The Employment Impact of Differences in Dmand and Production

million over the period. Labour productivity growth, with its job-destroying effects, has been
principally concentrated in only two sectors (again on the VIS basis, including the supply chain):
the production of ‘Manufactures’, and Wholesale and Retail Services; productivity gains in
delivering these outputs have eliminated 27.8 million FTE jobs, while the effects of productivity
were approximately employment-neutral (-0.2 million FTEs) across the remaining sectors.
Wholesale and Retail Trade thus play an exceptional dual role in this dynamic, also found from a
different perspective by Foster, Haltiwanger and Krizan (2002) The effects of changes in the
inter-industry linkages are present but small. The European economies, in contrast, show more
muted employment gains from demand growth and markedly stronger employment losses in the
VIS. Both the gains from demand and particularly the losses from productivity are more widely
dispersed across VIS sectors. Changes in the inter-industry linkages, including outsourcing, are
only occasionally a significant part of the explanation of employment change, notably in the UK
and the Netherlands. The division of demand between employment expansion and labour
productivity gains is by far the more important determinant of relative employment outcomes.

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