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121 Monthly Lab. Rev. 22 (1998)
The Services Industry in the Good versus Bad Jobs Debate

handle is hein.journals/month121 and id is 116 raw text is: iiMJ4V The services industry in the 'good' versus 'bad' jobs debate Because average wages are higher in manufacturing than in services, some observers view employment shifts to services as shifts from 'good' to 'bad' jobs; however, a deeper assessment reveals that within each industry, especially in services, there is a range of job quality ne of the most notable transformations in the U.S. labor market since World War II has been the rising share of employment in the services industry and the declining share in manufacturing. In 1945, at the conclusion of the war, the services industry accounted for 10 percent of nonfarm employment, compared with 38 percent for manufacturing. (See chart 1.) In 1982, services surpassed manufacturing as the largest employer among major industry groups. By 1996, the services industry accounted for 29 percent of nonfarm em- ployment, and manufacturing, at 15 percent, was ac- tually somewhat smaller than retail trade. In industrial classification systems currently used in the United States, there is a broader group- ing of industries that are called service-producing industries. These industries include: transporta- tion and public utilities; wholesale trade; retail trade; finance, insurance, and real estate; and ser- vices. Rather than examining all service-produc- ing industries in detail, this article focuses on the services industry, which has the largest share of employees in the service-producing group. The ser- vices industry includes a broad variety of activi- ties, such as health care, advertising, computer and data processing services, personnel supply, private education, social services, legal services, manage- ment and public relations, engineering and archi- tectural services, accounting, and recreation. The article also includes comparisons between these industries and other industries outside of services, such as retail trade, mining, and construction. De- mand for services has grown tremendously as a result of demographic shifts, changes in consumer preferences, technological advancements, and in- creases in competitive pressures. Some of these same forces have contributed to the decline in both the level and share of manufacturing jobs. Table 1 shows employment trends in manufac- turing and the other major industry groups, as well as services and its detailed components. Nature of the debate The services industry accounts for a growing proportion of the output of goods and services produced in the United States, as measured by the gross domestic product (GDP). Just after World War II, the services industry accounted for 9 percent of GDP; by 1994, its share had risen to more than 19 percent. Over the same period, the contribution of manufacturing to total U.S. output fell from about 30 percent to 17 percent.' The shift of employment and output away from manufacturing and toward services has caused considerable consternation among some labor market observers, policymakers, business leaders, and workers. One reason for this con- cern is that the production of goods-in facto- ries, farms, and mines-often has been regarded as the source of a nation's economic strength. Indeed, Adam Smith espoused such a view in The Wealth of Nations. In that influential 1776 treatise, Smith referred to the labor of manu- facturers as productive and the labor of those who provide services as unproductive.2 In Smith's view, manufacturers added value to the raw materials with which they worked, and this value was stored in whatever commodity the manufacturer produced. Servants, as Smith called them, did not produce value that lasted beyond the moment the service was performed. Smith felt that service providers-physicians, lawyers, clergy, household servants, actors, mu- 22 Monthly Labor Review February 1998 Joseph R. Meisenheimer II Joseph R. Meisenheimer II is an economist in the Division of Labor Force Statistics, Bureau of Labor Statistics.

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