Final answer:
Productivity improvements in the service sector are difficult due to its labor-intensive nature which requires human interaction and is less susceptible to automation compared to other sectors. Outsourcing and economic transitions from agriculture to manufacturing impact labor dynamics. Increased productivity does not always equate to higher wages in this sector.
Step-by-step explanation:
The statement that productivity in the service sector has proven difficult to improve because it is typically labor-intensive is True. Service sector jobs tend to be intensely labor-focused and often require direct human interaction or intervention, which makes automation and other efficiency improvements more challenging compared to manufacturing or agricultural sectors. This is in part due to the fact that the service sector deals with intangible goods and personal interactions that cannot easily be optimized through machinery or technology.
Economist Sir W. Arthur Lewis pointed out that industrializing economies shift labor from agriculture to manufacturing, where low-skilled workers can have a greater marginal product. The manufacturing sector can absorb a larger number of workers and make more efficient use of their labor, which is often not the case in the service industry. Outsourcing manufacturing jobs to nations with cheaper labor markets can further complicate the issue, as service jobs cannot always be outsourced to the same extent. Additionally, increased productivity does not always lead to increased wages in the service sector, and this can occur for various reasons including a surplus of labor, wage suppression, or other market dynamics.