Recommended
WORKING PAPERS
Brian Webster, Ranil Dissanayake, and I have just published a paper forecasting global structural transformation over the next thirty years. The forecasts are based on independent GDP growth forecasts and a simple empirical model linking sector shares to income, time, and fixed country characteristics. Given that, it shouldn’t come as a great surprise that it suggests the planetary shift toward services employment and out of both agriculture and manufacturing will continue. But it does suggest something many find might novel about the magnitude and reach of the likely change, and what that implies for development strategies.
Agriculture and industry (including mining, manufacturing, utilities, and construction) accounted for 74 percent of the global workforce in 1975. By 2018 that figure was 52 percent and by 2050 we predict it to reach 43 percent. Peak (absolute) global agricultural employment has passed—it was higher in 1995 than at any point since then or in our forecast to 2050. As a share of total employment, agriculture will fall from 29 percent in 2018 to 25 percent in 2050, bringing it to considerably less than half of its employment share in 1975. We predict the absolute number of manufacturing jobs will also fall worldwide between now and 2050. In 1975, manufacturing employed 13.3 percent of the global workforce. This had climbed to 14.3 percent in 2018, but we suggest it will decline below 10 percent by 2050.
It should be noted that services output, which accounts for about two thirds of total output today, will see a very similar share in 2050 if the forecasts pan out: globally, a declining labor force in industry will be accompanied by relatively more rapid labor productivity growth. But Figure Two suggests mining in particular will expand its share of global output while manufacturing and agriculture shrinks. Again, business services will see a greater share of total output while government and consumer services see relative decline.
Are these estimates plausible? The underlying growth scenarios suggest we’ll see more rapid growth in the poorest countries than in the past and slower growth in richer countries, but the sectoral forecasts suggest global manufacturing jobs are going away—and it was the growth of manufacturing employment that underpinned the miracle growth rates of East Asian countries.
That said, a lot of global manufacturing takes place in one country: China. In fact, we predict China’s share of manufacturing output in the study countries might rise to 43.7 percent in 2050. But if the early signs of investment into manufacturing of the last few years continues, perhaps African countries will take on a rising share. And notwithstanding this potential relocation, we argue that the role of manufacturing as the unique path to prosperity has likely been overstated: we are seeing global convergence of labor productivity across countries in every sector (Figure Three).
This all has implications for development prospects. Everywhere, even in the poorest countries, there are likely to be limits to the role that manufacturing can play in developing country growth. That’s not necessarily a problem if we continue to see convergence in services productivity and more opportunities for services exports. If the twentieth century growth miracles were driven by investment in machines and the movement of goods, twenty-first century growth miracles are more likely to involve investment in skills and the movement of people.
Disclaimer
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
