ABSTRACT
The success of firms depends on their ability to manage resources effectively (Olsen et al., 1998). Labor-intensive firms that form an integral part of the service industry are dependent on the productivity of their workforce to ensure overall firm productivity. Although labor productivity is a concern of service firms globally, the United States, whose economy for the most part is driven by service firms, has not improved service productivity over the past few decades. According to Sheehy and Schone (2003), “productivity gains are impressive in manufacturing—increasing at about four to five percent a year—but service sector productivity improvement is anemic” (p. 5). Although Bosworth and Triplett (2003) posit that the services sector productivity has grown faster than the manufacturing sector productivity during the post-1995 period, this chapter purports that the services sector productivity has not been impressive from a historical perspective. The impact of productivity is even more alarming since the service industry contributes approximately 75 to 80 percent of the overall U.S. gross domestic product.
