Technology in Services Policies for Growth, Trade, and Employment (1988) / Chapter Skim
Currently Skimming:
Technology and the Services Sector: America's Hidden Competitive Challenge
Technology and the Services Sector: America's Hidden Competitive Challenge
Pages 118-138
The Chapter Skim interface presents what we've algorithmically identified as the most significant single chunk of text within every page in the chapter.
Select key terms on the right to highlight them within pages of the chapter.
From page 118... ...
Quite simply, massive investments in information technology have failed to boost national productivity growth in the present decade. Furthermore, with manufacturing productivity now on the rebound, problems in the services sector loom increasingly large in America's broader competitive struggle.
|
From page 119... ...
NOTE: Shaded areas indicate recessionary periods as designated by the National Bureau of Economic Research. The goods-producing sector is defined to include manufacturing, mining, and construction; the services sector from which government entities are excluded—consists of trade, communications, transportation, public utilities, finance, insurance, real estate, business services, professional services, health, and legal and educational institutions.
|
From page 120... ...
By industry, the recent strength in services sector investment has been concentrated in finance, insurance, and real estate; wholesale trade; and retail trade segments of the economy. By contrast, over the past decade and a half, capital spending growth has slowed for transTABLE 1 Shifting Trends in Business Fixed Investment, Average Annual Growth Rates (percent)
|
From page 121... ...
For trade establishments, capital stock growth has actually picked up in the present decade relative to the pace of the 1970s. A similar trend is observable for a collection of services sector industries referred to as "information producers" communications, finance, insurance, real estate, business services, and legal services.
|
From page 122... ...
Figure 3 divides services sector capital stock growth into technology and "nontechnology" items. As the middle panel shows, the stock of information technology capital in the services sector has expanded at close to a 10 percent average annual rate over the past 35 years; although the growth rate slipped a bit in the 1960s and 1970s, it has accelerated significantly in the present decade to approximately a 12 percent average annual pace—a record performance by historical standards.
|
From page 123... ...
Information technology capital, or information-processing equipment, is defined to include computers, office and accounting machinery, communications equipment, instruments, and photocopiers and related equipment. Industry estimates of information technology capital were obtained by a technology "sort" of the industry-commodity capital stock matrix described for Figure 1.
|
From page 124... ...
Information technology capital includes office, computing, and accounting machinery; communications equipment; instruments; and photocopiers and related equipment. In addition to the information technology grouping, this functional breakdown also includes the following broad categories: "basic industrial capital," which encompasses fabricated metal products, engines and turbines, metalworking machinery, special industry machinery, general transmission, distribution, and industrial apparatus; "buildings," which consists of commercial, office, and public utility structures; and "transportation," which is composed of automobiles, trucks, trailers, buses, commercial aircraft, and rail equipment.
|
From page 125... ...
Because of rounding, totals may not add up to 100.0 percent. Information technology capital includes office, computing, and accounting machinery; communications equipment; instruments; and photocopiers and related equipment.
|
From page 126... ...
0.2 0.4 1.6 20.5 Credit agencies 0.1 0.3 1.1 15.6 Securities brokers 0.0 0.0 0.1 0.9 Insurance carriers 0.2 0.2 0.7 6.1 Insurance agents 0.2 0.3 0.3 1.0 Investment holding companies 0.1 0.1 0.4 2.3 Real estate 7.3 12.4 20.4 44.0 Services 3.1 7.1 16.4 49.3 Hotels and lodging 0.0 0.0 0.1 0.9 Personal 0.1 0.8 1.6 1.5 Business 0.3 1.2 4.3 22.3 Auto repair 0.1 0.1 0.1 0.8 Miscellaneous repair 0.0 0.0 0.0 0.2 Motion pictures 0.1 0.4 1.4 2.4 Amusement and recreation 0.4 1.1 1.9 3.8 Health 1.2 2.4 5.4 13.7 Legal 0.0 0.1 0.1 0.7 Educational 0.1 0.1 0.2 0.7 Other 0.7 1.0 1.3 2.1 NOTE: Figures are averages over designated intervals and are Morgan Stanley estimates derived from the Industry-Commodity Capital Stock Matrix of the U.S. Department of Commerce.
|
From page 127... ...
0.6 0.6 1.0 4.8 3.8 4.8 Credit agencies 0.5 0.5 0.7 3.7 3.0 5.5 Securities brokers 0.1 0.1 0.1 0.2 0.1 2.1 Insurance carriers 0.6 0.4 0.5 1.4 1.0 3.1 Insurance agents 0.6 0.5 0.2 0.2 0.0 1.2 Investment holding companies 0.4 0.2 0.3 0.5 0.3 1.8 Real estate 25.1 20.7 14.8 10.4 -4.4 0.7 Services 10.5 11.6 11.7 11.6 0.0 1.0 Hotels and lodging 0.0 0.0 0.0 0.2 0.2 5.9 Personal 0.5 1.2 1.2 0.4 -0.8 0.3 Business 1.1 1.9 3.0 5.3 2.2 1.7 Auto repair 0.2 0.1 0.0 0.2 0.1 4.5 Miscellaneous repair 0.0 0.0 0.0 0.0 0.0 2.6 Motion pictures 0.5 0.6 1.0 0.6 - 0.4 0.6 Amusement and recreation 1.4 1.8 1.4 0.9 - 0.5 0.7 Health 4.1 3.9 3.8 3.2 - 0.6 0.8 Legal 0.1 0.1 0.1 0.2 0.1 1.6 Educational 0.3 0.2 0.1 0.2 0.1 1.7 Other 2.3 1.7 0.9 0.5 - 0.4 0.6 al985/1970s average. NOTE: Figures are averages over designated intervals and are Morgan Stanley estimates derived from the Industry-Commodity Capital Stock Matrix of the U.S.
|
From page 128... ...
1970s Percentage Business Sector 1950s 1960s 1970s 1985 Points Ratioa Ace INDUSTRIES 2.5 3.7 5.8 12.5 6.7 2.2 Goods producing 1.1 1.1 2.0 6.1 4.1 3.0 Services providing 3.3 5.2 7.7 15.5 7.8 2.0 Transportation 0.4 0.5 0.6 1.1 0.5 1.9 Rail 0.2 0.5 0.7 0.6 - 0.1 0.9 Nonrail 0.8 0.7 0.5 1.4 0.9 2.8 Air 1.5 0.7 0.4 3.0 2.5 7.3 Trucking 0.5 0.5 0.1 0.4 0.3 3.7 Other 0.8 0.8 0.8 1.3 0.5 1.7 Communications 20.0 30.6 40.8 53.4 12.6 1.3 Telephone and telegraph 20.8 31.9 42.1 54.5 12.5 1.3 Broadcasting 5.7 10.6 19.9 32.9 13.0 1.7 Public utilities 0.5 0.6 1.1 3.1 2.1 2.9 Electric 0.5 0.6 1.2 3.2 2.0 2.6 Gas and other 0.5 0.4 0.6 2.8 2.3 5.0 Total trade 0.7 0.9 2.5 11.1 8.7 4.5 Wholesale trade 1.6 1.8 4.9 22.5 17.6 4.6 Retail trade 0.4 0.5 1.1 3.3 2.1 2.9 Finance, insurance, and real estate 6.1 5.7 6.0 14.4 8.5 2.4 Finance and insurance 4.1 3.5 4.7 27.3 22.7 5.9 Banks (including Federal Reserve) 1.7 1.9 3.9 26.3 22.4 6.7 Credit agencies 3.1 3.1 3.3 25.0 21.7 7.6 Securities brokers 2.6 3.9 8.3 31.6 23.3 3.8 Insurance carriers 6.0 4.4 7.2 38.0 30.8 5.3 Insurance agents 17.9 15.6 12.0 32.7 20.8 2.7 Investment holding companies 14.2 8.0 10.2 31.2 21.0 3.1 Real estate 6.4 6.1 6.3 9.7 3.4 1.5 Services 5.8 6.5 8.3 16.1 7.9 2.0 Hotels and lodging 0.1 0.1 0.1 1.7 1.6 11.5 Personal 2.7 9.3 13.6 11.5 - 2.1 0.8 Business 5.1 7.9 10.9 28.4 17.5 2.6 Auto repair 0.6 0.5 0.2 1.5 1.3 7.6 Miscellaneous repair 0.5 0.4 0.5 2.7 2.2 5.3 Motion pictures 8.3 15.0 31.5 42.2 10.6 1.3 Amusement and recreation 5.3 9.7 12.3 19.7 7.4 1.6 Health 21.2 16.0 19.2 29.5 10.3 1.5 Legal 1.9 2.9 4.0 13.3 9.3 3.3 Educational 10.0 9.5 12.2 46.8 34.6 3.8 Other 19.0 10.0 6.6 10.5 3 9 1.6 a 1985/1970s average.
|
From page 129... ...
Table 5 deals with this issue by providing a detailed analysis of the share of each industry's (or industry grouping's) total capital stock that can be accounted for by information technology products, measuring what is called "technology endowment." Table 6 summarizes this analysis in a systematic and consistent fashion by estimating what can be referred to as "technology intensity measures" (TIMs)
|
From page 130... ...
TIM2 is each industry's 1985 technology endowment relative to the all-industries average. Technology intensity measures are Morgan Stanley estimates derived from the Industry-Commodity Capital Stock Matrix of the U.S.
|
From page 131... ...
As Table 5 indicates, banks, credit agencies, security brokers, and investment holding companies currently have about 25-30 percent of their capital stock invested in such technologies; for the insurance industry the share is even higher. Also, as the results of TIM1 confirm, this sector has made by far the most rapid move into information technology over the present decade; by industry, credit agencies and banks have increased their technology endowment most dramatically, followed, in order, by insurance carriers, security brokers, and investment holding companies.
|
From page 132... ...
Financial services, as of 1985, are estimated to have 27.3 percent of their total capital held in the form of computers and other office machinery a share over seven times the ratio for all industries. Within the finance sector, securities brokers, investment holding companies, and insurance companies have the highest dependence on computers, followed in turn by banks and credit agencies.
|
From page 133... ...
TIM2 is each industry's 1985 technology endowment relative to the all-industries average. Technology intensity measures are Morgan Stanley estimates derived from the Industry-Commodity Capital Stock Matrix of the U.S.
|
From page 134... ...
In addition, whereas productivity growth is estimated to have nicked Fin _ ~ _ _1_ .1 _ _ ~ ~ ~ . Sony In trade and miscellaneous services, after barely rising at all during the 1970s, such improvement seems paltry when compared with the rapidly growing intensity of technology endowment in each of these segments of the economy.
|
From page 135... ...
As American managers and other "information workers" become more adept at understanding and utilizing complex new technologies, they climb the traditional "learning curve" that eventually opens the door to ever-greater efficiencies. The lack of an instantaneous payback does not necessarily preclude a transitional break-in period that allows information technology to grow naturally into its full productive potential.S Another facet of the productivity problem may also be the unique nature of the technology itself.
|
From page 136... ...
In this regard, it also seems increasingly clear that the link between technology and productivity performance is central to the present debate on America's competitive dilemma. The lingering productivity shortfall in the United States is no longer a problem traceable mainly to manufacturing, since that sector has now moved back to its longer term productivity growth trend.
|
From page 137... ...
5. Elsewhere it has been argued that today's computer revolution is comparable to the industrial revolution, the building of a nationwide rail system, and the advent of the factory assembly line all dramatic technological breakthroughs that sparked a process of structural change that paid off only after a considerable period of time; see Morgan Stanley (1986)
|
From page 138... ...
Pp. 29-57 in Productivity Growth and U.S.
|
Key Terms
This material may be derived from roughly machine-read images, and so is provided only to facilitate research.
More
information on Chapter Skim is available.