eli5: Why does Services make up such a massive percentage of developed economies compared to Agriculture and Manufacturing
In: 47
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.
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