Servicing a Service Economy
Checking the news sites this morning, I couldn’t help but notice that the lead story on Reuters anticipated the Labor Department’s employment report, due out later today. What struck me was not the expected increase in jobs and decrease in unemployment but a factoid that the service sector now accounts for 80% percent of US labor. If true, it confirms my long-held suspicion that the U.S. economy would eventually become a service economy.
So what does it mean to be a service economy? Well, it means that, as an economy, you manufacture very little and make all your money selling services, which is to say, information, function and labor. In the middle to upper classes you have managers, administrators, officials, bureaucrats and technocrats. In the middle to lower classes you have construction, maintenance, distribution and technicians. At the lowest levels you have food, retail, maintenance and transportation. As for production and factory work, well, from 1970 to 2010 these jobs have gone from 27% to 9% of total U.S. payroll employment. By now, very little of what we consume and earn issues from domestic production. Our money flows to manufacturers abroad, and what of it remains in the economy circulates among us in the form of services, whose value is relative to the knowledge and skill required to perform them.
Living in a service economy means that your relative worth depends on what you know and how you apply it–knowledge and skill, respectively. Knowledge and skill are the products of a service economy and they are acquired by education and experience. So, to stimulate such an economy, you must generate knowledge and skill, which is to educate and train. Knowledge and skill are the primary drivers of prosperity in a service economy–we see recent historical proof of that in the information revolution of the 1990s.
Personally, I’ve got no nostalgia for the bygone manufacturing days. Asia can have the factories, pollution and assembly-line drudgery. What I’m apprehensive about is a lack of focus, as a nation, on educating and training folks to function in the economy we’ve got. We’ll never go back to being a manufacturing powerhouse. We must not, however, cede our leadership in technology and science to those countries which are industrial powerhouses. Nationally, we need to develop people for the information industry we now have. This would be far more effective than offering cuts to manufacturers to try to stimulate employment, or waiting for “consumer confidence” to go up and people to start buying more foreign-manufactured stuff–something they can’t do without an income, anyhow.