🔍 Read the full analysis: AI Evolution: How 80% Moved To Services on ThorstenMeyerAI.com
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TL;DR
A November 9 article from ThorstenMeyerAI.com reports that services accounted for 79.6% of U.S. employment in 2025, based on International Labour Organization estimates. It explains the long-running shift through Baumol’s cost disease and cites a study in which an AI assistant increased customer-support agents’ issues resolved per hour by 15% on average. The article does not establish that AI will reduce service-sector employment.
Services accounted for 79.6% of U.S. employment in 2025, according to International Labour Organization estimates cited in a November 9 article by ThorstenMeyerAI.com. The report connects the long-term shift toward service work to economist William Baumol’s theory of uneven productivity growth and points to a customer-support study in which an AI assistant raised issues resolved per hour by 15% on average.
The article argues that the U.S. move into services was well underway before manufacturing employment peaked in 1979. Bureau of Labor Statistics payroll data cited by the author show that service-providing industries accounted for 62% of nonfarm payroll jobs in 1939, 67% in 1967, 72% in 1979 and 86% in 2025. Those figures exclude farm workers and self-employed people; the ILO’s broader estimate of 79.6% uses a different measure of employment.
The report uses a live performance to explain Baumol’s cost disease: a string quartet still requires four musicians to play for roughly 45 minutes, or three hours of combined labor. In the article’s account, Baumol’s 1967 theory distinguishes activities where technology can repeatedly increase output per worker from work where human attention or performance is central. If wages rise across the economy, labor-intensive services may become more expensive even when their productivity changes little.
Prices cited in the source illustrate the contrast, not a single cause. Since 2000, the official quality-adjusted U.S. price of a television fell 98%, while hospital-service prices rose 274%, college tuition 188% and car repair 143%. The author also notes that U.S. health spending was 18.0% of the economy, compared with 12.4% in Germany. The source does not provide further methodological detail for these comparisons in the supplied text.
Infographic 02 · Baumol's cost disease
Why the workers moved to services
Baumol's mechanism in four steps, and what it looks like in US jobs.
- 1966Baumol and Bowen: the quartetA 45-minute Schubert quartet still takes about three hours of human work
- 1967Two kinds of workWhere labour is a tool, machines cut it again and again; where labour is the product, they can’t
- WagesPay rises everywhereTeachers, nurses and musicians must earn more too, or they leave
- ResultCosts rise, people moveIf we keep buying the same mix, more and more workers end up in the slow sector
Service industries, share of US nonfarm payroll jobs
US jobs, annual average 2025 (millions)
Payroll shares exclude farm workers and the self-employed (BLS establishment survey). Health spending: national health expenditure as a share of gross domestic product.
Sources: W. J. Baumol, “Macroeconomics of Unbalanced Growth”, American Economic Review 57(3), 1967, BLS Current Employment Statistics (own calculation of shares), CMS, National Health Expenditure, Table 1.
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AI Meets Labor-Intensive Services
The report matters because services now account for most U.S. employment, while many service tasks are difficult to scale in the same way as factory production. If AI helps workers resolve more customer problems per hour, it could alter productivity in at least some service jobs. The cited result offers a measured example, rather than proof of a broad labor-market shift.
In a study of 5,172 customer-support agents, an AI assistant increased the number of issues resolved per hour by 15% on average, according to the source article. That finding may be relevant to employers and workers weighing how AI tools affect output and job design. It does not show whether the workers’ hours, pay, workload or employment levels changed, nor whether the result applies to other service occupations.
The distinction also helps readers interpret rising service costs. The article’s framework suggests that limited productivity gains can put upward pressure on costs when wages rise, but it does not explain every price increase. The source itself points to different U.S. and German health-spending shares as evidence that institutions and policy also shape what consumers and the economy pay.
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A Shift That Predates Factory Decline
The article follows earlier coverage of the U.S. manufacturing employment peak in June 1979, when manufacturing employed almost 20 million people, according to the source. It cautions against treating the rise of services simply as a consequence of shrinking factories: service industries already represented a majority of nonfarm payroll jobs in 1939, decades before that peak.
William Baumol and William Bowen’s 1966 book, Performing Arts: The Economic Dilemma, examined the financial pressures facing performing arts organizations. A year later, Baumol developed the productivity argument in “Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis.” The source uses the familiar example of a Schubert quartet: unlike automobile manufacturing, the time musicians must spend performing a piece cannot readily be cut without changing the nature of the performance.
Baumol’s categories are not absolute, the article says. Retail productivity changed through supermarkets and self-service, while aircraft allowed a traveling lecturer to reach audiences more efficiently. The underlying distinction is whether technology can raise output per worker while preserving the product people value.
““Human ingenuity has devised ways to reduce the labor necessary to produce an automobile, but no one has yet succeeded in decreasing the human effort expended at a live performance of a 45-minute Schubert quartet much below a total of three man-hours.””
— William Baumol, as quoted in the article from a passage cited by economist Alex Tabarrok
What the AI Study Cannot Show
The source identifies a study of 5,172 customer-support agents and reports a 15% average increase in issues resolved per hour, but the supplied material does not name the study, its publication date, participating employers or research design. It also does not say how long the measured effect lasted or whether the results held across different types of customer-support work.
The reported productivity result does not establish whether AI will reduce service-sector employment, increase wages, change working conditions or shift workers into other roles. The article presents that outcome as an open question. Its price comparisons and employment shares also refer to different measures and datasets, so they should not be read as evidence that one factor alone caused the wider economic changes.
Evidence on Jobs and Productivity
The source frames the effect of AI on service employment as a question for the coming season of its series, rather than reporting a settled forecast. Further reporting would need to establish whether productivity gains persist, which tasks benefit and how employers use the time saved.
For now, the evidence presented is a long-run rise in the share of employment classified as services, alongside one cited customer-support result. Additional information about the study and labor-market outcomes would help show whether AI mainly changes how service workers do their jobs or also changes how many workers are needed.
Key Questions
What share of U.S. workers were in services in 2025?
The article cites an International Labour Organization estimate of 79.6% of U.S. employment in services in 2025. A separate BLS measure puts services at 86% of nonfarm payroll jobs that year; that measure excludes farm workers and self-employed people.
Did the rise of services begin after manufacturing jobs peaked?
No. The source reports that service-providing industries accounted for 62% of nonfarm payroll jobs in 1939, compared with 72% in 1979, the year U.S. manufacturing employment peaked.
What is Baumol’s cost disease?
It is an economic explanation for why some labor-intensive services can become more expensive relative to goods whose production benefits more readily from productivity gains. The theory points to wage growth across the economy even when certain activities, such as live performance, still require similar amounts of human labor.
Does the reported AI result mean service jobs will disappear?
No. The source reports a 15% average increase in issues resolved per hour in a study of 5,172 customer-support agents using an AI assistant. It does not report whether employment fell or establish what will happen to service jobs overall.
Source: ThorstenMeyerAI.com
