The rise of the service economy

Abstract

INTRODUCTION In the analysis of the structure of modern economies, it is common to identify three sectors: agriculture, industry and services. The dividing line between services and industry is a rather grey area but services are usually taken to include, at a minimum, transport, communications, retail and wholesale trade, recreational activities, banking and professional services, as well as many activities directly financed by government like education, health and social services. For long seen as peripheral to economic development, services came by a quiet revolution to dominate the economies of the Western world by the end of the twentieth century. Services increased in the nineteenth and early twentieth centuries, but for many historians this was a feature of industrialisation, not the driving force. Technological developments in industry and the railways, along with increasing occupational and spatial specialisation, promoted the growth of separate sectors like wholesaling, insurance and telecommunications and increased the importance of education and training for the supply of technicians and scientific manpower. The rise in per capita incomes generated a demand for better health and for wider access to recreation and the performing arts. However, it was the second half of the twentieth century which saw a truly remarkable rise in services. Specialist firms supplying professional services like accounting and computer support mushroomed and, in conjunction with the continuing rise in employment in health, education and retail trade, ensured that services became the dominant source of employment for Britain’s labour force.