Services and growth

In the last thirty years, there has been a pronounced trend of sectoral shift in the UK economy. Manufacturing or secondary industry has declined in parallel to the growth of the tertiary or service sector. A service industry is usually seen as one where there is no tangible product. Consumption and production occur simultaneously.

There are a number of separate elements of the service sector, not all of which have experienced growth following deindustrialisation. Public transport declined as a result of long-term underinvestment during the 1960s, 70s and 80s. Public services slowed and declined after the 1970s as public expenditure was cut. Most growth was experienced in financial and business services, especially during the Thatcherite 1980s.

Manufacturing industry largely moved to buying services from service firms rather than providing them themselves. This externalisation, or outsourcing, of corporate services led to the boundaries of manufacturing and service industry blurring, creating confusion within the accepted notion of sectoral shift.

Service occupations

Service occupations can take place within manufacturing - they are clerical, administration or other tertiary services provided to the secondary industry. An example of this would be transport services provided to and from a manufacturing plant.

White collar professional workers have increased as a proportion of the workforce. This has been seen by some as evidence of a new, post-industrial society.

At the same time, some service occupations have been 'industrialised', e.g. fast food, or cleaning. The industrial title refers to the mass automation or production line techniques which are now employed in those industries.

Sector model explanation

A model that explains the sectoral shift is the Clark-Fisher thesis. It uses percentages employed in each sector to show that many economies move through three stages: primary, when the largest percentage are employed in primary industry; secondary, when the largest percentage are employed in secondary industry and the post-industrial stage, when most people are in tertiary industry.

This change is driven by an increase in productivity per employee. Increased productivity in agriculture frees people to work in manufacturing. Increased manufacturing productivity and increased income means people spend proportionally less on agricultural goods than manufactured goods, and in turn less on manufactured goods than services.

The model ignores the international economic context - it does not take into account imports of manufactured goods, or the relocation of Britain's manufacturing to less economically developed countries.

'Self-service' economy explanation

A different explanation is that as service costs have risen and productivity stayed roughly constant, many services are now performed in the home, for example, launderettes have been largely replaced by home washing machines. Many traditional service functions are now performed in the home - some examples include entertainment, decoration or repair. Manufacturing companies in search of wider markets have seen this potential and have marketed such goods heavily.

This, in turn, has led to increased service employment as manufacturing companies strive to become more efficient, employing more white collar workers as managers and in research, design and development areas. Outsourcing plays a part here, as admin and marketing are contracted out.

'Search for profitability' explanation

In this theory, the sectoral changes are explained by the fact that companies think they can profit more from the service sector than from manufacturing. This may be, for example, because the services are local in nature and as such inherently protected from foreign competition in a way that manufactured goods are not.

However, recent service development begun relocating services to LEDCs in a similar manner to the relocation of manufacturing thirty years previously. Examples of this are the telemarketers in New Delhi who are given briefings on the English Premier League before telephoning homeowners in Britain or the Ordnance Survey's recent sub-contracting to an Indian map-making firm.

There are several other reasons why such a shift would be profitable. Saturation in the company’s traditional market could be slowing growth. In this case, diversification would increase the economic base of what would become a conglomerate. Another explanation could be decreased growth due to a plateau in productivity in their manufacturing arm.

This theory notes the diversification of many manufacturing transnational corporations into services. It also ties in the growing concentration of ownership in many service sectors by large service-based multinationals. Examples of such companies are Mitsui Babcock, an engineering specialist, and the somewhat unfeasibly named nuclear services provider RWE Nukem.

Regional differences in service growth

These three explanations can apply to different regions of Britain. The Clark-Fisher model suggests that people who lose manufacturing jobs are not likely to be those who will gain employment in tertiary industry.

Growth in private services has been concentrated in the south and east. In the 1980s the 'service gap' between north and south widened, with about two-thirds of service sector jobs created in the south-east, East Anglia and the south-west.

Producer services

Private services in the south are concentrated into the producer services, those that serve manufacturing or other industries. Much growth occurred along the M11 and M4 corridors, outnumbering the much-trumpeted high tech employment there.

Concentration of producer services in the south can be largely accounted for by the concentration of other industry there. The export market in that area is also large requiring much administration and advertising. The south has also seen more externalised services.

Other explanations dispute this, saying admin work has been outsourced from London where office space comes at a premium. This 'concentration of control' is seen as important: decision making remains in the capital while actual work goes on in other areas of the country.

Segmented labour markets

There is increasingly a contrast between two types of service sector workers:

Primary segment
  • Well-paid
  • Full time
  • 'Career'
  • admin or professional job

Secondary segment

  • Low-grade
  • Part-time
  • Routine/industrialised jobs

Growth in services is increasingly in the second type: part-time, low-paid, low-skill jobs. On short-term contracts, they are easily taken on and dismissed according to short-term demand. Of the 4.9 million employed part-time in Britain in 1984, 90% were in the service sector. Women tend to be over-represented in this sector of the economy.

Self-employment grew to about 10% of the workforce in the 1980s. It has been concentrated in the service sector and the south-east, East Anglia and the south-west. Over 50% of the nation's self-employed are in those regions. Contracting self-employed workers is preferred by some companies in place of having actual employees on their books.

Youth and the labour market

Many youths without further or higher qualification become part of the secondary segment of the labour force. Particularly in the deindustrialising north, there are major problems finding employment for this section of society.

Youth labour markets tend to be very local because youth can often not travel far, living at home and relying on public transport. Such limits to distance mean very local variations in labour markets, for example within the same city.

Youth training schemes serve a far greater proportion of youths in the north than in the south. Schemes differ from place to place. They mainly separate trainees into two streams, mode A and mode B. Mode A trainees were given apprenticeships or placements with an employer. The advantage for employers is obvious: cheap labour, often committed to work for several years on low 'training' pay. Mode B trainees were effectively sheltered provision for disadvantaged youths.

Gender and employment

Gender inequalities are present in the UK despite legislation aimed at preventing it. In general women tend to be in the secondary employment segment. On average, a woman in the UK earns two-thirds of a man's pay.

Women are concentrated in a relatively small number of industries, especially education, health, retail and financial services.

A 'defeminisation' of manufacturing industries affected women in northern cities, while women in the south participate more in the expanding service sector. Many women are employed on part-time contracts. Most domestic chores are done by women; most single parent families are headed by women. A recent trend has been for female professionals to employ others to undertake domestic and childcare tasks.

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