Transcript Chapter 8 Services • Complexity in defining and measuring services • Diversity in industries and occupations • Why have services grown so rapidly? • The.

Chapter 8 Services
• Complexity in defining and measuring
services
• Diversity in industries and occupations
• Why have services grown so rapidly?
• The productivity issue in services
• Work in the service sector
• The position of finance and producer
services
• Globalization of services
• Consumer services & tourism
Services
• The “tertiary” sector – diversity of
occupations and industries
• The so-called “post-industrial” era
• The ongoing changing division of labor
• Service industries vs. service occupations
vs. service functions (consumer use of
service industries)
U.S. pattern
has to be wrong,
See Fig. 8.2
Key
Lines of
Service
Employment
The Shift To Services And
Income Change
An Alternative to Fig 8.2
Government
4500000000
Personal Services
4000000000
$1980 Thousands Personal Income
Health Services
3500000000
Retail
3000000000
Wholesale
2500000000
Support
2000000000
Professional
1500000000
FIRE
1000000000
Transport, Utilties &
Information
Manufacturing
500000000
Construction
0
1960 1970 1980 1990 2000 2013
Agriculture & Mining
1980 Distribution of
Occupations by Industry
Executive P/Tech
Sales
Other
Admin/Cler Service
Transport &
Precision Machinery Material
craft/
Operators Handling
Agriculture
Mining
Construction
Manufacturing
TCU
Wholesale
Retail
FIRE
PrivateHH
Other Services
Public Administration
Total
1980 Total
11017
16035
6254
20361
11803
12469
10510
0-1% +
1-5% +
5-10% + 10-25% + 25-50% + 50%+
zero - blank
0-1% 1-5% 5-10% 10-25% 25-50% - 50% -
Handers &
Other
Labor
Total
3214
937
6175
21379
6468
3792
16001
5918
1252
27419
5245
97800
3504
4293
Change in Occupations
United States 1980-2000
Executive P/Tech
Sales
Other
Admin/Cler Service
Transport &
Precision Machinery Material
craft/
Operators Handling
No change
Agriculture
Mining
Construction
Manufacturing
TCU
Wholesale
Retail
FIRE
PrivateHH
Other Services
Public Administration
Total
Change
(thousands)
8589
9436
10126
-1525
5548
2472
-3259
0-1% +
1-5% +
5-10% + 10-25% + 25-50% + 50%+
100%_+
0-1% 1-5% 5-10% 10-25% 25-50% - 50% -100%
blank - zero in 1980
? Role of New Economy Industries?
1960
Handers &
Other
Labor
Total
276
-409
3137
-1341
3272
1562
6180
3041
-302
20937
818
37171
876
Across Most Occupations Job Gains Have
Been Largely in Services
6000
5000
400.0%
350.0%
300.0%
4000
250.0%
3000
S e rvic e s C h a n g e
200.0%
% S e rvic e s
2000
150.0%
1000
100.0%
ut
iv
e
si
o
Te n
ch a l
ni
ca
Ad
l
S
m
in a le
s
/c
l
P e ri
ri
c
O va t a l
e
th
Tr
an
P er S HH
M
r
s p ac ec
e
o r h i n i s i rvi c
o
t&
e
e
n
M ry O c r
a
a
H
a n te r p e r ft/
at
d e ia l
rs H a o rs
&
n
o t d li
he ng
rl
a
Fa b o r
rm
in
g
0
fe
s
ro
P
E
xe
c
-1 0 0 0
50.0%
0.0%
? How much
of this growth
has been in
New Economy
Industries?
Forces Driving the Growth of
Services
• Rising Incomes (income elasticity of demand for
particular services) Fig 8.5
• Demand for health care (Figures 8.7 & 8.8)
• Increasingly complex division of labor –
innovations in services
• Growth of the public sector – services &
regulation
• Service Exports – regional & international
• Externalization Processes
Health Spending Rises in Most
Developed Economies
Producer Services: Why Have
They Grown so Rapidly
• Some data from Beyers’ NSF funded
research
• The next few slides come from this project,
conducted in the mid-1990’s
• It is unlikely that the major contours of
these results have changed
• New lines of intermediate services have
emerged since this study
Producer Services have considerable Nonlocal Markets,
but….
Table 9 Geographic Markets for Producer Service Establishments, Urban-Oriented
Sample
Weighted
Unweighted
Market Location:
Average
Average
Local
44.55%
66.81%
Elsewhere in State
8.14%
10.31%
Elsewhere in Region
10.34%
7.65%
Elsewhere in U.S.
31.00%
12.58%
Canada
3.48%
0.63%
Mexico
0.32%
0.23%
Other Foreign
2.17%
1.79%
n=249
Aggregate sales - $1.5 billion for weighted estimate
n=350
Producer Service Businesses have Bifurcated Markets:
They Tend to be Local or Export
Figure 3 Frequency of Export Market Percentages
# of obse rv ations
140
120
100
80
60
R ura l
40
U rb a n
20
0-5
6-15
16-25
26-35
36-45
46-55
56-65
66-75
76-85
86-95
96-100
0
Lone Eagles & High Fliers % N o n l o c a l S a l e s Local Firms
These data are indicative of market orientation of New Economy firms
The Traded-Dimension of Producer Service Businesses
is Expanding Over Time
Figure 4 Lone Eagles and High Fliers: Exports Five Years Ago and Exports Today*
C u rre n t Ex p o rt P e rce n ta g e
100
90
80
70
60
50
40
0
10
20
30
40
50
60
70
80
90
100
E x p o r t P e r c e n ta g e F i v e Y e a r s A g o
Localized firms mirror the trend for Lone Eagles/High Fliers
Externalization Processes in the
Producer Services
• Transactions Cost Considerations: the
“make or buy” decision
• Flexibility
• Risk Reduction
• Concentration on core skills
• New types of services
• Third-party objectivity
• New regulations
Externalization Pathways
• Service product innovation
• Service process innovation
• Increased complexity of the business
environment
• Business process re-engineering to simplify
internal production structures
• Likely when firms lack in-house expertise, when
firms are small single establishment, is
sophisticated compared to competitors, and
when services are dynamic, markets are
uncertain, and when there is a mismatch
between internal needs and the minimum scale
of internal provision
Consequences of Externalization
• Shifts risks to suppliers
• May lead to reduced costs if suppliers are
able to exploit scale economies
• May allow acquisition of expertise that
cannot be provided internally due to lack
of knowledge on the part of the purchaser
• ? Have these processes inflated the size
of the service sector?
Possible Development
Sequence
Face to Face Communication Is Key and is Not
Diminishing in Its Importance
Table 3 Percentage of Establishments Considering Factors to be Highly Important as a
Means of Producing and Delivering Their Services
Face to face conversations at clients offices
Face to face conversations at establishment office
Telephone Conversations
Video Conferencing
Computer File Transfer - via modem direct
- via E mail, internet
via LAN
via WAN
via Mail/Courier
Written/Graphical Documents - face to face @ client
- face to face @ estab.
- mail/courier
- Fax
Other: Satellite Uplinks
Other
Number of highly important cites/business
Source: (Beyers 2000)
(1)
Current
40.8%
46.2%
47.1%
0.0%
11.7%
6.8%
2.6%
0.8%
10.5%
36.1%
28.3%
39.1%
39.4%
0.6%
3.0%
3.13
(2)
Increases
0.6%
2.0%
2.6%
1.1%
14.3%
9.9%
3.2%
1.4%
11.7%
1.2%
0.5%
1.7%
24.2%
1.1%
1.1%
76.4%
(3)
Decreases
2.0%
2.7%
0.7%
0.5%
0.4%
Zero
Zero
Zero
0.4%
1.0%
1.6%
0.7%
Zero
Zero
Zero
10%
Recognition of Producer Services
as a Part of the Economic Base
•
Historic metro concentration
• Recent rural deconcentration
• Role in “Edge Cities”
• The “New Economy.”
• --Producer Services as a progenitor to the
New Economy:
–now multimedia, online retail, .com,
–.org, .edu; telemedicine, teleservices,
tele?; content providers; media conduits;
delivery agents, etc.
The Productivity Debate
• The presumed slow growth of productivity
in services compared to goods production
• Difficulties in measuring services
productivity – Output per unit of input. But
what is the Output? Take a college
professor as an example. What are the
inputs in higher education?
• Routine services vs. complex services
Constraints on Productivity
• Personal (human) labor is necessary
• The co-presence need for seller and
buyers for many services (haircuts)
• Proximity requirements may grant
monopolistic power to sellers, restraining
productivity
• Opacity in markets (buyer not
knowledgeable about service)
• Often a relational matter between buyer
and seller (design services)
Impact of IT on Services
Productivity
• Falling costs of IT equipment & software
• Growing real power of machines and
networks
• Changing capabilities, that in many cases
have allowed innovations in services
• Integration of service providers in
networks, including the rise of the Internet
as a medium for services transactions
Labor Markets in the Service
Economy
• The shifting level of jobs – industry &
occupation again
• Labor intensity in services compared to
goods production
• Income distribution of service work:
Contingent labor
Vs.
Professional – Table 8.2
& Figure 8.12
Labor Markets in the Service
Economy, continued
• Gender composition of employment –
Figure 8.18, and the rising female labor
force participation rate (Figure 8.17)
• Income distribution in services
employment vs. goods production (Figure
8.15) but the overall rising income
inequality in the U.S. (Figure 8.16)
• Low rates of unionization in services,
contributing to low incomes in some
sectors
Wages in goods vs. services industries
Data show a slightly lower
distribution of wages in services
than in goods production
Increasing income inequality
in the U.S. as services
become a larger share
of total employment
Ratio about 11:1 in 1967
between bottom 20% and the
top 20%
This moves to be about
15:1 by 2005
And for the wealthiest 5%
it moves from 18:1 to 26:1
Is this trend due to structural
Change in the economy, or
From changes in our tax code
That have benefitted wealthy
People whose income comes
From nonearned income (dividends,
royalties, rents, property income,
pensions, and transfer payments)?
The Rising Role Females In the
Labor Force
Gender Composition of
Employment - % Female
Pink
Collar
Jobs –
Defined by
Occupation
Not by
industry
Education Levels & Income
Tendency
For College
Educated
Labor
To work
In the
Service
Economy
Education and Unemployment
The
Great
Recession