Service Economy

The term service economy refers to those industries and occupations within the formal economy that provide various services. It is a broad, general term covering industries as diverse as insurance, transportation, and food, and occupations as diverse as lawyers, investment bankers, and bartenders. Rather than producing a material object for subsequent market sale, as manufacturing did during the industrial era, the contemporary service sector sells a less tangible service. For example, when parents put their children in day care, they are paying solely for the service of watching children. Today, the United States has a service economy; the provision of services is the main driver of the economy, rather than the industrial or agricultural production of earlier eras, although the latter two still play major economic roles. However, the recent shift to a mostly service economy has caused significant economic, social, and cultural change in U.S. society.

The service economy has numerous “sectors,” or agglomerations defined by the types of services provided. Some examples are the fire, insurance, and real estate (commonly referred to as FIRE) service sector, the information sector, the legal services sector, the protective service sector (such as security and law enforcement), and the food and beverage service sector. Scholars often examine occupations within, rather than across, these sectors. However, comparisons across sectors do reveal much about the nature of the service economy as a whole. Complicating analysis, though, is the difficulty sometimes in categorizing an occupation as strictly a service occupation, since many occupations feature some manner of service and workers within the service economy generally deal with other people on a much higher level than those within an industrial economy. The key distinction is that today much of the U.S. economy is geared toward the provision of services of various sorts, resulting in the creation of new service occupations and a proliferation of existing ones.