Academic journal article ABA Banking Journal

Are Service Jobs Creating a Second-Rate Economy?

Academic journal article ABA Banking Journal

Are Service Jobs Creating a Second-Rate Economy?

Article excerpt

The economy added slightly more than 2.4 million service-producing jobs over the past 12 months while goods-producing jobs grew by 116 thousand. The trend toward service jobs has been occurring for some time. In 1950, about 58% of all jobs were in the services sector and that percentage rose to 67 in 1970. Today, 80% of all jobs are in service-producing firms.

Such statistics often prompt concerns because service firms do not pay the high wages of the manufacturing sector. Or do they? The type of service jobs being created as well as a review of the earnings in various service jobs, dispels the myth that service jobs are creating a second-rate economy.

Mix of service jobs

The term "services" often conjures up images of hamburger flippers at fastfood restaurants. In reality, services includes firms that provide health care, legal services, engineering and business consulting, computer, and finance services. In fact, one-third of the service-producing jobs that were created in the last 12 months ending with August fell into the higher paying jobs just mentioned. In contrast, restaurants added less than 5% of the service jobs created over the same period.

As shown in the accompanying table, jobs are divided into two main groups: goods-producing and service-producing. As noted earlier, 80% of all jobs fall under the service production category. In addition, more than a third of all jobs are in the narrower service sector which includes health, businesses, consulting, and legal services. The trade and public administration sectors each comprise about 20% of all jobs, while the transportation and utilities sector and finance, insurance, and real estate sector each make up about 5% of total jobs.

Wage growth

A study produced by the Federal Reserve Bank of Cleveland found that in 1992, median wages for full-time services workers was only 3. …

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