The Employment Impact of Differences in Dmand and Production

7 Conclusions on the Role of Services

The conclusions from our analysis can now be summarized.

Services have been becoming progressively more important in modern economies, as demand
patterns are increasingly oriented towards services and employment is increasingly concentrated
there. We find that the conventional wisdom concerning the greater employment-intensity of
services is not borne out when this is measured on the basis of the vertically integrated sector,
encapsulating jobs generated throughout the supply chain. On the VIS basis the employment-
intensities of services and manufacturing are broadly equal. Nevertheless, there is a substantial
heterogeneity at the level of the individual industry, which tends to persist over time. This gives
rise to the possibility that differing product mixes selected within individual countries could
affect overall employment.

The employment advantage of the US relative to the European economies as a group cannot be
attributed to the product mix in final demand. The evolution of the product mix has been
employment-neutral in the US, and employment-friendly for the European economies. The final
demand mixes of the UK, the Netherlands and Spain would generate higher employment in the
US than its own pattern. Only the demand patterns of France and Germany would reduce it,
and then only marginally. Conversely, if the European economies were to be characterized by
the US demand mix, lower employment would result.

When the focus is restricted to the behaviour of the consumer some effects of consumption
mix on relative employment can be found, although these are for the most part limited in scale.
The evolution of the consumption mix, with the growing role of services, has been friendly to
employment in the US, but has contributed only 3% of the growth of employment attributable
to consumption over the period. Among the European economies, it has been significantly
employment-friendly in Germany (contributing 9% of the employment growth attributable to
consumption there) but has reduced employment in the UK, France and the Netherlands. The
consumption patterns of France, Germany and the Netherlands would reduce employment in
the US by between 2.6 and 5.1%, although the pattern from the UK would marginally increase it.
The clearest counterfactual finding is that the US consumption mix would increase total

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