Friday, September 23, 2011

Services vs Industry as a Percent of GDP



Because it's more important for a country to produce sociology majors and Green Peace activists and social workers than it is for a country to produce something people want like IPod's and gasoline and food.

5 comments:

Anonymous said...

It's not an accident that real wages peaked at about the same time as that crossover point when services started exceeding industry (1969-70). Industry provides a decent middle class wage, "services" provide low-paid McJobs.

Ryan Fuller said...

"Services" includes economists, doctors, lawyers, accountants, scientists, and every other non-manufacturing, non-agriculture job. It's not just fast food "McJobs". That's a stupid term anyway.

Complaining about services supplanting industry reminds me of physiocrats bemoaning industry supplanting agriculture.

Real wages stopped going up when companies started offering insurance on a regular basis. Wages are subject to taxes, but employer provided health insurance is tax deductible. Since it's cheaper for them to give you a hundred dollars worth of health insurance than it is to actually give you a hundred dollars, wage increases have been sparse. Expansion of benefits has been the norm.

Steam said...

America is one of the largest manufacturers in the world. We recently got beaten by China, who is now responsibl efor 19.8% of global manufacturing (America is 19.4%), BUT we make that 19.4% with about FAR fewer people than the Chinese, as our workers are far more productive.

The things Ameirca excels at are medical devices, computer chips, instrumentation of all types, sophisticated componentry, industrial machinery and equipment, machine tools, jet engines, aircraft, automobiles, farming equipment, construction equipment, etc...high-margin, sophisticated products. Not the kinds of things you will find on the shelves at your local Target store, but things still very important to the functioning of the U.S. economy.

Low-margin, simpler things, like shoes, consumer electronics, toys, etc...are made in places like China, but even then, most are still designed here in the U.S. The Pod may be made in China, but it was designed and engineered here in America.

What we have is not so much any decline in manufacturing, as American manufacturing increases year after year, but the massive increases in productivity that have made it where we can manufacture a lot more using far fewer actual humans along with the growth of whole other areas of the economy (services). We grow more food then we did back when we were an agrarian nation, but like with manufacturing, we just need far fewer people.

Services run the gamut from high-paying service jobs (like doctors, lawyers, etc...) to low-paying service jobs (like hotel and restaurant workers and such). Many manufacturing companies are also services companies in that they will manufacture the product but also come out and service it for the customer.

Bobby Jay Sweet said...

Methinks the captain never heard of the terms 'comparative advantage' and 'human capital,' and thus cannot be really captain capitalism. More like captain mercantalist.

weka said...

@Mechman.
The US designs a whole lotta stuff. But generally they don't have the QA down. Consider high fi -- the local blokes at Perreaux HAND MAKE everything because they have to ship it to you all in the good ol' USA and make sure that it does not break because some scum lawyer will then sue them in Bumfuck, Ark. The big corps in the USA will just buy the lawyer out.

@ Ryan. Yeah, Service includes medicine, government etc. That should be about 40% at most of the economy. The rest better be making something. Otherwise, regardless of how big your manufacturing economy is, you are going down the toilet, because somewhere else WILL make the same widget better, cheaper, and at higher quality since they concentrate on design, not patient trolls and avoiding other scum from the "service industries"