenable to increased productivity—occupations like Uchida’s, which Baumol called “nonprogressive”—as an indirect function of rising wages in more productivity-receptive “progressive” occupations:
If wages and productivity in the progressive sector both go up two per cent per year, costs there will not rise at all. On the other hand, if in the nonprogressive sector productivity is constant, every rise in wages must yield a corresponding addition to costs—a two per cent cumulative rise in wages means that, year in year out, costs must be two per cent above those of the preceding year.
In other words, in the “progressive sector,” costs are held in check because productivity gains counterbalance wage increases; but in the “nonprogressive sector,” costs escalate because productivity gains are insufficient to counterbalance wage increases. (“Relative costs in the nonprogressive sectors must inevitably rise,” Baumol wrote, “and these costs will rise cumulatively and without limit. For while in the progressive sector productivity increases will serve as an offset to rising wages, this offset must be smaller in the nonprogressive sectors.”)
Given Wednesday’s announcement of tuition rates for the 2024-2025 academic year, now would appear to be as appropriate a time as any to talk about the relationship between constant productivity and rising wages that has come to be known as Baumol’s cost disease, and to acknowledge that K-12 schools like ours are inarguably “nonprogressive” economic entities by Baumol’s definition. While many factors explain the high “base cost” of an MICDS education—our small class sizes, the breadth and depth of our curricular and extracurricular program offerings, the extensive scale of our facilities and grounds, and the numerous staff whom we employ in non-teaching roles to support students and teachers alike—only Baumol’s cost disease substantially explains consistent year-over-year tuition increases above the rate of inflation.
According to data from the United States Bureau of Labor Statistics, the for-profit, non-government business sector of our economy (the “progressive sector”) witnessed sustained annualized productivity gains of 2% from 1987 to 2021—a net increase of nearly 100%—due in large measure to technical innovations and improvements in worker efficiency. No parallel innovations or efficiencies in education, however, effected a doubling of the learning capacities of 8-year-olds, 11-year-olds, or 15-year-olds in 2021 relative to those of their predecessors in 1987, any more than performances of Beethoven’s Piano Concerto No. 1 in C Major became twice as efficient over the same period—even as the wages of teachers and musicians, and tuition and concert ticket prices by extension, steadily grew. Neither children nor works of art are widgets. Of education in particular, Baumol predicted as much. “As productivity in the remainder of the economy continues to increase,” he wrote, “costs of running educational organizations will mount correspondingly, so that whatever the magnitude of the funds they need today, we can be reasonably certain that they will require more tomorrow, and even more on the day after that.”
Our Board and administration are well aware of the effect of Baumol’s cost disease on the affordability of an MICDS education, and we continue to seek to offset its impact on families through circumspect oversight of our non-labor operating costs, maximization of our endowment investment returns, careful stewardship of our Tuition Assistance and Assistance Beyond Tuition programs, and active pursuit of gifts to our annual budget through the MICDS Fund. All of these countervailing efforts being acknowledged, approximately two-thirds of School revenues are nevertheless allocated to faculty and staff salaries and benefits, which we are committed to increasing year over year in just recompense for the transformative work in which our employees are engaged—notwithstanding the resistance of their occupations to gains in productivity. As a piano concerto is a piano concerto, so is a child a child.
“There is still plenty of good music to be written in C major,” the Austrian-American composer Arnold Schoenberg told his students at UCLA in 1940. Beethoven knew this in 1795, too, and in composing his Piano Concerto No. 1 gave the world a precious and enduring gift in the simplest of keys. Do our teachers not commit to much the same ambition? There are sometimes more important measures of an enterprise than its productivity, and better measures of its worth than its price.
Always reason, always compassion, always courage. My best wishes to you and your families for an enjoyable weekend.
Jay Rainey
Head of School
This week’s addition to the “Refrains for Rams” playlist: the opening movement of Ludwig van Beethoven’s Piano Concerto No. 1 in C Major as performed by the Berlin Philharmonic accompanied by pianist Mitsuko Uchida (Apple Music / Spotify)