The Employment Impact of Differences in Dmand and Production

2 Job Creation across Vertically Integrated Sectors
over Time and across Countries

We now apply this approach to the six economies (US, UK, Germany, France, the Netherlands,
Spain) for the period from the late 1970s to the late 1990s. The main data that we use are the
standardised (domestic) input-output tables prepared by the OECD. To allow for the differing
incidence of part-time work across the six economies employment is measured as far as
possible on a full-time equivalent (FTE) basis. More detail on the data is given in Appendix 1.

The implication of the conventional view of services as characterized by high employment-
intensity (low labour productivity) is that they create more employment per unit of final demand
than manufacturing industries where labour productivity is higher. By focusing exclusively on
within-sector employment this view neglects the fact that high productivity manufacturing
industries are also involved in the production of services through supplying necessary
intermediate goods, and vice-versa with service inputs into manufactures. The VIS approach
encapsulates these inter-relations; employment is generated in intermediate as well as final
production, and labour productivity depends on efficiency in labour use throughout the supply
chain as well as in the final sector.

For each country we first present the VIS measure of the employment-intensity of all the
individual sectors. This is calculated as the employment generated economy-wide by the
injection of a standardized increment of final demand to the sector. The demand injection is
made to the single industry, notionally holding final demands for all other industries at zero, to
give employment created in that VIS sector. We repeat this for each sector in turn. The
injection is standardized at 1 million units in the country’s own currency, converted to prices of
the most recent year. VIS employment then allows us to compare the number of jobs generated
economy-wide by the injection to each industry. (Since on the input-output methodology each
unit of final demand requires the same use of inputs we can think of this interchangeably as a
unit of consumption, investment, government expenditure or export demand for the product.)

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