Beyond conventional service economics: Utility services, service-product chains, and job services

Günther Schmid

No FS I 00-203, Discussion Papers, Research Unit: Labor Market Policy and Employment from WZB Berlin Social Science Center

Abstract: This essay intends to explore three innovative ways to foster job creation in services: First, the switch from product markets to utility markets would induce more and new types of user services. Such a switch would not only be more employment friendly but also foster a sustainable economic development compatible with ecological principles. The reorientation from products to utilities provides strong arguments for an emphasis on the framework conditions of services, for instance for lowering VAT in favour of labour intensive services, for forward regulation through (usually service enhancing) high quality standards, for deregulating market entry barriers, and for subsidising networks instead of individual products or services. Second, the thesis of cost disease has to be reconsidered in view of productivity enhancing possibilities by new technologies, and in view of innovative possibilities in managing specific income risks related to modern services. Service-product chains are the main ingredient for increasing productivity in services which is demonstrated in the field of art. Various approaches of social insurance in this field offer also inspiring ideas for risk management beyond the traditional welfare state. The most important policy conclusion related to this experience is the inclusion of consumers into the financing of social insurance. Third, the switch from transfers to persons with low earnings capacities to the support of peoples self-reliance through their own work could also induce increasing demand for already existing or new types of job services, and contribute especially to gender equality in the labour market. The central policy conclusion is the recommendation to turn social benefit entitlements (transfers) into vouchers for buying or co-financing job services.

Date: 2000
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