Service Industry

service industry

Industry that provides services rather than goods. Economists divide the products of all economic activity into two broad categories, goods and services. Industries that produce goods (tangible objects) include agriculture, mining, manufacturing, and construction. Service industries include everything else: banking, communications, wholesale and retail trade, all professional services such as engineering and medicine, all consumer services, and all government services. The proportion of the world economy devoted to services rose rapidly in the 20th century. In the U.S. alone, the service sector accounted for more than half the gross domestic product in 1929, two-thirds in 1978, and more than three-quarters in 1993. Worldwide, the service sector accounted for more than three-fifths of global gross domestic product by the early 21st century. As increases in automation facilitate productivity, a smaller workforce is able to produce more goods, and the service functions of distribution, management, finance, and sales become relatively more important.

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Service Industry 

the sector of the national economy whose output takes the form of services.

According to the system of industrial classification used in planning and statistics in the USSR, the service industry includes trade, the food service industry, and the branches of the nonproduction sphere, with the exception of the branches of science, science service, and administration. Certain services are performed in response to orders by individual citizens.

In the USSR, the service industry accounts for approximately one-tenth of the total output of goods and services (in 1973, 89.9 billion out of 850.2 billion rubles). The share of services in the total consumption fund of goods and services by the population in the USSR rose from 29.6 percent in 1960 to 33.7 percent in 1974. While the service industry employed 17.1 percent of the work force in 1960, the figure had grown to 23.7 percent in 1974.

The significant growth of the service industry can be explained by structural changes in societal needs. As the material and cultural level of a society rises, the need for services related to education, culture, and public health increases at a greater rate than the aggregate of other needs owing to the objective economic law of increasing requirements. The proportion of personal income expended on services also increases. As a country’s level of economic development rises, the service industry absorbs a growing share of society’s resources, and the output of the industry plays an increasingly important role in personal consumption. The service industry is growing in all the socialist countries, and the same trend can be seen in the developed capitalist countries. In the United States, for example, services accounted for 30.4 percent of the gross national product in 1950, 37.2 percent in 1960, and 41.9 percent in 1973

REFERENCES

Rutgaizer, V. M. Sfera obsluzhivaniia—kakoi ei byt’?. Moscow, 1971.
SShA: sfera uslug v ekonomike. Moscow, 1971.
Teoreticheskie problemy uslug i neproizvodstvennoi sfery pri solsializme. Moscow, 1972.
Pravdin, D. I. Neproizvodstvennaia sfera: effektivnost’ i stimulirovanie. Moscow, 1973.

V. M. RUTGAIZER