Baumol activism

If you work for a nonprofit, you’re probably underpaid. The obvious reason is that the organization doesn’t have a lot to spend on employees (like, it doesn’t have profits). But another reason is that you’re getting another benefit: you probably support its cause and are happy to serve it.

This has consequences. People who are passionate about a cause might not be able to contribute to it. If they don’t have rich parents, a spouse to support them, or enough money to pay for child care, they won’t be able to afford it.

Similarly, there are people who might have a lot to contribute that aren’t particularly passionate about the cause. If a nonprofit could pay them what they’re worth, it might benefit greatly. But if it can’t, they just go to work in the private sector. Nonprofits often don’t hire “the best person for the job;” they hire “the best supporter for the job.”

This means nonprofits often have to deal with two issues. One is employees who are effective but disillusioned - “I’m sorry, Alice, we can’t pay you 25 cents more per hour even though you’ve been doing this for 10 years.” Another is employees who are enthusiastic but not very effective - “Yeah, Bob isn’t very good at organizing events. But he’s one of our most dedicated staffers.”

Another reason you might take a low-paying job with a nonprofit: it might give you a platform. “I would make more doing data entry,” you might think. “But being Director of Charitable Contributions at AlmsWorth is way more prestigious.” Nonprofits risk having their high-minded goals serve as cover for some other interest.

This same analysis applies to universities. There are a lot of underpaid grad students, adjuncts, and professors vying for a limited number of cushy positions. The ones who can afford to do this are very committed, already financially secure, or in it for the prestige.

And it applies to journalism. The media sector is shrinking, layoffs are happening left and right, and the number of secure jobs is dwindling rapidly. There are certainly journalists who are dedicated to their practice. But a lot of the ones who get jobs are ones who could afford to do several unpaid internships. And journalistic institutions have large platforms that can be used for other purposes.

This means, I think, that nonprofits, universities, and media outlets are very attractive to activists. And as salaries get less competitive, as barriers to entry get higher, as influence becomes more diffuse - we should expect the concentration of activists to increase.

We can probably generalize this. The Baumol effect says that if one sector becomes more productive, workers in other sectors have to be paid more to keep them from switching. But that payment need not be monetary - it can be in the form of prestige or influence. We should see activists becoming a larger portion of any sector that’s either (a) shrinking, or (b) not growing as fast as other sectors.

As I write this in 2020, the activists I have in mind are mostly left-wing types. But this effect should be visible on the right too. Right-wing activism has definitely changed the NRA, for example. The legal profession looks a lot like the academic profession (lots of low-paid competitors, a few big winners), and conservative legal philosophy is ascendent.

If we want activists to stop taking over institutions, we should probably ask ourselves how to make those institutions more productive. The type of people who join growing institutions is different from the type of people who are willing to fight for small and/or shrinking benefits.