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Work force ageing and expanding service sector: a double burden on productivity?

Expansion of the service sector has often been considered as a threat to aggregate productivity. We examine whether work force ageing is a cause of further concern in the service sector, using matched employer–employee data from Finland. The results show hump-shaped relationships between average age of the work force and establishment productivity. The results vary somewhat across different service industries (hotels and restaurants, trade, transportation, and business services). The conclusion is that there is some worry about a double burden from ageing of the work force and expansion of the low-productivity service sector, especially in the labour-intensive, low-skill fields.