Service industrialization, employment and wages in the US information economy

Abstract

The US economy has undergone significant shifts towards services and towards information intensive industries. The latter trend has been driven by advances in information technology. These advances have concurrently led to substantial changes in the production and delivery of services, especially notable in information-intensive sectors. We examine these changes from the perspective of "service industrialization", since they are similar in many ways to the historical industrialization of goods production. We focus on the effect of industrialization on employment and wages, and identify certain important consequences of this direction. One major consequence is the impact on the customer facing services and the "front office" in addition to the effect on service processes in the "back room". An important aggregate result is a decline in white collar jobs in both those categories. A larger effect is at the sector level, with significant disruptions in some sectors leading to their substantial restructuring. Such disruptions are likely to occur in other information intensive sectors as well.