We’ve all heard the statement that the United States is becoming a service economy. Usually this comment is greeted with some dismay because many view service jobs as somehow less important than manufacturing jobs and, more importantly, less financially lucrative.
Why are service jobs increasing? Most would say it’s because our country’s manufacturing sector is crumbling. Nothing could be more removed from the truth. Both the nation’s factories and North Carolina’s factories continue to make more manufactured products. North Carolina’s manufacturing companies increased production by 72 percent during the past quarter century, despite the fact that factory employment dropped by 6 percent.
Of course, the reason manufacturing output has been able to increase while manufacturing employment has fallen is that each factory worker, using modern technology and equipment, can produce significantly more than his or her predecessors years ago.
Are service jobs somehow less “worthy” than manufacturing jobs? Of course not. Any job that provides value to the economy and the consumer is “worthy.” Why would anyone say the person who repairs and services your heating system is less worthy than the person who manufactures that system? The real concern about service jobs is their pay. The conventional wisdom is service jobs pay less than manufacturing jobs, and this is the major reason why people are upset about the growth of service jobs relative to manufacturing jobs.
Before this issue can be examined, we must define “service” jobs. The broadest definition of service jobs, technically called “service-producing” jobs, includes all employment outside of manufacturing, construction, agriculture and forestry, and mining.
“Service-producing” employment includes a broad array of jobs, and consequently the salaries are diverse. Service jobs such as those of physicians and financial managers can easily pay more than $100,000 annually, while another job in the service sector, restaurant workers, can make as little as $11,000 per year.
So to determine whether the reduction in manufacturing jobs and the increase in service jobs have resulted in better or worse salaries for North Carolinians, we need more specifics. We need to know precisely what manufacturing jobs are being cut and what types of service jobs are being added.
More than 85 percent of the manufacturing jobs lost in North Carolina since 1990 have been in so-called “traditional manufacturing” in our state: tobacco manufacturing, textile and apparel manufacturing, and furniture manufacturing. In 2002, these industries paid similar salaries, averaging $28,000 annually.
Also since 1990, six of 10 new service jobs in North Carolina have been in six categories: professional and technical, managers, teachers, clerical, health care, and restaurants. These jobs paid an average of $32,000 in 2002, slightly more than the $28,000 salary of the lost manufacturing jobs. However, unlike the manufacturing jobs, there is a wide range in the salaries of the growing service jobs, from a top average pay of $65,000 for managers to a low pay of $11,000 for restaurant workers.
Indeed, the salaries of the growing service jobs can be split 40-20-40. Forty percent, including professional, technical, and managerial jobs, pay salaries higher than the pay of the lost manufacturing jobs. Twenty percent, like teachers and some health care, pay salaries roughly equal to those of the lost manufacturing jobs. The remaining 40 percent, in the clerical, nursing and residential care, and restaurant fields, have salaries less than that of the lost manufacturing jobs.
So the picture is certainly not bleak for the earnings of service jobs. In fact, 60 percent of the new service jobs in North Carolina during the past 12 years have paid the same or more than the manufacturing jobs cut in the state during the same time period. Clearly, among the many myths about the economy, include the one that says service jobs are universally low-paying.