Will COVID be a catalyst for service sector productivity?

This research was published on July 29, 2020

​Amid the destruction, the pandemic potentially holds a macroeconomic silver lining: consumers, forced into isolation, have ramped up their digital engagement with the services economy, which has long been a drag on aggregate productivity growth. Could coronavirus be a catalyst for faster productivity growth in services?

​While coronavirus cannot overcome all obstacles to greater services productivity, there is a credible shift to new value propositions, such as adapted business models, new processes, new delivery models, and, importantly, a greater rate of adoption of digital services. We discuss three service sectors to illustrate the opportunities and challenges involved.

​Though economic impact is difficult to quantify, we discuss plausible and implausible aspirations for a Covid effect. At the macro level, major gains are hard to come by – even a growth bump of 20 bps would be enormous – yet small numbers at the macro level are associated with significant opportunities at the sector and firm level and could persist and grow over time. We also remind readers that decades of flat services productivity growth do not precluded a future inflection – though that will require a technological step change in addition to the behavioral changes that the pandemic has triggered.