The contours of stratification in service-oriented economies

Abstract

Theorists argue that service economies have relatively high inequality because dichotomies have developed between manufacturing and service industries, and between knowledge-intensive and labor-intensive service industries. Researchers, however, have not adequately tested hypotheses arising from this theory. We overcome this weakness by examining, hierarchically, the effects of service industry employment and the size of Finance, Insurance and Real Estate (FIRE) industries on individuals’ income in metropolitan statistical areas. Using the 2002 Current Population Survey, we find that dichotomies exist among industries in the service economy that help generate high incomes among upper-echelon occupations, particularly in the knowledge-intensive services and manufacturing industries. These incomes, however, are not available to laborers and service workers. Furthermore, we find that FIRE industry size impacts the wages of managers and service workers in more complicated ways than previously theorized. These findings help clarify the contours of stratification in the contemporary service-oriented economy.