Service industries Summary

  • Last updated on November 10, 2022

Until the 1960’s, the American economy was dominated by industry and manufacturing. However, as the United States increased its global trade, its economy grew, and average wages rose. This led to the development of many services industries, dedicated to providing customers with a variety of benefits. Since then, the American economy has become dominated by service industries, and it has seen a great decline in manufacturing.

A service industry can be anything from automobile repair to cosmetology, real estate agencies to restaurants. In the United States, service industries make up the majority of new jobs that have been added to the economy during the 1990’s and early twenty-first century. Instead of producing physical goods, the United States economy is becoming increasingly based on producing services for consumers and businesses.Service industries

Whereas jobs involved in producing goods often require skills, in general, service industries demand far less of their employees. As a result, service industries have created a more flexible economy. Previous to the introduction of service industries, most people would stay within the same occupation for the majority of their lives, since jobs required a great deal of training. However, in an economy that is based on service industries, less training and skill are required, and people may switch occupations many times throughout their lives. This also means that each employee is more replaceable, since virtually anyone can be trained to do the same job.


As the United States has begun to depend more heavily on service industries, many people have stepped out to voice their concern over the ability of service industries to sustain a healthy economy over a long period of time. The increase in service industries and decrease in goods-producing industries means that the United States is more dependent on foreign countries for nearly everything but services. Since the introduction of service industries, the United States imports an increasing amount of its clothes, food, electronics, and other merchandise. This means that American consumers are at the mercy of foreign companies when it comes to price and availability.

Also, there is a fear that an economy that does not produce anything will not be able to bounce back in the event of a recession. An economy that is based on service industries depends on people buying goods and partaking in the existing services to sustain itself. If people are unable to purchase anything in a service industry, the economy will falter. Critics of service industries fear that in the event of an economic recession or depression, people will have no money to buy services, and therefore, the economy will continue to suffer. These critics would suggest an economy that incorporates a more even balance of service industries and goods-producing industries.

Despite what critics say, service industries have made a huge difference in the way that Americans live, work, and play. They are changing the way that businesses compete and are forcing business owners to become more innovative in looking at how to please their customers and clients. The United States does still produce goods to a certain degree, but it is becoming increasingly obvious that service industries will continue to become a larger part of the American economy.

Further Reading
  • Albrecht, Karl, and Ron Zemke. Service America in the New Economy. New York: McGraw-Hill, 2001. A guidebook to how the American economy operates, and how businesses can maximize their profits through customer relations.
  • Daniels, Peter W. Service Industries in the World Economy. Hoboken, N.J.: Wiley-Blackwell, 1993. A geographer’s perspective of service industries and the growth and effects of this economic sector outside of the United States and throughout the world.
  • Gustafsson, Anders, and Michael D. Johnson. Competing in a Service Economy: How to Create a Competitive Advantage Through Service Development and Innovation. San Francisco, Calif.: Jossey-Bass, 2008. A “how to” guide for businesses and business students that discusses being competitive in the service industry and can be useful in understanding the flexibility and resilience of the service economy.
  • Stahel, W. R. “The Service Economy: ’Wealth without Resource Consumption’?” Philosophical Transactions: Mathematical, Physical, and Engineering Sciences 355, no. 1728 (1997): 1309-1319. Article that presents the argument that current industrial processes are not sustainable, and moving toward a service economy is the only way that wealth can be sustained.
  • Young, Laurie. From Products to Services: Insights and Experiences from Companies Which Have Embraced the Service Economy. Hoboken, N.J.: Wiley-Blackwell, 2008. Book that attempts to give answers to some of the myths and fears surrounding service industries by telling the stories of some large companies that have attempted to create some service businesses.

Drive-through businesses

Legal services

Online marketing

Overseas outsourcing

Rental industry

Restaurant industry

Retail trade industry

Shipping industry

Vending machines

Categories: History