Economic Growth and Services

Abstract

IT HAS often been contended that the national share of expenditures devoted to services would rise over time in an increasingly industrialized society. This contention was given a contemporary setting by Clark and Fisher in their Clark-Fisher hypothesis.' Their generalization asserts that major emphasis is put upon agriculture, forestry, hunting, and fishing in primary or low levels of economic development and that the emphasis in the secondary period is turned to manufacturing defined as a process, not using the resources of nature directly, producing, on a large scale, and by a continuous process, transportable goods.2 The tertiary or service-industries level is associated with increasing attention to trade and finance, transport and communication, building and construction, professional and personal services, and government activities. The United States is seen as being well launched into this tertiary stage where abundant leisure provides opportunities to engage in such former luxuries as travel, amusements of diverse types, music, art, lite-rature, education, philosophy, and other personal and intangible services. Other scholars have further elaborated such groupings. One pair of writers has limited the tertiary group to domestic and quasi-domestic services: restaurants and hotels, barber and beauty shops, laundry and dry cleaning, repairing and maintenance, and the sprinkling of handcrafts, once performed at home.3 Under the caption of quaternary industries they group transport, commerce, communication, finance, and administration. A quinary group serves the purpose of refining and extending human capacities: medical care, education, research, and recreation (including the arts). Presumptive evidence abounds that the over-all thesis is generally true. Ernst Engel supported it in 1857 when he enunciated his Engel's Law. This law has been summarized as follows: As income increases (1) the percentage of income spent for food decreases; (2) the percentage spent for rent, fuel, and light remains the same; (3) the percentage spent for clothing remains about the same; and (4) the percentage spent for increases rapidly.4 The term sundries is generally interpreted to include a large share of such services as education, medicine, recreation, and amusements, etc. Stigler has reported that the share of the United States labor force engaged in services increased from one-fifth in 1870 to one-half in 1950_5 Stigder reneralized