I think that position is simplistic at best. Sure, it would explain an relative increase in human-intensive services compared to machine-empowered ones. What if fails to explain, though, is:
1. A sustained, inflation-adjusted increase in human-intensive services over time. Specially when combined with stagnation in the compensation of this (supposedly) expensive, and specialized Labor over the same period of time.
2. A perceived trend of decrease in quality of the service, in a futile attempt to keep #1 under control.
If I where to venture an explanation of that would take automation and technology into account, I'd try to approach the problem from a systems theory point of view and suggest that maybe we are observing an overzealous attempt at partial automation.
This industries, as you correctly pointed out, cannot be fully automated/outsourced. This however does not prevent upper management from trying to achieve at least a part of the goodness that is benefiting other, more malleable, industries. They will of course try to automate some non-critical part of their workflows, which will upset the balance between the different subsystems of the whole and place more burdens in the critial parts. This, paradoxically, will force them to hire more personnel to keep the operation afloat, which then seeds the way for future interventions when technology advances makes posible the automation of some of those extra positions.
Even in a very bread-n-butter manufacturing environment, that type of death-cycle is extremely damaging. Take a look at Eliyahu M. Goldrat's novel "The Goal" to see a fictional example unravel.
Baumol's cost disease predicts growth in prices above inflation. After all, inflation is overall growth in prices, and consists of things that suffer from cost disease as well as things that actually get cheaper (TVs, etc).
1. A sustained, inflation-adjusted increase in human-intensive services over time. Specially when combined with stagnation in the compensation of this (supposedly) expensive, and specialized Labor over the same period of time.
2. A perceived trend of decrease in quality of the service, in a futile attempt to keep #1 under control.
If I where to venture an explanation of that would take automation and technology into account, I'd try to approach the problem from a systems theory point of view and suggest that maybe we are observing an overzealous attempt at partial automation.
This industries, as you correctly pointed out, cannot be fully automated/outsourced. This however does not prevent upper management from trying to achieve at least a part of the goodness that is benefiting other, more malleable, industries. They will of course try to automate some non-critical part of their workflows, which will upset the balance between the different subsystems of the whole and place more burdens in the critial parts. This, paradoxically, will force them to hire more personnel to keep the operation afloat, which then seeds the way for future interventions when technology advances makes posible the automation of some of those extra positions.
Even in a very bread-n-butter manufacturing environment, that type of death-cycle is extremely damaging. Take a look at Eliyahu M. Goldrat's novel "The Goal" to see a fictional example unravel.