An explanation for the rising share of services in employment

Services are crucial for the functioning of a society and an economy. Nonetheless, they have not been given the attention they deserve and remain poorly understood by the economics profession. In many studies services are taken to be technologically sluggish or stagnant, and this then, is regarded as an explanation for their rising share in overall employment. The fact that due to the new information technologies, labor productivity in services has been perceptively increasing is not adequately reflected and acknowledged in economic statistics. This article discusses some aspects relating to changes in labor productivity with special reference to services. It describes the product of services from the final consumers’ point of view, as well as from the point of view of producers and analyzes the effect of services on process and product innovation. Attention is directed to the problem of measuring productivity in services and to some explanations for their rising share in GNP and employment in OECD countries. The conclusions suggest that changes in income, and in consumer behavior, affect the share of services and influence the growth of productivity in service industries.