Services Trade and Employment

Johannes Schwarzer

Discussion Notes from Council on Economic Policies

Abstract: Driven by spectacular technological advances and the emergence and intensification of global value chains, trade in services has been the most dynamic part of global trade over recent years. All regions of the world have witnessed growth in services trade, albeit at different paces. Europe and North America have been the most successful regions in terms of services exports. Serious data limitations still prevent a deeper understanding of the exact nature of global services trade flows, but indicate that the magnitude of services trade is currently rather under- than overestimated. The services sector is the largest employer worldwide and absorbs labor at faster rates than other sectors across regions and throughout various development stages. However, the link between employment shares in services and services trade remains unclear. Services trade occurs across all economic sectors and even nontradable sectors may host tradable occupations, which can potentially be offshored (services imports). While some studies estimate the number of potential jobs directly related to services trade to be up to 50% of the workforce, most studies estimate that this number is significantly lower. Due to the services sector’s importance for the wider economy, however, the indirect effects of services trade on employment generation are estimated to be much larger. On average, jobs in tradable services appear to be of better job quality than those in nontradable services and manufacturing. In particular, workers in tradable services are better paid and usually enjoy higher education as compared to other sectors or occupations in the economy. This finding seems to hold across both developed and developing countries. Moreover, it appears that the services sector as a whole absorbs female labor at a higher rate than other sectors, effectively contributing to greater female labor participation notably in developing countries.

Pages: 26 pages
Date: 2015-06
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