Structural change of firms and of the workforce

Autor: Michael Weichselbaumer
Report 03/2025

This report explores structural transformation between manufacturing and services for firms and employees in Austria. As a consequence of structural transformation from manufacturing to services, firms can go through an internal transition by increasing services components of the goods they produce. The results are sector switches, factoryless producers, or hybrid producers. First, we present evidence on the extent to which manufacturing firms increase service activities. Austrian manufacturing firms show some of the patterns typically associated with structural change in firms. While employment drops to the level of the average services firm, labor productivity—already high before the switch – further increases. Sectoral switchers have higher shares of intangible investment. Second, we analyze sector switches from the perspective of employees displaced from their employer. Sector and firm switching persons are already different before the displacement. They are younger and earn lower wages. Higher educational attainment increases the switching probability. After the switch, only persons switching within manufacturing can close the wage gap to non-switching persons. For individuals moving to non-market services, the wage gap widens further. Women and workers aged 50+ face higher probabilities of switching to part-time work after mass layoffs and of becoming unemployed or leaving the labor force. Younger displaced workers are more likely to enter knowledge-intensive service subsectors, but less likely to move into high-productivity service subsectors.

Zitiervorschlag: Weichselbaumer M. (2025). Structural change of firms and of the workforce. Report 03/2025, Büro des Produktivitätsrates, Wien.

Publikationsjahr: 2025
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