Service Economy Essay

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The term service economy refers to those industries and occupations within the formal economy that provide various services. It is a broad, general term covering industries as diverse as insurance, transportation, and food, and occupations as diverse as lawyers, investment bankers, and bartenders. Rather than producing a material object for subsequent market sale, as manufacturing did during the industrial era, the contemporary service sector sells a less tangible service. For example, when parents put their children in day care, they are paying solely for the service of watching children. Today, the United States has a service economy; the provision of services is the main driver of the economy, rather than the industrial or agricultural production of earlier eras, although the latter two still play major economic roles. However, the recent shift to a mostly service economy has caused significant economic, social, and cultural change in U.S. society.

The service economy has numerous “sectors,” or agglomerations defined by the types of services provided. Some examples are the fire, insurance, and real estate (commonly referred to as FIRE) service sector, the information sector, the legal services sector, the protective service sector (such as security and law enforcement), and the food and beverage service sector. Scholars often examine occupations within, rather than across, these sectors. However, comparisons across sectors do reveal much about the nature of the service economy as a whole. Complicating analysis, though, is the difficulty sometimes in categorizing an occupation as strictly a service occupation, since many occupations feature some manner of service and workers within the service economy generally deal with other people on a much higher level than those within an industrial economy. The key distinction is that today much of the U.S. economy is geared toward the provision of services of various sorts, resulting in the creation of new service occupations and a proliferation of existing ones.

The Rise of the Service Economy

Although the provision of services in some form has always been a part of the U.S. economy, only in recent decades did the service sector come to dominate economic growth. Several factors caused the overall decline in U.S. manufacturing and “blue-collar” jobs: increased levels of automation making workers obsolete for many tasks; increases in exporting labor overseas and the subsequent increases in foreign production; and overall international competition within the global market. Along with this decline were several economic and social changes in the past century that led to the proliferation of service jobs and rise of the service economy. One such shift was the increase in the number of households outsourcing needs such as food, child care, and home care as a result of increasing dual-income families and less weekday free time. More individuals thus rely on others to service them in various aspects of their lives than ever before.

Today, service is a commodity in itself that is bought and sold. A company’s level of service carries considerable weight and often is the sole basis of competition for customers. As a result, businesses and individual entrepreneurs continually devise new services and/or new strategies for providing old services. The result is new social relations under a new economy with complex consequences.

Problems in the Service Economy

A major problem with the service economy is the bifurcation of employment. Despite the creation of a significant number of jobs and significant expansion of preexisting service jobs such as those in the FIRE and food and beverage sectors, most of these new service jobs are generally low-paying positions with little, if any, opportunity for upward mobility. These are jobs in sectors such as fast food, frequently filled by people with less educational achievement or opportunity than those in the higher-status service professions. The service economy, then, has a tendency to divide workers within it along class and educational lines, which often translates into issues concerning race, ethnicity, and gender. It creates a two-tiered system in which some get well-paid, high-status jobs, while others get low-paying, low-status, unstable employment. Those in the latter category are often ethnic and racial minorities. Sometimes this division of labor along various lines is visible within a single workplace. For example, restaurants often feature ethnic minorities (often immigrants) in the backstage, low-paying, and low-status roles of dishwashers and line cooks and whites as front-stage waiters and waitresses, dealing with customers and earning more money.

Another important problem with the service economy is the conditions that the service jobs produce, as the service economy tends to turn many everyday forms of social interaction into economic exchanges. Numerous scholars apply Karl Marx’s classic concept of alienation to the conditions of the service economy. Although Marx was referring to industrial capitalism when he discussed how workers under capitalism are alienated from themselves, the work process, and what they produce due to material conditions and the relations of production, many scholars argue that service workers in diverse occupations are also alienated in these ways due to conditions of the service economy. One issue that these scholars point to is the existence of the managerial system, which limits autonomy that workers have over their work. Like factory workers, service workers often perform rote tasks that are easily rationalized, routinized, controllable, and calculable. Unlike factory workers, however, most service sector employees are not unionized or, more accurately, are not members of their industry’s unions. This is a result of the transient nature of such jobs and the fact that many feature office conditions far removed from those of factories.

Similarly, many scholars also examine the concept of emotional work, or service work that requires employees to deal with customers and clients on a face-to-face basis or over the phone. In these occupations, workers use their abilities to control their own emotions as well as those of their customers or clients. These workers put on an emotional display that may or may not express their true feelings. Although emotional service workers sometimes have autonomy over how they display themselves to others, they are often exploited for their emotional abilities by management, owners, corporations, protocols, or some combination of these actors in order to provide a distinct service. In this way, service workers for whom emotional expression is an important part of their jobs are alienated (a) from themselves, in that they are not expressing themselves in a way they normally would; (b) from what they do, in that they are not performing tasks in a manner that they normally would; and (c) from what they produce, in that their emotional expression during their occupational performance is not their own. Workers, then, in effect, become the commodity.

On the other hand, scholars also see the service economy as a liberating shift from the industrial era. These scholars show how the pendulum of service work and emotional labor also swings in the other direction to create more autonomy for workers to be themselves and to be creative. This is certainly true for many professions, such as waiting tables, in which workers use their emotional appeal to procure tips. Again, however, it must be kept in mind that this is often determined by position within the service economy, meaning not all occupations have the luxury of autonomy. As mentioned earlier, contemporary U.S. households are frequently dual-income and individuals frequently experience an intensification of time in their daily lives, leaving them with little time of their own for themselves. A large, stable service economy helps to free up time so that individuals can pursue leisure activities. Scholars also point to the increasing amount of occupational flexibility that comes with this economic shift. No longer tied down to a single company, region, or even industry, workers are freer to explore many options in the service economy.

Overall, the rise of the service economy has had a profound impact on U.S. society. As the service economy and service industries expand, as more and more areas of everyday life become outsourced to private business actors, and as public social interaction rests on economic exchanges based on the provision of a service, U.S. society will continue to experience such effects in ever-changing and dynamic ways.


  1. Bell, Daniel. [1973] 1999. The Coming of Post-Industrial Society: A Venture in Social Forecasting. New York: Basic Books.
  2. Ehrenreich, Barbara. 2001. Nickel and Dimed: On (Not) Getting by in America. New York: Holt.
  3. Florida, Richard. 2002. The Rise of the Creative Class: And How It’s Transforming Work, Leisure, Community, and Everyday Life. New York: Basic Books.
  4. Hochschild, Arlie Russell. 2003. The Managed Heart: Commercialization of Human Feeling. 2nd ed. Berkeley, CA: University of California Press.
  5. Lloyd, Richard. 2006. Neo-Bohemia: Art and Commerce in the Postindustrial City. New York: Routledge.
  6. MacDonald, Cameron Lynne and Carmen J. Sirianni, eds. 1996. Working in the Service Society. Philadelphia: Temple University Press.

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