California services growth support

Press, 5 December 1988, Page 20

California services growth support

From

JOHN HUTCHISON

in San Francisco

With basic American industries — principally mining, manufacturing and agriculture — facing increasing foreign competition, growth of California’s service industries accounts for 180 per cent of the state’s robust increase in employment. Many critical economists view with alarm the masive shift, warning that it means a deteriorating standard of living and a sub-standard level of subsistence wages. Now comes a senior economist of the Bank of America to dispute this gloomy view. In a report issued in America, he says that the California service sector is the strongest in the nation, and is largely responsible for job creation which outpaces the national growth. x . Frederick Cannon, a vice-president of the bank broadly defines service industries as those which do not produce goods. They employ four out of five of the 13.5 million job-holders in California and include such categories as health care services and business services (the dominant elements) hotels, auto repair, personal services, recreation, motion pictures, and a long list of others including legal, consulting, food and protective services. While total employment in California has increased since 1980 by 25 per cent, general service employment rose by 42 per cent. This trend clearly benefits the

growth potential of the state, said Mr Cannon.

He says it embraces an increasing proportion of firms and industries, such as software development and motion pictures “that are as basic to the economy as manufacturing, and can independently generate wealth and spur economic growth.” He cited three benefits: — First, the business service sector is outpacing the manufacturing sector in output (although in the Californian climate, manufacturing is also thriving). Second, productivity growth in the service sector is under-estimated, and service employment increase contributes to higher productivity in manufacturing. And third, many service sectors can be viewed as basic industries which export their products worldwide and which are driving the state’s economy. "California’s service economy is enabling enormous growth to outpace the nation,” the economist said. Between 1985 and 1988, U.S. employment grew by 1.8 per cent; California’s rose by 3 per cent. California’s gross product grew at an annual rate of 4.1 per cent during the period; the national rate was 3.2 per cent. Mr Cannon’s appraisal concluded: “As employment' in California continues to shift toward the highly productive segments of service employment, the state’s economy will become stronger and continue to increase its competitiveness.”