Service Sector Dominates Today’s Economy
When I Google “what is hot in business today,” it reminds me that things have changed a lot over the last few decades.
The search shows articles and lists on topics ranging from hot new business ideas, the most profitable small businesses, which businesses are booming, etc. What strikes me is the overwhelming dominance of services.
These booming new businesses usually have no tangible product to sell. They are not involved in extraction or manufacturing. They’re selling services, and often they do not depend on significant assets—sometimes they don’t even need a public-facing space of any kind.
When we hear “service industry” we often think of jobs generally regarded as low-education, low-reward positions such as wait staff, hotel maids, janitors, fast-food workers.
What we’re really talking about, though, is the “service sector” which includes those workers, plus finance, real estate, health care, accounting, sales and marketing, technology, management, quality, product and service delivery, human resources, finance and product development.
Why Have Services Outrun Goods?
Why the jump in the service sector in today’s economy?
“Changing demand for new products and services, technological advancements and international trade all have led to a current economy that looks different from decades ago,” according to an in-depth article by The Federal Reserve Bank of Kansas City titled The Growing Importance of the Services Sector. While their detailed analysis follows trends in the Rocky Mountain States, some statistics stand out, such as the fact that in 1920, 55% of US workers were employed in goods-producing industries compared to 15% today.
It’s interesting to note that these statistics are true despite the shorter lifespan of so many of the goods people purchase today. Our great-grandparents kept clothes, cars and furniture longer than we do, and most of us agree that a toaster built in 1950 lasted longer than one built today. There’s no question that today’s laptop, while far more expensive than a typewriter, doesn’t last nearly as long. In fact, these statistics could support the suspicion that manufacturers engage in some “planned obsolescence” to keep consumers buying.
Technology has also eliminated a lot of jobs in certain goods-based services such as farming, manufacturing, logging, and mining. For example, swaths of Midwest farmland which once supported hundreds of families are now supporting enormous agricultural enterprises, which grow single crops and are highly automated.
In any case, the high overhead cost for goods-based businesses — and the low cost of importing — are doubtless big reasons for the fact that service businesses top the lists of “best small business ideas” today.
Lists from Entrepreneur (75 Ideas for Businesses You Can Launch for Cheap or Free), Small Business Trends (50 Small Business Ideas for Beginners) and The Street (24 Ideas for Your Next Small Business in 2019) cite businesses almost exclusively in the service sector.
Era of the Entrepreneur
America has always glorified the entrepreneur, and this trend suggests that opportunity is ripe for launching a small service-oriented business. For those that can embrace the risk, and have the resources to handle such incidental expenses as covering their own health insurance, there have never been more options.