The Effect Of Globalization On Human Services

Economists have long understood that direct services--services provided hands-on, person-to-person--are inherently inflationary. The reason for this is that such services are not subject to productivity gains. A hair dresser can dress only so many heads in a day. A therapist can serve only so many clients in a day. And so forth. When other kinds of work benefit from improved productivity and you can thus buy more widgets with a dollar, that dollar still buys the same amount of direct services. As productive capacity rises and real earning power increases, direct service providers increase their charges to keep pace but the service remains pretty much the same. Now your dollar buys more goods but less services.

Globalization--an inevitable process, not a political one--increases general productivity by driving production to low cost producers. This in turn encourages innovation, in particular the use of technology, as producers worldwide battle to drive their costs ever lower, maintain quality and thus increase their productivity. The global battle of globalization is ultimately not the exploitation of low wage, poor regions. This is a temporary phenomenon. It is the total global productivity battle.

Human services, dominated by directly delivered services, thus becomes increasingly inflationary as the rest of the economy benefits from the productivity gains driven by globalization. It certainly means that all the activities that surround the person providing the direct service must be focused on for productivity gains, in particular through the use of technology. But the bottom line inflationary nature of these services will continue to be the dominating trend. This has profound implications for public policy and service providers.

Copyright © 2007 Philip Bookman

Technorati: Globalization, Strategic Planning