Europe needs an industrial policy for services. We typically associate industry with manufacturing. And manufacturing might be important for innovation in high technology areas or for national security. But its importance for creating inclusive societies and good jobs, which are the foundation of healthy polities and sustainable democracies, has significantly declined – and continues to do so.
Today, all over Europe, around only 15 per cent of the workforce is employed in manufacturing – and the number keeps falling. It appears to be difficult to reverse that decline, given the trends in technology and global competition. Therefore, manufacturing will not be a labour-absorbing sector but, in fact, will be a labour-shedding sector. If we also consider the small proportion of agricultural workers, that leaves only services as the sector where jobs will be created.
And we want them to be good jobs and services. To create good jobs, we often think of education, skills and training. But we also must recognise that at least half of future jobs in services do not require high levels of education. These are jobs in wholesale and retail trade, sales and clerical jobs, health and social care, construction, transport, storage and logistics, and food and accommodation services. Simply investing in education will not be the remedy. We must think bigger.
Of course, increasing the collective bargaining power of workers, better labour regulations, minimum wages and sectoral collective agreements must ensure that workers in those sectors have a solid foundation – and a pathway to the middle class.
But ultimately, good jobs are underpinned by productivity in the broad sense of the term: a service that is of value to the customers and contributes significant value to the quality of the service. And that’s precisely where we really need an industrial policy: to address a productivity bottleneck in services.
We should focus on using new technologies and new organisational innovations. Take the long-term care sector as an example. New technological tools could provide care workers with real-time information to exercise much greater agency and autonomy in a much broader range of tasks. This could include varying eating schedules, undertaking additional medical tasks, responding to the needs of the people they are caring for. The productivity benefits would be the increase in the satisfaction of the people who are being cared for. It would reduce hospital admission rates, costs in the medical system, incidence of chronic disease, while increasing the autonomy, agency and job satisfaction of the workers.
Similarly, in areas like retail and education, we can use AI tools and other forms of technological assistance to enable salesclerks or relatively lower-skilled educators to provide more customised and sophisticated services to their customers or students. They could deliver services targeted to the specific needs of the student groups or to specific questions they confront in clerical tasks.
Industrial productivity for services is not about subsidies or trade protection. It’s the deployment of organisational and technological innovations that help service workers become more productive and provide a wider range of more sophisticated tasks.
But let’s be clear. These technologies don’t always help those that need it. Indeed, quite often they lead to worse jobs, not better ones. That’s where the government and the public sector must direct technology to focus on these kinds of industrial policies that target services. These will have to be collaborative arrangements between national governments, the EU level and subnational units, municipalities and regions. This local experimentation will have to play an important role in figuring out pathways into these kinds of new arrangements.
We are only at the beginning of thinking about these issues, but they are hugely significant. The future of our societies depends on creating good jobs: as the foundation of the middle class, as the foundation of our democracies.
Dani Rodrik, professor of international political economy at Harvard University’s John F Kennedy School of Government, is president of the International Economic Association and author of Straight Talk on Trade: Ideas for a Sane World Economy (Princeton University Press).
