Service Industry Vs. Manufacturing Industry

The manufacturing and service industries continue to evolve. An examination of manufacturing and service jobs reveals distinct differences in the two sectors: employment patterns emerge to uncover details about the U.S. economy. While public policy can somewhat influence the balance of manufacturing and service industry jobs, global socioeconomic forces have caused a major shift in the number of jobs in both sectors. Knowing the differences between manufacturing and service jobs will help you better understand how the U.S. economy is changing.

The manufacturing industry came to prominence in the United States during the 19th century. Spurred by technological advances that were occurring in Britain in Western Europe, manufacturing industries arose in conjunction with the advent of the steam engine, the extensive mining and use of coal and the building of railroads. Before the Industrial Revolution, America had been an agricultural society; as technology promoted travel and created new, easier ways to make things, manufacturing industries attracted capital (investment) and labor, especially in America's bigger Northern cities. Manufacturing was the dominant industry sector for much of the 20th century.

Although service industry jobs have existed for centuries, the prominence of the service industry sector is more recent. Beginning in the mid-1980s, service jobs such as medical, educational, food services and hospitality, pulled even with manufacturing in the total number of jobs by category in the United States. By 1999, however, the service industry employed about twice as many workers as the manufacturing industry.

Manufacturing jobs, as the name suggests, involve making things. Manufacturing jobs include machinist and craftsman work, laboratory production in chemicals and pharmaceuticals, food processing and electronics and engineering jobs, to name a few. Manufacturing may occur in factories; mass production, one of the drivers of the boom in industrial manufacturing, often incorporates assembly lines with specialized tasks to produce items at the highest possible rate of speed.

Service industry jobs, by contrast, have a much broader function. The service industry is defined by the U.S. Department of Labor as including workers as varied as health care employees, educators, restaurant employees, hairstylists and even performers like musicians and actors. Basically, service industry jobs can involve working with things (like fixing appliances, for example) or working with people.

Historically, the manufacturing sector has contained a much higher rate of unionization than the service industry. While during the 1970s more than 29 percent of the U.S. labor force belonged to a union, in the early 2000s that figure had dropped to 13 percent. As the U.S. economy has become more service oriented, less unionization has occurred.

Another contrasting feature is the service sector's relative resistance to economic downturns. While the manufacturing industry contracts during a recession, the U.S. Bureau of Labor Statistics has found that some service industries, such as health care and education, are "countercyclical," or may actually increase in number of jobs during a recession, due to increased demand for these services.

Other trends help further separate the manufacturing and service sectors. Globalization, or the increase of trade between nations, has weakened the U.S. manufacturing sector in terms of percentage of jobs. Emerging economies, like China and Brazil, that are rapidly becoming more open to trade and investment, have seen increases in their manufacturing sectors as production moves overseas from the United States.

Although U.S. service industries are not immune to the same kind of job losses, a more pressing trend concerns wages. Public policy makers fret that the movement away from highly paid, mostly unionized manufacturing jobs will correspond with an increase in low-wage service jobs, especially in food service, personal services and hospitality businesses.

As globalization continues, manufacturing jobs will continue to relocate from the United States to other nations. To avoid becoming a country of low-paid workers, America will need to develop more service jobs that are higher paid and higher skilled, such as in health care, where demand from the aging baby boomer generation will naturally increase the need for services. In addition, jobs programs, whether from the government or via private-public partnerships, will continue to aid displaced manufacturing sector workers transitioning to service industry jobs.