construction services and hotels and restaurants are characterized by “low” skill intensity but also by “low” or “medium” productivity-enhancing traits: formal worker training programs, use of foreign technology, exports (direct and indirect), introduction of new products and new processes, and R&D spending. Such non-traded service sectors could also be constrained by the pace of expansion in domestic demand. For instance, the productivity-enhancing structural change in Africa has been attributed to an expansion in low-end services, but it appears that this expansion might be unsustainable, owing to limited demand beyond the domestic market (McMillan, Rodrik, and Sepulveda 2017).<sup>6</sup> Among service sectors, tourism and wholesale and retail trade are perhaps exceptions in that they are both tradable and create jobs for unskilled labor. Based on the analysis of firm-level data across manufacturing and service sectors from a sample of six LMICs in Nayyar, Cruz and Zhu (2018), wholesale and retail trade was classified as “low” skill-intensive but “medium” in tradability, linkage effects, use of foreign technology, and on-the-job learning programs. Similarly, many lowincome countries have used tourism services to diversify their exports away from volatile primary sectors. In Uganda, for instance, services account for just over half of total exports, with 45 percent of that figure made up of tourism. Furthermore, technology has the potential to transform some low-productivity services such as construction and tourism (for example, through e-commerce platforms), as it allows services to be produced and traded just like goods and hence generate greater employment opportunities. Given that barriers to international trade are higher for services than for goods (Miroudot, Sauvage, and Shepherd 2012), there is potential for exports of these services to gather speed if appropriate policy actions are taken.

The issue of the _quality_ of employment among lower-end service activities, which are the large employment creators for unskilled labor, is particularly relevant in light of the labor market polarization resulting from changes in technology and trade (Autor 2015). Evidence suggests that labor compensation in the industrial sector is somewhat higher than in services for comparable workers. In a sample of 20 advanced economies, for example, the median difference in labor earnings between industry and services for high- and low-skilled workers is about 6 percentage points and 9 percentage points, respectively (IMF 2018). Similarly, in the United States, lowerwage workers in manufacturing earn about 11 percent more than their peers in other sectors, while high-wage workers earn just 4 percent more (Helper, Krueger, and Wial 2012). Using data from India, Nayyar (2011) finds that similar workers earn less in wholesale and retail trade, hotels and restaurants, transport services, and community and personal services than in manufacturing.

Yet, some valuable nonwage attributes of manufacturing jobs appear less widespread in other sectors. Manufacturing jobs tend to be characterized by formal employment arrangements with associated benefits for workers, such as access to minimum wages, labor codes, retirement plans, paid holidays and sick leave, and health and life insurance. They also tend to provide relatively stable arrangements, relying less on part-time or temporary contracts than other sectors, and may offer collective bargaining via unions (Jaumotte and Osorio Buitron 2015). Recent experimental evidence from Ethiopia also indicates that not all manufacturing jobs are better than selfemployment in services: in the studied factories, there is no evidence of a significant industrial

> 6 That said, recent studies suggest that the domestic demand for services exhibiting strong productivity growth may increase in relative terms over time as they become more affordable (IMF 2018).

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