The decline of manufacturing sector in U.S.A. has been compensated by a growing service sector - Essay Example

United States has for more than three decades witnessed growth in its service sector and a converse trend in manufacturing. This has been the trend for many high income countries as they have been shifting reliance from manufacturing to service. This is a post-industrialization trend where people’s income continues to rise with less interest in investment in material processing The current trend has been more investment or shift to health care, education, insurance and others. It is important to mention that employees’ productivity grows slowly in the service sector than in the manufacturing the reason being low mechanization in service processes.

Services therefore become more expensive which results in them contributing a higher portion of US GDP (Gallaher 49). This trend has also resulted to having higher employment in service sector than in the mechanized manufacturing sector. The service sector is now leading while manufacturing is declining with former compensating for the decline. The service sector capitalizes in production of intangible commodities in health, information and communication, education and others (Triplett and Bosworth 64).

Globalization has been one of the key factors towards the shift from manufacturing to service. Manufacturing firms have been relocating to other countries mostly in the developing economies which either have more people in the low-income or middle-income bracket. Countries like China and India have for the last two decades been encouraging foreign investments through various incentives like tax holidays and low wages for workers. American government in turn is trying to develop policies that will see most of its citizens above the minimum wage bracket; a move that is driving industries to foreign countries.

The service sector is labor intensive and it requires highly skilled personnel therefore raising the need to have quality and sustainable education. Also due to globalization many skilled immigrants have come to the United States to seek jobs in the service sector resulting to high brain drain especially in the developing nations (Gallaher 130). Global trends also dictate firms to engage in more environmentally friendly activities and the service sector has come to solve this problem. The service sector engages in more human capital than natural.

This has made United States to have heated debates regarding quality of education so as to have more skilled human capital (Gallaher 89). The general lack of undue intervention in the natural resources reduces environmental degradation which is more prone with manufacturing firms. Environmental consciousness has therefore caused investors to shift their investments to more environmentally friendly businesses. Statistics show that in the turn of the 20th century America’s manufacturing and agricultural sectors had taken more than 75 percent of the GDP while in the turn of the 21st century the service sector had more than 60 percent contribution (Triplett and Bosworth 106).

This is a huge turn of events considering that it is a gap of just a century. It is within this century that America’s economy grew tremendously into the current post-industrialization era. The above statistics show that to a large extent the service sector is surely filling the gap left with the decline in the manufacturing sector. The world economy has in the last four decades experienced turbulence of booms and decline which have affected the two sectors differently. The manufacturing sector over this period has been heavily affected and shrunk as a result (AIER 2006).

The recent economic crisis of 2008 heavily affected industries like motor vehicle manufacturers leading to closure of many plants, takeovers, bailout programs and many other negative occurrences. In the recovery trend the service sector has been seen to recover quickly than the manufacturing