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Service Sector Employment in Local Economic Growth: A Job Vacancy Chains Approach

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.

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Service Sector Employment in Local Economic Growth: A Job Vacancy Chains Approach

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  1. 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 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. Backward Linkages Suppliers: 30 Indirect Jobs Instrument Plant 100 Direct Jobs Forward Linkages Household-serving: 20 Induced Jobs Light Bulbs Inc. SciSource Supermarket Stores Horizontal Multipliers

  5. Direct Indirect Induced ‘Horizontal’ Multipliers

  6. Job Changer: Mr. Jones Job Changer: Ms. Dee New Job in SciSource Existing Similar Job in OptiSource Existing Related Job in InstruSource Vacancies In-Migrant to Local Area Ms. Black Terminates Chain Job Chains and Vertical Multipliers

  7. Induced Indirect Direct Job Chains and ‘Vertical’ Multipliers Chain Termination Job Chains Vacancies

  8. Multiplier effects ---expected chain lengths Efficiency effects Distributional Effects Three Major Outcome Measures

  9. 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. Data

  10. Origin-Destination Matrix for Industry and Services

  11. 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?

  12. 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 ?

  13. Efficiency Effects

  14. 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

  15. Distributional Effects

  16. 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

  17. 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.

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