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TL;DR
A November 9, 2026, article examines why services account for about four in five U.S. workers and how Baumol’s cost disease helps explain rising costs in labor-intensive fields. It points to a study in which an AI assistant increased customer-support issues resolved per hour by 15% on average, while stressing that the effect on jobs and service costs remains uncertain.
ThorstenMeyerAI.com published an analysis on November 9, 2026, examining why services account for about four in five U.S. workers and whether artificial intelligence can ease the productivity constraints behind rising service costs. The article draws on a study of 5,172 customer-support agents, in which an AI assistant was associated with a 15% average increase in issues resolved per hour; it does not establish that AI will reduce prices or service-sector employment.
The article uses economist William Baumol’s cost disease to explain why some services become more expensive even as goods produced with rising productivity get cheaper. In a 1967 paper, Baumol described work where labor is largely an input that technology can reduce, and work where labor is central to the product. A live quartet still requires musicians to spend the time performing it; a factory can produce more goods per worker as production methods improve.
The source reports that the quality-adjusted U.S. price of televisions fell 98% from 2000 to 2025, while hospital services rose 274%, college tuition 188% and car repair 143%. These figures describe different categories over the same period, not a single measure of service costs. The article also notes that haircuts and car repairs rose without relying on health insurance or student loans, while arguing that institutional factors can still contribute to differences in spending.
For the employment shift, the article calculates that service-providing industries accounted for 62% of U.S. nonfarm payroll jobs in 1939, 72% in 1979 and 86% in 2025. Those figures use Bureau of Labor Statistics payroll data and exclude farm workers and self-employed people. A separate International Labour Organization estimate puts services at 79.6% of all U.S. workers in 2025, a different measure with a broader worker population.
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 analysis matters because services make up a large share of employment and household spending, yet many service tasks are difficult to speed up without changing what customers receive. If wages rise across the economy while productivity grows unevenly, labor-intensive services may face ongoing cost pressure. That is Baumol’s explanation, not proof that every price increase is unavoidable or that every service is equally resistant to technology.
The customer-support study offers a concrete, limited sign that AI can change the pace of at least some service work. A 15% average increase in issues resolved per hour could affect staffing, workloads or operating costs, but the study result alone does not show which outcome will follow. The broader question is whether AI can raise output while preserving service quality, and whether any productivity gains reach customers or workers.
The article also cautions against treating technology as the sole explanation for expensive services. The U.S. health-spending comparison it cites—18.0% of the economy in the United States versus 12.4% in Germany—suggests that the same broad productivity pressures can coexist with different national spending levels. The figures do not, by themselves, identify why those differences occur.
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A Service Shift Predating Factory Decline
The source challenges the simple account that services expanded only after manufacturing employment fell. Its payroll series begins in 1939, when services already represented 62% of nonfarm payroll jobs. The share rose to 67% by 1967 and 72% in 1979, the year U.S. factory employment reached its reported peak of nearly 20 million. It reached 86% in 2025. These are the article’s calculations from BLS Current Employment Statistics annual averages; they do not count farm workers or the self-employed.
Baumol and economist William Bowen examined the economics of performing arts in their 1966 book, Performing Arts: The Economic Dilemma. The source quotes their example of a 45-minute Schubert quartet requiring three musician-hours, a quantity that cannot be cut simply by asking the players to perform faster. Baumol developed the wider productivity argument in a 1967 American Economic Review paper. The source presents the distinction as a matter of degree: technology can raise productivity in some services, but it may do so less readily than in manufacturing.
““In a study of 5,172 customer support agents, an AI assistant raised the number of issues resolved per hour by 15% on average.””
— Thorsten Meyer, summarizing the customer-support study
What the AI Productivity Figure Cannot Show
The source gives the customer-support study’s sample size and average productivity result, but the supplied material does not name the researchers, publication, study date, comparison method or range of results. It also does not explain how issue complexity or customer satisfaction was measured. The 15% figure should therefore be read as a reported study finding, not a forecast for all customer-support work or services as a whole.
It remains unclear whether AI-related gains will lead to lower prices, fewer jobs, higher service volumes, improved quality or some combination. The article frames that outcome as an open question rather than a settled prediction. Its price and employment figures also have defined limits: price changes cover 2000–2025, while the two service-employment estimates use different populations and methods.
Evidence Needed on Jobs and Costs
The next evidence to watch is whether AI productivity results hold across different service roles and over longer periods. Useful follow-up measures would include service quality, customer outcomes, worker pay and staffing, as well as the costs passed on to customers. The source does not announce a specific next study, policy decision or release date.
For now, the analysis links a long-running economic argument to a recent measure in customer support, without claiming that AI has solved the service sector’s cost pressures. Whether the technology changes employment or prices will depend on results beyond the single average productivity figure reported here.
Key Questions
What does the 80% service figure refer to?
It refers to an International Labour Organization estimate that 79.6% of U.S. workers were in services in 2025. The source separately calculates that services made up 86% of nonfarm payroll jobs, a measure that excludes farm workers and self-employed people.
What is Baumol’s cost disease?
It is an economic explanation for why labor-intensive services can become more expensive relative to goods when productivity rises faster in other parts of the economy. The theory does not mean that every service price increase has the same cause.
What did the customer-support study report?
The source says a study of 5,172 customer-support agents found an AI assistant raised issues resolved per hour by 15% on average. The supplied material does not provide the study’s publication details or establish effects on customer experience, jobs or prices.
Does the article show that AI will lower service prices?
No. The reported productivity result does not establish that companies will pass savings on to customers. The article says the effects on prices, employment and service quality remain uncertain.
Source: ThorstenMeyerAI.com
