eli5: Why does Services make up such a massive percentage of developed economies compared to Agriculture and Manufacturing
In: 47
Because agriculture and manufacturing can be, and have been, largely automated in those economies.
But you still need to employ people, and services cannot be as automated as the other two: a human guide can answer questions an audioguide cannot. A waiter or waitress can give you advice and do small talk.
Also a developed economy has historically meant more free time. Time which is now put toward leisure, which means you need more people in service to accomodate for people using those services.
As economies grow, they tend to become richer. Richer economies are able to a) mechanize/automate/import the results of simpler jobs, so fewer people have to do them, and b) educate their population to be capable of more technically demanding jobs, that they can export the results of. The end result is richer countries focusing on service jobs that CAN’T be automated or imported.
Services have higher profit margins compared to agriculture, mining, or manufacture. For services all you really need is experienced personnel and sometimes software. Compare that to agriculture where you need lots of land, planting machines, harvesting machines, irrigation infrastructure, seeds, fertilizer, silos, transportation, distribution, and much more. The same thing applies to mining and manufacturing.
Short answer : productivity gains.
It is way easier to do things more efficiently with the help of technology in industries and agriculture.
You can add all the fancy tech you like but if a teacher needs 1h to teach something, he needs that 1h. Similarly your hairdresser probably do as many haircuts a day as an hairdresser did 100years ago.
A developed economy will be able to reduce the proportion of jobs that industry and agriculture represent but won’t be able to do the same for services. The more inhabitants you have the more jobs in services you need regardless (more or less) of your technology (there are some productivity gains but they are not comparable to industry or agriculture).
There’s only so much food and physical stuff you want. Beyond that you’re just reaching to “better” luxury versions of the same thing (bigger house, nicer car). Since most people have food and physical stuff covered, the rest goes to services.
Two reasons
Most assessments of an economy are related to the labor pool: employment. Thanks to machines, developed economies need far fewer people in agriculture and manufacturing; therefore everyone is working in a service that still (for now), requires people.
That automation drastically reduces the cost of good in those sectors. Agriculture is heavily subsidized because we produce so much food, and waste a lot of it as a result, that it’s essentially free. Prices are artificially inflated relative to actual supply. For example, Grocery stores and restaurants toss out a ton of food in order to keep the prices at rates profitable enough for the business. Apple iPhones are grossly inflated and all but worthless after a few years; because in fact, the cost of manufacturing such things is low and falling.
Regardless, the first sale of the products from agriculture and manufacturing (to the provider) is rather low, and then marked up. The original low price factors into the economic assessment and, bottom line, farmed goods and manufactured products are cheap compared to hiring people to do work for you (services).
The only reason labor is constantly being replaced by technology is because people are expensive. The economy will incessantly seek ways to remove labor from a sector, replacing it with tech.
Ironically and important to appreciate, while it seems like we’re getting rid of jobs, this is the process that actually creates wealth, and explains why such economies are, as you put, developed.
In some markets person to person contact is important. In many, it is not. McDonald’s can be 100% automated. But if I’m served by a robot at In’n’out. I’m out
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