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Extensive economic degradation in the USA
Extensive economic degradation in the USA. One of the central problems in the United States is the degradation of the labor force, which directly affects labor productivity. Official US statistics do not cover the industry breakdown of labor productivity in the service sector, but this is the key to answering the question: “what is wrong with the USA?”.
As with industrial labor productivity, I have been able to reconstruct the industry breakdown in the services sector based on BLS data for labor and BEA real value added data for economic sectors according to national classification codes for comparable comparison.
The hypothesis was that it cannot be that a rapidly dulling society with a clear trend towards a loss of motivation to work will work efficiently and productively. That doesn't happen. Need confirmation.
There was an assumption that in the field of public catering this trend would be most pronounced, i.e. a conventional American produces fewer hamburgers per hour of shift than 10 or 15 years ago. Is it so? Yes!
For the 1st quarter of 2022, labor productivity in the catering segment (cafes, bars and restaurants) is 13% less than in 2005.
Other domestic and personal services (barbers, beauty salons, repair services, and so on) have labor productivity 18% less than in 2005, and the trend is steadily downward.
Labor productivity has fallen by 20% in construction since 2005, in education minus 6%, in the culture, sports and entertainment industry, labor productivity has not changed in 17 years. There is productivity growth in retail (+5%) and wholesale (+15%). The reason for the growth is the integration of e-commerce, courier deliveries and automated trade, warehouse and service mechanisms.
The 25% productivity collapse in transport and warehousing services is largely due to the retention of employment in the post-COVID collapse in demand for transport services. An 8% increase in productivity in healthcare over 17 years is associated with the introduction of more marginal healthcare services.
Are there service industries in the US where labor productivity is growing? There is. These are the information sector, the financial sector, and professional and business services, which include R&D, consulting and other marginal services.
First, it is worth systematizing the problematic sectors. Industries in which labor productivity is declining compared to 2005 (education, construction, transport and warehouse, culture, sports and entertainment, catering, other personal and household services) provide employment for 38.8 million people, which is almost 26% of all employed in the non-agricultural sector. However, the contribution to the value added of the economy is only 12.3%.
Wholesale and retail trade provide employment for 21.6 million people or 14.4% of the labor force, forming 11.3% of the national value added. Health and social services provide employment at 13.5% with a contribution to value added of 7.6%
US labor productivity is falling in low-income, low-margin industries that lack the ability to scale.
For example, the conventional average barber in the United States could produce 10 haircuts in 2005, now he masters only 8 haircuts per shift. They began to spin hamburgers by 13-15% less per shift. These industries are not scalable. To do 16 haircuts, you need to hire another hairdresser.
Another thing is information products, where the number of produced copies of intellectual property in digital form is unlimited and the cost of a replica is zero, scalability is not limited by anything.
The information sector provides employment at 1.84% with a contribution to value added of 8.1%, the financial sector forms 14.6% of national employment and contributes to value added -19.8%! Professional and business services form 14.6% and 15% respectively.
Labor productivity in the information sector has grown by 172% since 2005, in the financial sector by 24%, and in business services by 34%. Grows what is easily scalable and what has the ability to export.