San José State University 1 The Role of Services in an Economy A Brief Introduction Stephen K. Kwan...

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San José State University

The Role of Services in an EconomyThe Role of Services in an EconomyA Brief IntroductionA Brief Introduction

Stephen K. KwanStephen K. Kwan20082008

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Nation Labor

%

A

%

G

%

S

%

Service

Growth

China 21.0 50 15 35 191%

India 17.0 60 17 23 28%

U.S. 4.8 3 27 70 21%

Indonesia 3.9 45 16 39 35%

Brazil 3.0 23 24 53 20%

Russia 2.5 12 23 65 38%

Japan 2.4 5 25 70 40%

Nigeria 2.2 70 10 20 30%

Bangladesh 2.2 63 11 26 30%

Germany 1.4 3 33 64 44%

Ten NationsTotal 50% of World Wide Labor

A = Agriculture, G = Goods, S = Services 1980-2005PC Age

2005United States

The largest labor force migration in human history is underway, driven by global

communications, business and technology growth, urbanization and low cost labor

(A) Agriculture:Value from

harvesting nature

(G) Goods:Value from

making products

(S) Services:Value from enhancing the

capabilities of things (customizing, distributing, etc.) and interactions between things

Where science and engineering demand is growing…

International Labor Organization

US Employment History & Trends

cf. Figure 1.2 in F&F

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“The labor of some of the most respectable orders in society is like that of menial servants, unproductive of any value, and does not fix or realize itself in any vendible commodity which endures after that labor is past. In the same class must be ranked some both of the gravest and most important, and some of the most frivolous professions: churchmen, lawyers, physicians, men of letters, players, buffoons, musicians, opera-singers, and so on.”

Adam Smith, Wealth of Nations, 1776.

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Examples of Services that touch on our daily lives:Examples of Services that touch on our daily lives:

• Business ServicesBusiness Services• Communication ServicesCommunication Services• Construction ServicesConstruction Services• Distribution ServicesDistribution Services• Educational ServicesEducational Services• Environmental ServicesEnvironmental Services• Financial ServicesFinancial Services• Health-related and Social ServicesHealth-related and Social Services• Tourism, Cultural and Sporting ServicesTourism, Cultural and Sporting Services• Transport ServicesTransport Services• Armed ServicesArmed Services• … …....

How many did you engage today?How many did you engage today?

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“There are no such thins as service industries. There are only industries whose service components are greater or lesser than those of other industries.

Everybody is in service.”

Theodore Levitt, “Production-line Approach to Service”, Harvard Business Review, Sept/Oct 1972.

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http://www.usnews.com/usnews/edu/grad/articles/brief/gbeng_brief_2.php

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http://www.ilo.org/public/english/region/asro/bangkok/public/releases/yr2007/pr07_02sa.htm

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““America Competes Act”America Competes Act”Public Law 110-69 110Public Law 110-69 110thth Congress Congress

““To invest in innovation through research and development,To invest in innovation through research and development,and to improve the competitiveness of the United States.” and to improve the competitiveness of the United States.”

SEC. 1005. STUDY OF SERVICE SCIENCE. (a) Sense of Congress.--It is the sense of Congress that, in order to strengthen the competitiveness of United States enterprises and institutions and toprepare the people of the United States for high-wage, high-skill employment, the Federal Government should better understand and respond strategically to the emerging management and learning disciplineknown as service science. (b) Study. No later than 1 year after the date of the enactment of thisof Sciences, conduct a study and report to Congress on how the Federal Government should support, through research, education, and training, the emerging management and learning discipline known as service science. (c) Outside Resources.--In conducting the study under subsection (b), the NationalAcademy of Sciences shall consult with leaders from 2- and 4-year institutions of higher education, as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)), leaders from corporations, and other relevant parties. (d) Service Science Defined.--In this section, the term“service science” means curricula, training, and research programs [[Page 121 STAT. 578]]that are designed to teach individuals to apply scientific, engineering, and management disciplines that integrate elements of computer science, operations research, industrial engineering, business strategy,management sciences, and social and legal sciences, in order to encourage innovation in how organizations create value for customers and shareholders that could not be achieved through such disciplines working in isolation.

http://thomas.loc.gov/cgi-bin/bdquery/z?d110:HR02272:@@@T

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Note: This is notan endorsement

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Barriers for Trade in Services?re: Page 7 in F&F

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Modes of Trade Some Examples

Cross Border Trade Software, Insurance, telediagnosisfrom country B into A

Consumption Abroad A’s residents obtain education or hospital treatment in B

Commercial Presence Bank, telecommunications firm, hospital from B set up subsidiary in A.

Movement of Natural Persons Engineers, doctors from B provideservices in A

Adapted from WTO definitions

Implications for eServices and Global Services Competition

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