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Service Sector Employment in Local Economic Growth: A Job Vacancy Chains Approach. Daniel Felsenstein. Israeli Regional Science Association, Annual Meeting, Ben Gurion University, Beer Sheva 15 th April 2008. The Service Sector and Job-Generation: The Perception. - PowerPoint PPT Presentation
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1
Daniel Felsenstein
Service Sector Employment in Local Economic Growth:
A Job Vacancy Chains Approach
Israeli Regional Science Association, Annual Meeting, Ben Gurion University, Beer Sheva 15th April 2008
2
The Service Sector and Job-Generation: The Perception
• Substantial job-generator – but ‘dead-end’ jobs
• Unlike manf, little prospects for promotion through internal progression
• More unequal wage distribution in services• Not a stimulant for local economic
development
3
A Chain Model of Local Labor Markets
• Assume unemployment and underemployment – slack in labor market
• A new job, if filled by an employed worker, opens up a chain
• Workers move from job to job to improve their welfare
• New perspective on employment ‘multipliers’
4
Horizontal Multipliers
Backward LinkagesSuppliers:30 Indirect Jobs
Light Bulbs Inc.
Forward LinkagesHousehold-serving:20 Induced Jobs
Supermarket Stores
Instrument Plant100 Direct Jobs
SciSource
5
‘Horizontal’ Multipliers
InducedIndirect
Direct
6
Job Chains and Vertical Multipliers
New Job in SciSourceExisting
Similar Job in OptiSourceExisting
Related Job in InstruSource
In-Migrant to LocalArea Ms. Black
Terminates Chain
Job Changer:Mr. Jones
Job Changer:Ms. Dee
Vacancies
7
Job Chains and ‘Vertical’ MultipliersInduced
Chain Termination Job ChainsVacancies
IndirectDirect
8
Three Major Outcome Measures
• Multiplier effects
---expected chain lengths
• Efficiency effects
• Distributional Effects
9
Data• PSID 1987-1993
(heads and spouses only)
• 3500 distinct year-to-year job changes
• 1992 Real average wage gains for job changers
• Data for five earnings classes and 2 broad sector groups: Industry =manf, mining, construction.
Services=transp, comms, wholesale and retail trade, FIRE, personal services, public admin.
10
Origin-Destination Matrix for Industry and Services
Destination
Origin Ind1 Serv1 Ind2 Serv2 Ind3 Serv3 Ind4 Serv4 Ind5 Serv5Ind 1 37.6% 6.6%
Services 1 14.0% 28.6%
Ind 2 18.7% 4.4% 45.4% 5.2%
Services 2 2.1% 22.9% 6.4% 48.1%
Ind 3 5.0% 0.0% 17.9% 2.6%43.9%
1.4%
Services 3 0.0% 4.7% 6.1% 18.6%6.2%
43.9%
Ind 4 0.0% 1.1% 2.8% 0.0%10.7%
1.4%43.2%
4.3%
Services 4 0.0% 2.2% 0.0% 0.9%3.5%
18.6%10.0%
40.6%
Ind 5 0.0% 0.0% 0.0% 0.0%1.6%
0.6%6.6%
1.2% 29.3% 1.7%
Services 5 0.0% 0.0% 0.0% 0.5%0.5%
1.8%4.5%
13.0% 9.1% 32.0%
Unemployed 3.9% 2.4% 4.4% 3.6%16.0%
7.4%21.4%
13.6% 35.1% 22.5%
Out of labor force 1.7% 5.3% 3.4% 3.9% 3.2% 9.1% 7.2% 16.0% 13.5% 34.3%
In-Migrant 17.1% 21.8% 13.6% 16.5%14.3%
15.8%7.2%
11.2% 13.0% 9.6%
Column Sum 100.0% 100.0% 100.0% 100.0%100.0%
100.0%100.0%
100.0% 100.0% 100.0%
11
Origin Job Group
Multiplier Matrix:Initial New Job: Destination Job Group
Job Multipliers Ind1 Serv1 Ind2 Serv2 Ind3 Serv3 Ind4 Serv4 Ind5 Serv5
Ind 1 1.64 0.15
Services 1 0.32 1.43
Ind 2 0.61 0.23 1.85 0.19
Services 2 0.28 0.67 0.23 1.95
Ind 3 0.36 0.13 0.61 0.17 1.79 0.04
Services 3 0.23 0.38 0.35 0.69 0.20 1.79
Ind 4 0.12 0.09 0.23 0.08 0.36 0.10 1.78 0.13
Services 4 0.13 0.21 0.19 0.27 0.23 0.58 0.30 1.71
Ind 5 0.02 0.02 0.04 0.02 0.08 0.04 0.18 0.05 1.42 0.03Services 5 0.05 0.06 0.07 0.09 0.10 0.17 0.20 0.34 0.19 1.48
Total Job Multiplier 3.76 3.36 3.57 3.45 2.76 2.72 2.46 2.23 1.61 1.51
Industry Multip 2.75 0.62 2.74 0.45 2.23 0.18 1.96 0.18 1.42 0.03
Services Multip 1.01 2.74 0.84 3.00 0.52 2.54 0.50 2.05 0.19 1.48
12
Industry versus Services: Chain length
• Recruiting the Non-Employed: Industry takes from unemployed. Services take from outside the labor force.
• Job multipliers; very similar. Decline from high to low wage groups.
• Internalization; both industry and services have much action on the diagonal. Use of internal promotion ladders?
13
Industry versus Services (cont).
• Cross-sector job vacancy multipliers. Larger from industry to services, but still considerable in both directions. Blurring the industry-services divide ?
14
Efficiency Effects
V/w
Wage Group Indust Services
1 $25.50-$40.0 0.41 0.43
2 $16.40-$25.50 0.44 0.41
3 $10.50-$16.40 0.55 0.56
4 $6.70-$10.50 0.62 0.62
5 $4.25-$6.70 0.65 0.69
15
Industry versus Services: Efficiency Gains
• For a given wage group, there is very little difference between industry and services in V/w.
• But wage distribution much more unequal in service sector.
• Service sector firms weighted towards high-end jobs, less efficient at generating welfare
16
Distributional EffectsWage Group of Initial New Job
1 2 3 4 5
V/w: Indust 0.41 0.44 0.55 0.62 0.65
Services 0.43 0.41 0.56 0.62 0.69
Share to Job Changes: Indust 23.5 18.1 13.5 14.9 0
Services 30.6 33.2 41.2 53.4 0
$ per year - Low: Indust 350 535 846 1,797 7,201
Services 411 548 1,001 1,916 7,201
$ per year – Lowest: Indust 3,267 4,659 5,720 10,535 7,201
Services 5,265 4,111 6,909 10,597 7,201
17
Industry versus Services: Distributional Impacts
• For a given wage group, little difference between industry and services on lowest wage groups (4 and 5), ie both contribute equally little to trickle-down.
• No evidence of more internal promotion ladders in industry.
• Industry only promotes trickle-down due to its more concentrated wage distribution
18
Conclusions
• Industry and Services recruit from outside the labor force in very different ways, BUT:
• Job multipliers of similar length
• Significant cross-sector multipliers
• Little difference in welfare effects
• Little difference in ‘trickle-down’ effects
• Conclusion; increasingly blurry industry-services divide.