Technology in Services Policies for Growth, Trade, and Employment (1988) / Chapter Skim
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Productivity in Services
Productivity in Services
Pages 99-117
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From page 99... ...
The first is growth accounting by which the chief forces promoting productivity growth in the total economy are identified and evaluated. The second is the use of multiple regression analysis to relate relative changes in productivity by industry to differences in levels or rates of change in causal variables.
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From page 100... ...
This continues a trend that has been evident since at least 1870, when 23 percent of the labor force was engaged in services. The share of real gross product originating in services has also increased, but to a somewhat lesser degree, as shown in Table 1.
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From page 101... ...
Real gross domestic product Billions of 1982 dollars 1,114.9 2,726.6 3,694.5 Pecentage distribution Agnculture 5.5 2.6 2.7 Mining 6.5 4.9 3.2 Construction 8.1 6.2 4.6 Manufactunng 21.4 22.8 22.0 Total Goods 41.5 36.5 32.5 Transportation 6.9 4.3 3.5 Communications 0.8 1.9 2.6 Public utilities 1.2 2.7 2.8 Trade 14.5 16.0 17.4 Finance, insurance, real estate 9.7 13.5 13.9 Services 11.6 12.5 15.3 Total Private Services 44.6 50.9 56.5 Government 13.9 12.6 11.0 SOURCE: Bureau of Economic Analysis, U.S. Department of Commerce.
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From page 102... ...
However, services productivity growth fell a bit further from 1979 to 1986, whereas goods productivity accelerated smartly due mainly to comebacks in manufacturing and farming. The reconciliation item between rates of change in TFP and in the more conventional real product per labor hour ("labor productivity")
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From page 103... ...
103 1948-1985 1948-1973 1973-1979 1979- 1986 A Real Gross Product in 1982 Dollars Business economy 3.2 3.6 2.5 2.5 Goods production 2.6 3.2 1.3 1.6 Farming 1.4 0.4 1.5 5.0 Manufacturing 3.3 3.9 1.9 2.2 Mining 1.3 2.5 - 0.4 - 1.4 Construction 1.7 2.6 0.6 - 0.4 Services production 3.7 4.0 3.4 3.1 Transportation 1.4 1.7 2.7 - 0.9 Communications 6.4 7.1 6.2 4.0 Public utilities 5.6 7.2 1.8 3.2 Trade 3.7 4.1 2.7 3.4 Finance and insurance 4.1 4.3 3.4 3.9 Real estate 3.7 4.2 4.3 1.4 Services 4.1 4.0 4.4 4.3 B
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From page 104... ...
Thus, real gross product in those portions of the finance and services groups, as in government, contains no allowance for productivity advance. If productivity grew as much in those industries as in the ones for which independent output estimates were used, productivity in the services sector as a whole would have grown by 0.3 percentage point more over the period as a whole, narrowing the gap with the goods sector as measured.
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From page 105... ...
groups that average rates were well below average, even after allowance was made for the probable downward bias in the output estimates. Rates of change in labor productivity for a wider range of services industries, prepared by the Bureau of Labor Statistics (BLS)
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From page 106... ...
The proportions of females and youth, who have less average experience, have generally increased more. Further, concentration is far lower in most services industries than in manufacturing, and the average education of employees is lower.
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From page 107... ...
It is with respect to these categories of causal factors that policy options are discussed in the next section. It may be noted that the results of the growth accounting studies are generally consistent with the findings of the interindustry analyses.
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From page 108... ...
Thus, the productivity slowdown in the United States between 1973 and 1981, which is also evident in other industrialized countries to varying degrees, was due primarily to the following developments: · slower growth of real capital per unit of labor, as a result of accelerated labor force growth and a reduced rate of capital formation; · a decline in advances of technological knowledge consequent on declines in the ratio of R&D to GNP; · less favorable effects of resource reallocations; · lesser economies of scale with deceleration of output growth; · a reduction in rates of utilization of capacity; and · increasing real costs of compliance with government regulations. The oil shocks of 1973 and 1979 were major factors behind some of these negative developments.
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From page 109... ...
The objective of relatively steady growth of real GNP around the "natural" rate of unemployment requires appropriate macroeconomic policies. Since the unemployment rate in 1987 averaged 6.2 percent approximately 1 percentage point more than the natural rate below which wage and price inflation tends to accelerate growth could probably proceed at about 4 percent for a couple of years without seriously heating up inflation.
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From page 110... ...
On the other hand, the shift to services tends to reduce the growth of productivity and productive capacity, which underlines the importance of seeking measures to accelerate productivity growth In services. Promoting Technological Knowledge In the modern era, the fountainhead of scientific knowledge and technological advance is research and development.
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From page 111... ...
It is important that companies in the services industries be fully represented in these and related initiatives. Savings and Investment There is a significant positive correlation between rates of change in real capital per worker and output per worker.
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From page 112... ...
Human Investments Growth accounting studies show that increases in average education and training of the work force contributed about 0.7 percentage point to the 2.2 percent increase in labor productivity between 1948 and 1986 (Denison, 1985; Kendrick, 19791. On a cross-sectional basis, as noted earlier, there is a significant positive correlation between rates of change in average education and output per labor hour by industry.
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From page 113... ...
The President's fiscal year 1988 budget provided almost $1 billion for worker adjustment assistance, well above the previous year. The President's Competitiveness Initiative recommends an $800 million program under the Job Training Partnership Act to provide summer jobs, remedial education, and skills training for disadvantaged youths.
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From page 114... ...
Governmental Policies In providing the legal framework within which private enterprises operate, government plays an important role in the productivity of the business economy. The aggregates and composition of government expenditures and revenues also have a significant impact on the private economy.
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From page 115... ...
business sector average. Most of the policy options discussed above would help to improve productivity in the business economy generally, but since most services industries are much more labor intensive than the goods sector, priority should initially be given to measures that improve the quality and efficiency of labor, including managers.
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From page 116... ...
In those services industries in which difficulties in measuring work units would militate against productivity gain sharing, profitsharing schemes offer an attractive alternative. With respect to technological advance, firms in the service industries should take full advantage of the present opportunities to form research consortia free of the threat of antitrust prosecution.
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From page 117... ...
1979. Productivity trends and the recent slowdown: Historical perspective, causal factors, and policy options.
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