and Low-Skill Jobs

distribution of values (indicated by the shading within each column, which reflects threshold values reported across the bottom of the table). The sectors are then sorted into the four categories based on the common sets of rankings across the dimensions.

Among these results, two characteristics—the share of low-skilled workers and trade intensity (the share of exports in value added)—demonstrated the greatest variation, so those measures form the y- and x-axes, respectively, of figure 1.6.24 And because of the significant correlation between trade intensity and the share of intermediate sales to other sectors, the bubble shading indicates the relative importance of linkages (low-linkage services in blue, high-linkage services in green). Offshorability and R&D intensity stood out in only a few subsectors, as indicated with the white dots inside the bubbles and a red outer circle, respectively. Capital intensity—the stock of capital

FIGURE 1.6 Services Subsectors Vary in Their Scope for Scale, Innovation, Spillovers, and Low-Skill Jobs

Services subsectors in the EU-15 and United States, grouped by trade intensity, offshorability, R&D intensity, capital intensity, intersectoral linkages, and low skill intensity

120

Share of low-skilled workers (%), 2018 100

80

60

40

20

0 Retail

Personal services Low-skill domestic services

Arts, entertainment, and recreation

Health Administrative and support

Education

Skill-intensive social services Low-skill tradable services Accommodation and food Transportation and storage

Wholesale

Information and communication

Global innovator services

Finance and insurance Professional, scientific, and technical

–20

–5 0 5 10 15 20 25 30

Share of value added exported (%), 2015 High-linkage services Low-linkage services Capital intensity R&D-intensive services Offshorable services

Sources: Calculations based on Blinder and Krueger 2013; OECD’s Trade in Value-Added (TiVA), R&D Sources and Methods, and STructural ANalysis (STAN) databases; and US Department of Labor’s Occupational Information Network (O*NET) database. Note: Data from latest available year. Bubble sizes indicate relative gross capital stock per worker. Bubbles shaded with dots refer to sectors with high offshorability (above 75th percentile). Red outlines designate sectors with high research and development (R&D) intensity (above 75th percentile). The data on exports exclude services provided through “commercial presence” such as the establishment of affiliates abroad (mode 3 of services trade in the General Agreement on Trade in Services [GATS]). The share of low-skilled workers in a sector’s employment is measured by the share of workers in manual-task-intensive occupations. The indicators on lowskilled workers, exports, and offshorability are based on US data; those on R&D, linkages, and capital intensity are based on EU-15 data. EU-15 countries comprise the 15 pre-2004 European Union member states: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom (which has since exited the EU). OECD = Organisation for Economic Co-operation and Development.

relative to workers employed—is represented by the size of the bubbles in the figure rather than being used as a way of categorizing the subsectors.

Taking the clustering of these characteristics together, the services subsectors can be analyzed in four groups: global innovator services, low-skill tradable services, skillintensive social services, and low-skill domestic services (figure 1.6). The groups sort into two levels of trade and skill intensity—as also reflected in the group names—but are further differentiated within each level by offshorability, R&D intensity, capital intensity, and/or linkages. The comparison of trends within this sector typology can indicate ways in which countries may be able to benefit from producing in these subsectors.

Global innovator services. Professional, scientific, and technical services; ICT services; and financial and insurance services are highly traded in international markets, and the large majority of employees in these industries are skilled workers. Furthermore, these services are traded in international markets through remote crossborder supply and are therefore amenable to offshoring (and thus similarly shaded in figure 1.6).25 Of these services, ICT and professional, scientific, and technical services are also characterized by high R&D intensity, while ICT and finance are relatively capital intensive. Collectively, these services subsectors also have greater linkages with other sectors.

Low-skill tradable services. Within the services subsectors that are more traded internationally, most of the employees in transportation and warehousing services, wholesale trade, and accommodation and food services are low-skilled workers. Further, transportation and warehousing services have a distinctly higher ratio of exports to value added—even higher than the subsectors making up the high-skill global innovators group—and are relatively capital intensive.

Of these three subsectors, transportation and warehousing services and wholesale trade also have greater linkages with other sectors.26 This, in turn, is relevant for their amenability to offshoring. Transportation services and wholesale and retail services can be traded without people or capital moving across national borders, to an extent that they enable the export and import of goods. Accommodation and food services are typically exported through consumption abroad by tourists.

Skill-intensive social services. Among the services subsectors that are less traded internationally, education and health employ a relatively low share of low-skilled workers. The share of low-skilled workers is about 40 percent in health services, owing to large numbers of workers employed in health care support occupations. This share falls to about 20 percent if home health aides, nursing assistants, occupational therapy assistants, physical therapy assistants, massage therapists, pharmacy aides, dental assistants, and the like are categorized as (semi-)skilled jobs instead, which might be closer to the reality in lower-income countries.

Although typically less traded internationally with respect to the overall size of the sector, education and health services are indeed tradable. For example, education services can be exported through FDI or the enrollment of foreign students. Similarly, health services can be exported through “medical tourism” or remittances of individuals who migrate across international borders. These services also incorporate a sizable component of public provision in many countries.

Low-skill domestic services. Among the services subsectors that are less traded internationally, retail trade; administrative and support services; arts, entertainment, and recreation; and other community and personal services all employ relatively high shares of low-skilled workers. Except for administrative and support services, these services have few linkages with other sectors. And except for arts, entertainment, and recreation services, they are also generally less internationally traded.

Based on data for high-income countries, this typology suggests that the most internationally traded global innovator services are typically also relatively skill intensive. These highly traded services also share greater linkages with other sectors domestically, providing greater scale and scope for spillovers. In contrast, many low-skilled services— such as arts, entertainment, and recreation; retail trade; and personal services—provide little by way of productivity-enhancing potential through trade, innovation, and linkages.27 Among the services subsectors, however, figure 1.6 shows that transportation and warehousing services, accommodation and food services, and wholesale trade are perhaps exceptions to this general pattern in that they are both internationally traded and create jobs for unskilled labor. Transportation and wholesale trade services are also highly linked to other sectors.28

The Subsector Groups, by Mode of Trade These subsector groups are reinforced by differences in how they are traded and thus the potential entry points for LMICs. Services can be exported through four modes: (1) “cross-border supply”; (2) “consumption abroad”; (3) “commercial presence”; or (4) “movement of natural persons” (as further defined in box 1.1).

Exports through mode 3—by establishing “commercial presence,” such as through affiliates abroad—is the most prominent form of trade across most services subsectors (figure 1.7). Accommodation and food services and education are the exceptions to this norm, being typically exported through tourism and the “consumption abroad” of foreign students (mode 2). Medical tourism provides similar opportunities, even though its share in global exports of health services is lower. Cross-border trade (mode 1) is most widespread among (a) the global innovator services that can be delivered digitally, as well as (b) transportation and distribution services (low-skill tradables) because they are closely linked to merchandise trade. The movement of individual service providers abroad (mode 4) is the least widespread mode of trade, although there is evidence of some exports through this mode among the global innovators and skill-intensive social services.