Least productive economic sectors are growing the fastest

Hmmm. This is via Workplace sentences to ponder by Tyler Cowen but it is actually quoting Matthew C. Klein (gated).

…In the past sixteen years, 94 per cent of the net jobs created were in education, healthcare, social assistance, bars, restaurants, and retail, even though those sectors only employed 36 per cent of America’s workforce at the start of the millennium…

Average hourly pay in these sectors, weighted by their relative sizes, has consistently been about 30 per cent lower than in the rest of the economy…

And since typical jobs in bars, restaurants, and retail involve far fewer hours than normal, weekly pay packets for workers in these growing industries were more than 40 per cent lower than workers in the rest of the economy. Average weekly earnings are now 3 per cent lower than they would have been if the distribution of employment had stayed the same as in January, 2000…

Two thoughts.

In developmental economics, the standard model is that as countries develop, they move up the productivity curve, old industries shedding jobs and relocating to countries earlier on the curve while pioneering and developing higher productivity new sectors. Typical example might be TVs, pioneered in the US. Production started here, then moved to Japan. As Japan developed, TV manufacturing moved to Korea. Then to China. Now towards places other countries like Vietnam.

Klein observation provides a twist to that. Education, healthcare, social assistance, bars, restaurants and retail are all notoriously lower productivity. This doesn't feel like we are moving up the productivity curve. Is this a hidden dynamic simply not observed before even though it might have been there? Or is this something new and, if so, what does it presage?

The optimistic argument might be that in an era with excess capital and low investment opportunities, we are simply reaching deeper into the investment barrel. Perhaps these sectors are growing precisely because they are inefficient.

Caveat is the retail sector. It has already experienced one massive shift in productivity improvement with the rise of precision retailing pioneered by Walmart. Walmart's productivity story and its impact on macroeconomics is too little told. Decent quality goods at low prices has been one of the most welfare enhancing events of the past forty years. Far greater than any single government policy in that time frame except perhaps the deregulation of telecommunications.

Still, all our growth occurring in sectors that are characterized as low productivity, low wage, unstructured work environments and nearly entirely consumption would seem at least mildly alarming.