The most important change in the demand for labor was the growth of the “white-collar” (service) sector, a diverse grouping that includes retail trade, finance, education, medicine, entertainment, and so on. Table 29.3 shows this expansion. In 1955, the service sector provided about 41 percent of all jobs; by 2011, 65 percent. The major declining sectors were agriculture, manufacturing, mining, and construction; their combined share fell from 36 percent in 1955 to 13 percent in 2011. Agriculture declined most rapidly in the period before 1970; manufacturing, on the other hand, held its own until 1970 and then began to decline. Overall, as Deirdre McCloskey explained when commenting on this chapter, production of “things” declined relative to production of “words.” This pattern can be explained by changes in the structure of demand. As real incomes rose, the demand for certain products, such as consumer durables, increased slowly while demand for certain services increased rapidly. For example, rapid improvements in medical technology and increased federal funding produced rapid growth in the number of health-related jobs. Inflation and deregulation encouraged firms in the financial sector to offer an array of new products.
Historically, productivity growth in the service sector has appeared to be slow compared with productivity growth in manufacturing and agriculture. But it must be admitted that productivity in the service sector is notoriously difficult to measure.
This point, Phillip Coelho asked the following question: How much would one pay to use the services of a dentist today to fill a cavity in comparison with a dentist who was using the techniques available in 1950? No one can give a precise answer, but we know it is a lot. The slowdown in the growth of real wages that we will discuss in more detail below was partly the result of the shift to the service sector. This does not mean, however, that the economy would grow faster if we invested more in manufacturing and less in other sectors. Expansion of some sectors has favorable effects on others. For example, productivity growth in education may be slow, but an expansion of the education sector contributes to the manufacturing sector by supplying new techniques and better educated workers. The growth of the service sector has also contributed to economic stability. In the manufacturing sector, a decrease in demand often leads quickly to unemployment. In the white-collar sector, however, employers are often willing to continue to employ workers because they have specialized knowledge or long-term relationships with customers. For this reason, the rise of the service sector has dampened the impact of recessions on employment in the postwar period.
World History
