Labor is a larger share of total costs in the service sector,so the effects of a given wage increase following unionization would have greater impact.

Question

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The service sector often involves a more direct interaction with customers, which requires a higher level of human labor. This means that labor costs make up a larger percentage of the total costs in the service sector than in other sectors, such as manufacturing. As a result, any wage increase following unionization would have a greater impact on the overall cost structure of the service sector.

Labor Is a Larger Share of Total Costs in the Service