Labour Cost and Employment in the Service Economy

In this paper we analyse the direct relationship between the cost of labour and employment in diverse service industries. In contrast to most existing studies, we assume that the tertiary sector is highly differentiated h terms of reactions to both supply and demand factors. The study suggests that we must reasses the relevance of demand factors, but it also confirms that the real cost of labour is a crucial determinant of certain kinds of service employment. Country comparisons have made US sensitive to the fact that the relationship between employment and the cost of labour is far from being globally similar. Each country exhibits behaviour in line with the peculiarities of its labour market.