Intellectual Property Discussion

5 Artists, the art market and artists? labour markets
One of the difficult questions in cultural economics is: Who is an artist? Allied to that is the
related issue of what is art. These are questions that economists have no professional
competence to judge but at the same time, some categorization has to be adopted in order to do
research on markets for art and artists? labour markets. For some purposes, these problems are
solved by the categories used in official censuses and statistics but these are not always
satisfactory for research in cultural economics. The ambiguity of some of the definitions used in
measuring output and employment in the creative industries and employment are outlined in
Chapter 6; here the focus is on the narrower area of the arts in which we are dealing with
creative artists, such as visual artists, architects, literary authors, playwrights, composers,
choreographers, f ilm directors and the like, as well as crafts people producing artistic products
(potters, weavers, wood workers) and performing artists ? musicians, singers, dancers, actors,
mime artists. These are the people who create and supply the artistic content on which the
creative industries are based. The most common approach taken in cultural economics in
research on the economic behaviour of individual artists is to use self-defining categories of art
and artists, as explained below. T he chapter also includes a brief account of work on the art
market. Art markets may be actual places of exchange, such as art fairs, auctions and workshops
or virtual ones in which deals are organized without the physical presence of the products: a
market refers to any type of organized exchange between buyers and sellers that involves prices.
T he determinants of visual art prices have been an important research topic in cultural
economics. An early topic in cultural economics was the analysis of artists? labour markets, in
part due to the abiding question of the role labour costs play in costs of production, especially in
the performing arts, in accordance with the theory of the ?cost disease?. Baumol and Bowen
(1966) included evidence on performers? earnings in their ground-breaking 5354 ADVANCED
INTRODUCTION TO CULTURAL ECONOMICS book, and that instigated further research that has
looked at both the evidence on earnings and conditions of work in a whole range of work in the
arts and at theoretical models that are more applicable to these labour markets than those in
?standard? economic theory. 5.1 Artists as workers Research on the economic aspects of
production at the level of the individual creative and performing artist has to classify the nature
of the output and the artist population in order to proceed. Official statistics include artistic
output and artists in several ways that vary according to the purpose for which the data are being
collected. Censuses of population and households ask for occupation and information on
socioeconomic factors such as family size, age, ethnicity, education and so on: occupation may be
confined to that in the census period or left to the respondent to choose. Labour force surveys
include employed and unemployed persons of working age and may include self-employment as
a category. For some arts occupations, particularly performers, employment is the norm; being in
employment means that the time and place of work is fixed and conditions of work are regulated,
tax and social insurance are paid, and so on. Creative artists are more likely to be self-employed
(and so technically cannot be unemployed), working in their own time and premises; they are
then responsible for their own taxes and social insurance payments and their business expenses
are tax deductible. Earnings of creative artists come from fees or revenues from the sale of their
work and possibly also commissions, grants, awards and prizes. Having said this, the typical
scenario is that artists experience a variety of work situations both in and beyond producing art
work. As a result, artists by and large do not fit the usual models of labour markets or worker
categories, and therefore most of what is known about artists? labour market behaviour comes
from specially designed surveys. Surveys are able to ask questions that specifically relate to their
target population: those for artists include questions designed to discover if the respondent is a
professional and what are their qualifications and work experience, as well as questions about
the type of work they do in their chosen art form or craft, the hours they work in the arts, hours
of work in jobs related and unrelated to their art, earnings from all these activities, family income
and other sources of income such as grants. A survey requires knowledge of the population to be
sampled ARTISTS, THE ART MARKET AND ARTISTS? LABOUR MARKETS 55 and access to a means
of contacting potential respondents and those requirements can be difficult in the arts: artists
move between jobs, are frequently self-employed, experience periods of unemployment and do
not always join professional associations. T he first task of a survey is therefore to draw up a
reasonable estimate of the relevant population with a source of contact information. Employers
such as theatres and orchestras, membership of trade unions and professional associations, lists
of artists connected to art galleries and so on are utilized for this purpose, though this may
introduce bias into the results; for example, if a professional association only accepts an
individual as a member who has a track record, that will introduce an upward bias into the
findings. An unknown bias can come from a low response rate ? are the respondents the poorer
ones who get little work and are therefore willing to spend time on a survey, or are they the older
and richer ones? A good response rate would iron out those problems but artists are often not
good at responding. 5.2 The art market T he art market is where the work of visual artists is
bought and sold. T he primary market in contemporary art deals with new works being supplied
by living artists, while in the secondary market works owned by those who have previously
bought them are traded. They may be owned by members of the public, museums or dealers. It
is rare for works by living artists to be sold at auction, though it has happened for the most
famous. Living artists, or at least the successful ones, contract with art galleries and dealers, who
usually take a large percentage (often 50 per cent) of the eventual sale price. They offer facilities
for exhibiting works of art, negotiating prices and sales. Despite these seemingly high commission
rates, there is a considerable turnover of smaller private art galleries with few apparently able to
make a profit. Some artists prefer to sell from their studios and craft makers often sell from their
workshops. Art and craft fairs cater for various levels of price and quality of works of art and
often charge considerable entry fees; even so, not all entrants are accepted. A small proportion
of very talented artists and crafts people are able to sell their work to, or even receive
commissions from, museums and public art galleries and with that endorsement (?certification?)
they would be able to sell their work privately at higher 56 ADVANCED INTRODUCTION TO
CULTURAL ECONOMICS prices. One of the chief problems in contemporary art markets is that
buyers are not well informed about quality or, as some have argued, are confused by the plethora
of styles and quality. As with many markets in the arts, there is a winner-takes-all tendency in
visual art with a few winners being promoted by ?market makers?, the critics and art experts who
considerably influence success and prices, though not always because the artists are more
talented and not always because their promotion comes about for purely objective reasons. In
general, the contemporary art market is unstable, with excess supply of works of art,
undeveloped tastes underlying demand and considerable uncertainty over prices as a result.
Most of the work in cultural economics on art prices has been on those in secondary markets,
often for auctions, on which there is a lot of available data. One of the main topics that has been
investigated is whether returns from investing in works of art have matched those of financial
instruments: the verdict is that they do not, seemingly because there is a consumption benefit
from owning works of art. More experienced buyers with developed tastes combined with
certification by sellers and the market dominated by long established auction houses, makes the
secondary market more stable than the primary market. Digitization has had its effect on both
primary and secondary markets by introducing the possibility of advertising and selling works
online. In the primary market, digital techniques are being adopted in creating works either as a
final version or as an input into a manually produced work, as well as delivering them via the
Internet. As a result, the distinction that was previously important in art markets between a
unique original and a work that produces multiple copies (for example, engravings and
photographs) is no longer valid. The plethora of amateur artists in addition to professional ones
creating and selling over the Internet is likely to confuse an already confused market. In the
secondary market it is possible that there could be a concentration of auction houses and
dealerships selling works as bidding may be done online. 5.3 Artists? labour markets T here are
two levels at which economists analyse labour markets: in macroeconomics they seek to
understand what determines the level of employment and the supply of and demand for labour
overall in the ARTISTS, THE ART MARKET AND ARTISTS? LABOUR MARKETS 57 economy; the
microeconomic approach is to analyse the underlying motivating forces of supply and demand.
This chapter is more concerned with the microeconomic approach and the evidence on artists?
earnings at the individual level. Employment in the creative industries is dealt with in Chapter 6.
5.3.1 Labour market theory As with any market, a labour market is the meeting of supply and
demand with the price in this case being the wage rate; the demand for and supply of labour is
measured in terms of hours of work and demand is derived from the demand for the end product
that the workers are engaged in making. The market concerned could be very specific, such as
that for opera singers, or it could be more general such as that for singers. The extent to which
these markets overlap or are integrated might be relevant to understanding supply; if the subject
were the market for clarinet players, it is not likely that there is any overlap with that for violinists.
T he notion of a wage rate may not seem to be universally applicable to the labour market for
artists; though many performers are paid a wage rate on an hourly basis, others are on salaries,
from which the hourly wage rate can be worked out from the hours for which they are contracted.
Creative artists, such as composers, literary authors, choreographers and so on are more likely to
be paid a fee for their work and in that case, the wage rate could be imputed only if the hours
spent on creating the work were known. Even though there may not be an actual wage rate, it is,
however, possible to think meaningfully in those terms. In general, the wage influences the
demand for and supply of labour: the higher the wage, the more hours artists would supply and
the less hours employers would demand. T he demand for a specific group of creators or
performers depends on what end product is to be produced: a concert of music for a string
quartet would require first and second violinists, a viola player and a cellist; an opera requires
sopranos, tenors and baritones ? and which kind? Dramatic for Wagner, and lyrical for Mozart.
These are examples where there is no substitutability between very specific groups of musicians
and singers, though the string players could play in orchestras and the singers could sing in the
chorus. Specialized work requires specialized skills but with them, a musician or singer could
work anywhere in the world where there is demand for string quartets and operas. In 58
ADVANCED INTRODUCTION TO CULTURAL ECONOMICS general, though, the greater the demand
for the good or service and the higher the revenues it commands, the greater the demand for
labour and the higher the wage or fee the organization that is producing it will be willing to offer.
T he supply of artists may depend on specialized training, though not exclusively so. One of the
fallacies of educational planning is that the numbers that ?need? to be educated or trained in an
occupation should determine the number of places that are offered for training; that stance does
not take into account the economic forces that motivate the uptake of places by trainees or
consider that there is flexibility in terms of substitutability in labour markets. An artist may
become a teacher and an actor may write a play. Later on, multiple job-holding in artistic
occupations is considered. 5.3.2 Human capital theory One of the ways economists explain the
decision by the individual to undergo higher education or training is that they invest their time
and money in it up to the point at which they expect to make a reasonable return through the
extra earnings they can make as a result; this is known as investing in human capital. Part of the
cost of that investment is the opportunity cost in terms of the earnings they would have had if
they had gone out to work instead of studying. So, to illustrate: an 18-year-old decides to go to
college for three years rather than go immediately into paid work. What he or she could have
earned in those three years is the sum of the average income of an 18-, 19- and 20-year-old, and
that amount is the indirect cost of the higher education. The direct cost is the cost of the fees and
other outlays associated with the course, such as living expenses. Together the indirect and the
direct costs are the amount of the investment. T he expected future earnings from age 21 to
retirement age must be discounted into the ?present value?, and that can then be compared with
the amount to be invested; if that is positive, then the course is worth taking. 1 T he thinking
underlying this theory is that education and training increase productivity and therefore earning
power. One of the problems of applying it to the arts is that formal education may not add
significantly to natural aptitude or ?talent?, which is what an increase in productivity would
require. Another difficulty is that evidence on earnings of artists shows they do not seem to rise
with age or with the ARTISTS, THE ART MARKET AND ARTISTS? LABOUR MARKETS 59 length of
the study period and moreover, the notion of a career profile does not apply either ? some
creators can go on working for most of their life, whereas performers (and dancers are the
extreme case here) often find it difficult to work into middle age. Economists have had their
doubts about human capital theory, arguing that it is difficult to separate out the assumed effect
on productivity from the screening and signalling role of undertaking higher education and
advanced training. Successfully completing a course in college signals a person?s willingness and
ability to do so, and that persistence and drive may be more attractive to an employer than the
content of the course. In the arts, though, a degree or diploma may at best get a foot in the door
and many arts organizations operate their own screening devices, such as requiring sight of a
portfolio of professional level work, or running their own auditions. 5.3.3 Specialized arts
education T hroughout the developed world, myriad universities and specialist colleges enrol
millions of students in courses in visual arts, music, acting, architecture, creative writing, film,
journalism and the rest. T hey teach skills appropriate to these occupations which they believe
will increase students? productivity and ability to navigate entry into them. Some are linked to
arts organizations and workshops that offer on-the-job training and work experience. In
economic terms, they offer ?general training? that students could utilize in many work places
both at home and abroad. General training does not mean that it is not specialized but that it is
not specific to a particular company so, for example, training as a stage manager would enable
the student to work in different theatres; specific training is, however, needed to work in, say, an
older theatre with its own peculiarities or with a particular art form, say, dance. It is likely to be
the case that the number of graduates from such courses contributes to excess supply in artists?
labour markets; it is also the case that very few are likely to succeed in obtaining paid work. That
does not necessarily imply that these courses are a waste of time for those that do not make a
career: research has shown both that graduates of specialized arts courses do as well as other
graduates on the general labour market and recently the contribution of these so-called
?creatives? in non-arts work has been researched. This conclusion is valid as long as the training
in question is not more expensive than 60 ADVANCED INTRODUCTION TO CULTURAL
ECONOMICS other types of higher education; some of it inevitably is, however, and that raises
some questions for subsidies to these courses. 5.3.4
Excess supply, earnings and
unemployment A feature of labour markets in all artistic occupations is the widely observed
excess supply of trained artists. That ties in with the analysis of artistic motivation ? ?art for art?s
sake? ? as it is often known, indicating a lack of concern with financial gain. Excess supply
inevitably undermines wage rates and without a minimum wage, which might be statutory or
negotiated by professional associations or trade unions with industry bodies, rates of pay would
drop. One of the inescapable and universal conclusions of studies of artists? labour markets is
that low earnings are experienced by the majority of trained artists. This uncomfortable fact
underlies many of the problems that artists and other primary creators experience in bargaining
for rates of payment, particularly as individuals but in collectively bargained situations as well.
Performers are more likely to benefit from a collectively bargained minimum wage than creative
artists or crafts people, though many professional associations try to lay down fees for various
types of work. In the end, though, market forces tend to win out. Related to this is the wider
question of unemployment; many creators and performers are unemployed for periods and
those who do get some employment are under-employed, meaning that they are unable to find
as much paid work as they would like to do. Moreover, many are self-employed freelancers with
multiple jobs for whom it is difficult to establish what would constitute unemployment for their
arts work. 5.3.5 Superstar theory T he other side of the coin of excess supply is the
phenomenon of superstardom, the domination of artists? (and other professional) labour markets
by a few outstanding individuals (or groups), who produce best-selling goods and services and
earn vastly more incomes than the less starry members of their profession. Superstar theory
seeks to explain this tendency in economic terms of access to, and the size of, markets for those
goods, and the perceived talent of their creators: with access to ever larger markets, the effect of
even small differences in talent can be multiplied into very high earnings, resulting in huge
differences in the distribution of earnings between the more and the less talented. Consumers
prefer more to less talent because it signals ARTISTS, THE ART MARKET AND ARTISTS? LABOUR
MARKETS 61 quality; opting for a winner reduces the consumer?s costs of searching the market
and obtaining information about possible other works and creators as well as increasing their
enjoyment by being able to share their appreciation with a large number of other consumers
with the same tastes. A related explanation for the skewed distribution of artists? earnings hinges
on the difficulty of new entrants to obtain information about their talent and the possibility of
success. Large numbers of wouldbe creative and performing artists enter the labour market with
great expectations but as they come to realize where they stand in the pecking order, many drop
out, leaving only the more talented winners in the running. This explains two features of artists?
labour markets: the predominance of younger people and the skewed distribution of income.
5.4 Artists? motivation and supply behaviour One of the long-standing discussions about the
motivation of artists to create and perform is the extent to which economic reward plays a part.
In one sense, if the answer were none, there would be little point in cultural economists
researching the subject. Unsurprisingly, however, artists like everyone else, need to pay the bills
and maintain at least a minimum standard of living. As a result, to supplement their incomes
when arts work does not provide enough, they take on multiple jobs, some of which are
arts-related, such as teaching and other professional work like examining, and some of which are
non-arts jobs undertaken purely for money. Even so, studies have shown that many artists and
other creators earn below the national average income in their country and are only able to
persist with their art work because they are supported by family income or grants or, in some
countries, from state income supplements, unemployment benefit and other transfer payments.
Many persist with this way of life for years, though few artists have a structured career that offers
some certainty over lifetime income or a pension when they decide to retire. 5.4.1 Artists? work
preference Economic models of the labour market assume a dislike of work on the part of the
worker that has to be compensated by a wage, so that higher wages are needed to induce the
supply of more hours of work. That 62 ADVANCED INTRODUCTION TO CULTURAL ECONOMICS
model has been found to apply to artists? work in non-arts and also to arts-related work, but
where work in their chosen artistic occupation is concerned, they have a preference for work that
may dominate leisure. T his is known as the work-preference model in artists? labour markets,
and empirical research testing this model has shown that when wages rise in non-arts work,
artists supply fewer hours to it and transfer their time to arts work; however, if wages rise in arts
work, they work less in non-arts and arts-related jobs and more in their arts work, reflecting their
strong motivation for spending time on their art or craft. This shift of allocation of work time
would also come about due to an increase in income from grants, copyright royalties and suchlike.
Overall, it seems that creators? time allocation is aimed at maintaining a satisfactory standard of
living within the household and maximizing the time spent in creating. 5.4.2 ?Crowding? theory
T hough economists are not competent to explain the motivation to create, which falls into the
purview of social psychology, they are, however, able to comment on the reward aspect of
motivation. Two broad types of motivation have been identified as ?intrinsic? and ?extrinsic?; the
former comes from the inner drive to create, whereas the latter is externally driven, say by the
conditions of an employment contract. Similarly, rewards take the form of intrinsic satisfaction
resulting from the feeling of achievement or recognition by respected peers and extrinsic reward
is financial payment. ?Crowding theory? relates to the appropriate matching of reward with
motivation: the wrong match would result in turning off or ?crowding out? the effort the worker
was prepared to make. This behavioural approach explains why awards, prizes and grants that are
decided by other artists are highly valued and motivate creativity whereas money alone would
not do so. The approach has been incorporated into models of the artist?s decision to spend time
on ?commercial?, extrinsically rewarding work rather than ?creative?, intrinsically satisfying work.
5.5 Research findings on artists? labour markets Research on artists? earnings, supply behaviour,
experience, education and training and socio-economic characteristics has utilized social surveys,
published data sources or specially commissioned in-depth searches into official statistics; all
come out with very similar results. ARTISTS, THE ART MARKET AND ARTISTS? LABOUR MARKETS
63 Several of the results have been mentioned in the text above; here they are presented more
systematically. Starting with the question of whom to designate as an artist, it is clear that just
having a higher educational or training qualification is not regarded as sufficient evidence for
practising as a professional, though that is undoubtedly one indicator. Many of the people who
have such qualifications do not work in the arts. Surveys have shown, by contrast, that a
significant proportion of practising creative and particularly performing artists do not have formal
artistic qualifications and many are effectively self-taught or have learned on the job. For these
people, experience is the important element of their human capital. In general, artists are better
qualified compared with other people working in managerial and professional occupations in the
sense that they have received more years of formal education and training. That appears,
however, to have little effect on earnings from arts work, though its effect is ?normal? for
non-arts work, and also for arts-related work (that is, earnings rise with longer time spent in
schooling) and it is likely to be the case because a lot of arts-related work is in teaching, for which
qualifications are required. Similarly, experience, measured as the number of years in the arts
occupation, which is another element of human capital, also has little impact on earnings, nor
does age. T hese patterns are the same for both female and male artists, though women
systematically earn less than men. As noted earlier, the age of the artist population is on average
lower than that in the workforce at large. Other socio-economic features, such as marital status,
have the same effect on arts as on non-arts earnings. One of the obvious reasons for differences
in earnings is hours worked. Artists work on average more hours on all types of work than is the
case for other comparable professionals. Even so, the majority of artists report that they are
unable to devote as much time as they would like to their chosen art form. The problem is
greater for women than men, seemingly due to family commitments; thus, spending less time
partly explains gender earnings differentials. For all artistic occupations, the distribution of
earnings is very uneven, with a few superstar high earners at one end and a long tail of those
earning below the national average income. Most of this research has studied earnings from sales
of work, fees and wages but recently there has been additional interest in earnings specifically
from royalties and other remuneration from the use of copyright works. As might be expected,
the same skewed 64 ADVANCED INTRODUCTION TO CULTURAL ECONOMICS distribution of
income is observed in relation to copyright royalties and other remuneration. The few studies
that have analysed artists? earnings from all sources including copyright have shown that high
earning individuals earn high royalties; the pattern might change as more and more works of art
are traded in digital form but there is no systematic evidence at the time of writing. Copyright
earnings are referred to in Chapter 7. T he upshot of these findings is that standard economic
indicators of labour hours and earnings do not predict artists? earnings. Cultural economists have
adapted economic models to the peculiarities of artists? labour markets, and have explained a
number of features of supply behaviour as a result. Research results imply, though, that none of
these elements predicts a successful career or even economic survival as an artist. 5.6 The
impact of digital technologies Creative industries such as advertising and games and
entertainment software offer significant employment opportunities to visual artists, designers
and film directors, requiring considerable skills in digital technologies. Those ?jobs? are mostly
short-term and project-based. T hese industries tend to cluster in a few big centres in which a
pool of skilled labour provides economies of scope and scale in job-seeking and hiring and
creators benefit from networking opportunities that also keep them abreast of the skills being
sought. Similar benefits, especially for selling their work online, accrue to freelance creative
artists, though so far there is not much evidence on success rates. One change that may help
young artists to get started is crowd-funding ? an interesting topic for new research on art
markets and artists? labour markets. 5.7 Final remarks T his chapter has covered several topics
that are clearly related ? the conditions in art markets in which artists sell their work and those in
artists? labour markets that determine how much they are able to create, supply and earn from
art. Dedicated artists, who have supportive family members, attract grants or can tolerate a
relatively low material standard of living, hang in there and gain compensatory satisfaction from
their work as artists, usually supplemented by work in ARTISTS, THE ART MARKET AND ARTISTS?
LABOUR MARKETS 65 other jobs that enables them to continue with their art or craft. Lucky
and highly talented artists can free themselves from economic hardship and a few earn high
incomes. It is often said that artists provide the main subsidy to the arts by their willingness to
put up with the difficult conditions in their labour market. What is not in doubt is that their work
provides the backbone of the creative industries for which novelty, imagination and skill in
expression are fundamental. Further reading Research on art markets by Olav Velthuis (2011) and
on art auction by Ashenfelter and Graddy (2011) are excellent introductions to those topics. The
seminal work on artists? labour markets is that by David T hrosby, summarized in Chapter 6 of his
book Economics and Culture (2001) and that on motivation and creativity by Bruno Frey in
Chapter 8 of Arts and Economics (2000). Hans Abbing?s (2002) book is a popular account of
artists? labour markets by an artist and economist. Payal Arora and Filip Vermeylen (2013) analyse
the effects of digitization in art markets. NOTE 1 The present value means the value at the time
at which the outlay is to be made where the total value will be earned in the future. If someone
expects to work for 40 years after completing the course, earnings in all those years must be
calculated into their value now, so that costs and returns can be calculated on the same basis for
decision-making purposes. The present value of future earnings is calculated using a discount
rate, which is the reverse of an interest rate. These concepts are explained in detail in Chapter 9
in relation to cost?benefit analysis and economic impact studies.
7
Copyright
Copyright has been alluded to earlier in this book as one of the major influences on production
and consumption in the creative economy. In this chapter, the economic aspects of copyright are
explored and its relevance to cultural economics discussed. 7.1 Economics and copyright
Copyright law creates statutory property rights that give authors the exclusive right to control the
use of their works. In order to make use of a work in copyright, permission must be obtained
(with some exceptions) from the author or other owner of the right or an agent acting on his or
her behalf. Those rights enable the owner to