injection to one of the Manufacturing sectors the share of jobs spilling over to other sectors
within the Manufacturing group has been tending to fall while the share located in Services has
increased sharply (columns (2) and (3)). Similarly, when demand is injected into Services the
spillover of jobs to Manufacturing has tended to decline, while the share of jobs generated within
other parts of the Services group has increased (columns (5) and (6)). Both Manufacturing and
Services have been economizing on their use of manufactured inputs and expanding their use of
intermediate services. Rising spillovers to Services both from Manufacturing and from Services
themselves is clearly the dominant trend.
These developments can be interpreted as showing outsourcing in various forms. The reduced
spillovers within and to Manufactures are consistent with rising import penetration through the
outsourcing abroad of parts of the manufacturing supply chain. The rising spillovers to the
Service industries from both Manufacturing and Services are consistent with the outsourcing of
functions, with firms increasingly restricting their activities to core competencies while buying in
ancillary services previously provided in-house. They may, for example, no longer engage in their
own recruitment, marketing, tax management, software development, cleaning, and catering, but
purchase these from specialist (services) suppliers. It can be argued that, in the limit, outsourcing
along these functional lines generates no additional activities (or jobs) within the economy, only
changing their sectoral location. However, some efficiency gains must be expected as part of the
incentive to outsource - even if, as some evidence suggests, outsourcing is not infrequently
unsuccessful and subsequently reversed. A further possible source of the increasing spillovers of
jobs from Manufactures to Services is that the output of manufactures not only increasingly
includes elements such as branding and marketing, but also explicit post-sale service components
such as maintenance contracts or financing. While the input-output approach is powerful in
revealing the trends in spillovers it does not allow us to disentangle and quantify the
contribution of these two trends, towards specialization and outsourcing, and for an increasing
service element in goods.
We summarize our results thus far. Final demand and consumption are increasingly oriented
towards Services everywhere. But a demand injection to the Service industries generates
approximately the same number of jobs as an injection to Manufacturing, when these are
measured on a VIS basis. Under these circumstances, a shift in final demand towards Services,
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