🔍 Read the full analysis: AI Trends 2024: 80% Service Roles on ThorstenMeyerAI.com
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TL;DR
A November 9, 2026 article from ThorstenMeyerAI.com says services accounted for 79.6% of US employment in 2025, a shift that began well before manufacturing jobs peaked in 1979. It links rising costs in labor-intensive services to Baumol’s cost disease and points to a customer-support study in which an AI assistant raised issues resolved per hour by 15% on average. Whether AI will reduce service-sector employment or change how those jobs are done remains unclear.
Services accounted for 79.6% of US employment in 2025, according to International Labour Organization estimates cited in a November 9 article from ThorstenMeyerAI.com. The report connects the long-running shift toward service work with Baumol’s cost disease—the tendency for labor-intensive services to get more expensive as wages rise—and asks whether AI could raise productivity in work where human time is central.
The article argues that the growth of services did not begin as a consequence of factory decline. Bureau of Labor Statistics payroll data, as calculated by the author, show that service-providing industries accounted for 62% of nonfarm payroll jobs in 1939, 67% in 1967 and 72% in 1979, the year US manufacturing employment reached its peak. The share was 86% in 2025. These payroll figures exclude farm workers and self-employed people, so they are not directly interchangeable with the ILO’s estimate covering all workers.
The explanation centers on a 1967 paper by economist William Baumol. Some work can produce more output per hour through machinery and other technological improvements. In other work—such as live music, teaching or personal medical care—time and attention are part of the service itself, making productivity gains harder to achieve without changing the product. If wages rise across the economy, employers in slower-to-improve services face higher labor costs even when the amount of human time required for each service changes little.
The report illustrates the contrast using US consumer prices since 2000: its cited official, quality-adjusted measure for televisions fell 98%, while hospital services rose 274%, college tuition 188% and car repair 143%. It also points to a study of 5,172 customer-support agents in which an AI assistant increased issues resolved per hour by 15% on average. The article does not identify that result as evidence that service jobs have already disappeared.
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 question matters because services make up most US employment and include work with direct consequences for household budgets, from health care and education to repairs. If AI helps workers complete more tasks without reducing the quality of service, providers could potentially increase output or change how work is organized. The reported customer-support result is one measured example of a productivity gain, but it does not establish that the same gains will occur across other occupations.
The price comparisons also caution against treating technology as the sole explanation for rising service costs. The article notes that car repair and haircuts became more expensive even though they do not depend on student loans or health insurance in the same way college and medical care do. At the same time, it contrasts US health spending, reported as 18.0% of the economy, with Germany’s 12.4%. That gap suggests national systems and policy choices also shape what people pay; the report does not claim Baumol’s theory explains every difference.
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Services Rose Before Factory Decline
The report places the employment figures alongside the history of manufacturing. US factory employment peaked in June 1979 at nearly 20 million people, according to the article. But the service share had already risen for decades by then. The distinction matters: the growth of service work cannot be explained only as workers moving into jobs left behind by shrinking factories.
Baumol and William Bowen developed the underlying observation while studying the finances of performing arts. Their 1966 book, Performing Arts: The Economic Dilemma, considered why orchestras and theaters faced persistent financial pressure. Baumol’s 1967 paper extended the idea to the wider economy. A string quartet still requires four musicians to perform, while manufacturing has repeatedly found ways to produce goods with fewer labor hours. The theory describes a difference in how readily productivity can rise, not a strict division in which one sector never improves.
The article also notes that service work can adopt technology: supermarkets changed retail, and faster transport made some forms of travel more productive. Its point is that improvements may be more limited where personal attention or live performance is part of what customers are buying.
““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, quoted in the article from his 1967 paper
AI’s Employment Effects Remain Open
The article leaves open whether AI will reduce service-sector employment, increase output while retaining workers, or move workers into other tasks. The customer-support figure measures issues resolved per hour in one study; the material provided does not specify the study’s date, setting, duration or effects on service quality, pay and staffing. It should not be treated as a forecast for the entire service economy.
The employment percentages also use different measures. The BLS series covers nonfarm payroll jobs and excludes self-employed workers, while the ILO figure cited covers all workers. The author supplies the BLS shares as personal calculations from annual averages, but the article does not provide a full methods discussion or a breakdown of which service occupations drive the later increase. Nor does it establish how much of the cited price growth reflects labor costs, regulation, market structure or other factors.
The Next Test Is Wider Adoption
The article frames AI’s impact on service work as an ongoing question for the season rather than a settled outcome. The next evidence to watch is whether productivity gains extend beyond customer support, persist in real workplaces and translate into lower costs, improved service, higher output or changes in staffing. Those outcomes are not interchangeable, and an increase in tasks completed per hour alone cannot answer which one will follow.
Further reporting would also need comparable employment and price data, clear details about the AI studies, and evidence on how workers’ roles change after adoption. Until those details are available, the supported conclusion is narrower: services have dominated US employment for decades, their labor requirements can make productivity gains difficult, and one cited study found higher hourly issue resolution among agents using AI.
Key Questions
What does the claim that about four in five US workers are in services mean?
The article cites an ILO estimate of 79.6% of US workers in 2025. It separately reports that services made up 86% of nonfarm payroll jobs in a BLS-based calculation; that measure excludes farm workers and self-employed people.
What is Baumol’s cost disease?
It describes how labor-intensive services can become more expensive when wages rise across the economy but the work itself is hard to complete with fewer labor hours. The theory helps explain cost pressure but does not account for every price increase.
Does the customer-support study show that AI is eliminating jobs?
No. The article reports a 15% average increase in issues resolved per hour among 5,172 agents in a study. That productivity measure alone does not establish whether employers cut jobs, changed duties or improved service quality.
Did services grow only after factory employment declined?
No. The article’s BLS-based figures put services at 62% of nonfarm payroll jobs in 1939 and 72% in 1979, when manufacturing employment peaked. The service share continued to rise afterward.
Source: ThorstenMeyerAI.com
