“Service Industries”

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Phil Gramm and Don Boudreaux, in today’s WSJ:

Yet workers aren’t eager to do that (work in manufacturing plants), and for the past 60 years Americans have educated their children to enable them to work in the services industries where wages are higher and opportunities greater.

I wonder what Gramm and Boudreaux visualize when they use the term “service industries.”  It is a very, very broad category, ranging from Uber Eats delivery drivers to shelf stockers at Home Depot to plumbers and handymen to trash collectors to warehouse workers at Amazon to local CPAs and high-level management consultants. Also rock bands, software development companies, and used-car salesmen.

True also of jobs in manufacturing, ranging from assembly worker to skilled machinist or toolmaker to shelf-stocker to dispatcher/expeditor to industrial engineer to PLC programmer to plant manager and VP of manufacturing.

Note that both the factory and the service business will employ janitors doing very similar work, and he will be categorized as a manufacturing or service employee accordingly…unless the job of ‘janitor’ is outsource to another firm, in which case he will fall under ‘services’.

Note also that the work of a distribution warehouse worker and the work of a stocker/picker in a factory will likely be very similar, despite the fact that the latter is considered ‘manufacturing’ and the former is considered ‘services.’  It would appear that Gramm and Boudreaux would regard the job of the warehouse worker as somehow higher-value and more in tune with technological progress.

Also, that part about Americans having educated their children to enable them to work in the services industries where wages are higher and opportunities greater…are they really unaware with the problems with so much American education over past decades, resulting in a lot of people who having limited written communication and even more limited basic math abilities? A lot of people are in dead-end service jobs specifically because of their lack of these skills, and indeed in many cases can function in those jobs at all only because of the computer-based deskilling that has been applied to the work.

Your thoughts?

18 thoughts on ““Service Industries””

  1. I spent my career working in R&D for major chemical companies. I was surprised to find out that I was considered part of a service industry, even though my work contributed significantly to the efficiency of our manufacturing operations.

  2. Funny you post this, I was working on something similar but from a different direction.

    What Gramm is talking about is two things.

    The first is the acknowledgment that interests of service workers (however you define it) are in competition with those in manufacturing. To use the Scooby Doo metaphor, it seems he is saying we could could have free trade if it wasn’t for those meddling manufacturing-wanting, MAGA voters

    The second is status. Top welders make in excess of $100,000+. Then again welders don’t get into the cool kids club. So if I was advising a high schooler, it might be reasonable to encourage them to pursue the more virtuous path by going into trades and do their own self-education program as opposed to going to college where they will poorer, dumber, and with less career prospects

  3. Mr Bill..in terms of the economic statistics, I’m pretty sure you would have been counted in manufacturing. Grok says:

    “In economic statistics, an employee’s classification depends on the primary activity of the company, not their specific role. If the company is a manufacturing firm (e.g., producing goods), all employees, including those in service roles like janitorial or R&D, are typically categorized under manufacturing in datasets like the Bureau of Labor Statistics (BLS) or NAICS codes. The company’s industry classification (e.g., NAICS sector 31-33 for manufacturing) drives the categorization, as economic data prioritizes the firm’s output over individual job functions.

    For example, a janitor or R&D worker at a car manufacturing plant would be counted in the manufacturing sector, as their work supports the production of goods. However, if the same roles were at a firm primarily providing services (e.g., a cleaning company or research consultancy), they’d be classified under services.”

    So if you ‘d been working for a contractor doing R&D for the company, you’d have been counted in the Service numbers, but if you were a direct employee, you’d be counted under Manufacturing.

  4. Think about the classic “service” job — a barber. What he does is essential, and it cannot be offshored. I have a suspicion that barbering was not what Gram & Boudreaux were thinking about when they praised “services” as the place where Americans ought to work.

    What does a barber need to do that essential “service” job”? Start with a suitable building, created by the construction trades. Then a highly engineered barber’s chair, which requires brawny workers to dig up iron ore, coal, other minerals, build steel mills, and eventually provide that chair. Next there are those very sharp metal blades in scissors & razors, produced by manufacturing workers using the products from steel mills. Towels, mirrors, brooms, antiseptics, and many more — all of them produced by manufacturing workers. Without the tools provided by manufacturing industries and their workers, “service” industries would die.

    I suspect the “service” industries Gram & Boudreaux think Americans should aspire to are their industries — politics, law, bureaucracy. Things that should mostly be classified as unproductive (or even destructive) overhead.

  5. Yet workers aren’t eager to do that (work in manufacturing plants), and for the past 60 years Americans have educated their children to enable them to work in the services industries where wages are higher and opportunities greater.

    Is this some sort of a joke?

    People including Americans want to work jobs that pay relatively well for their area and are also willing to work lower paying jobs with the goal of getting a higher paying one later.

    When most higher paying manufacturing jobs are sent to China or elsewhere, the willingness of people to work the lower paying industrial jobs with no likely future also vanishes.

    Que up the lecture about how lazy Americans are these days.

    Former Michigan resident here. Pre-NAFTA, I worked a service job in a store. It did not pay better than a good manufacturing job, which I wanted. It did pay much better than the second job I got for experience at a plant that paid rock-bottom minimum wage to new hires. Eventually I got a good job in industry and most of my coworkers at the store did too.

    Then came NAFTA. I got to watch the slow-motion disembowelment of the US economy for decades. I can only presume as GL notes that Gramm is referencing “service” jobs in politics, law, or bureaucracy when he imagines they pay better than industrial jobs.

    But then again Gramm is an elderly man and if I had to guess I would have assumed he was dead. Presumably he crawled out from under a rock buried underneath a retirement home because he was worried about his stock portfolio, noting that the Trump administration hasn’t been prioritizing Wall Street as much as he’d like.

    He can go straight square to h*ll.

  6. The survey data I’ve seen suggests that most workers aren’t looking for manufacturing jobs. Which I have no doubt is true, but at the same time is basically irrelevant. Manufacturing today is not labor intensive, as much of it is heavily automated, and has been for some time. I worked in the chemical industry and one building I worked in kept a copy of the shift staffing from the 1960s on the bulletin board (this was in the 90s). There were 4 times the number of workers on a shift for the same equipment we were running. If the US rebuilds its manufacturing base, operating that base will require only a fraction of the labor force that manufacturing had in the 1950s.

    As an example, textile manufacturing is returning to the US, but the mills are so heavily automated that they can be run by a staff of 2. That’s how they can be cost competitive. No one is talking about rebuilding manufacturing as it existed in 1950.

    This is not to say we don’t need more people to go into trades, we certainly do. But only a small fraction of the workforce is needed, and those are not the low skill, physical labor jobs that used to define a lot of manufacturing and that Americans didn’t want for their kids.

  7. The economic value of a ‘college degree’ may have been overstated, along with understatement of the cost of said sheepskin.
    In todays job market, degrees seem not as valued as they had been, and not being the ‘door opener’ that some have thought them to be.
    My opinion is that a lot of current and recent college students had no idea what they wanted to do post high school graduation, and attending a college sounded like a good thing to to, at least have some good parties, etc, before shouldering up to the grindstone, whatever it may end up to be. Graduates in ‘STEM’ seem to have a better appreciation of what they ‘want to be when they grow up’, as they will have to put in a lot more effort to succeed and graduate. Again, IMO.
    That said, it seems HS guidance counselors are not doing their job, to a degree( had no such thing at my HS) and tending to point most towards a college rather than consider alternatives.
    There are MANY jobs that are not college degree related, that can pay a pretty healthy salary almost immediately post HS graduation. It will not be instant riches but certainly pretty good wages for reasonable work. In addition, it is HARD to outsource plumbing, and many more alternative occupations. My nephew, son of a heart doc, wants to eventually set up his own shop to repair watercraft near Tampa. I wish him the best. I hope he is pursuing something that he loves to do.
    In my opinion a guidance counselor should present alternatives that align with either helping to determine a potential career, or perhaps putting things on hold or recommending a temporary attendance at a local CC if one has not determined an actual target degree and thus, one would hope, a career area, at least. IOW, don’t go deep into debt learning about things you really don’t care about. And, the most important, spend wisely, of finance and time.

  8. The Brits are getting all angsty about shutting down the last two blast furnaces in the country. Not that any of them would consider working in a steel mill. It seems that it has dawned on a few of the less dim that there are a long list of important steel alloys that can’t be produced from scrap. Also that a lot of useful things are made from steel and they’re not quite ready to descend to the bronze age in their living standard.

    Of course steel production is both energy and carbon intensive. They already import all their iron ore and even coke, so the strategic difference is negligible. I’m sure that they have some scam going so that the energy and pollution from that iron ore and coke don’t count in their holy pursuit of “carbon neutrality” but as the article I read pointed out, blast furnaces produce prodigious quantities of carbon dioxide with steel as a minor byproduct. Running the vacuum arc furnaces to convert that pig iron into something useful is challenging in a country with both very high electric rates and a fragile grid.

    Finally, you can be sure that all the workers from that mill will hit the dole and stay there until they “retire”. England’s economy is just as strong and resilient as their electrical grid, might not be a coincidence.

    What the people touting this great “service” economy never get around to is explaining just who is going to buy these services and where the wealth to for them will come from. I remember from years ago an example of two people sitting across from each other, each selling insurance to the other.

    On the other hand, I remember a book that held that the source of all wealth was the ground though either mining or farming. Producing useful materials where they never existed before. This overlooks the importance of converting and refining but those have to start with something.

    As far as workers wanting these jobs; eating regularly has proven to be a sure fire motivator.

  9. No one is talking about rebuilding manufacturing as it existed in 1950.

    I would second this, except I know that the legions of “free trade” shills employed by Beltway think tanks bring up 1950 constantly. See, manufacturing isn’t leaving the US because of foreign mercantilism or machinations by the CCP or Triffin’s Dilemma. It’s leaving because our competitors are no longer bombed out ruins like in 1950, so shut up about it. Don’t worry that the US can no longer produce things like medicine or container ships or most consumer goods, just think about the sheer wonderfulness of the stock market.

    As far as workers wanting these jobs; eating regularly has proven to be a sure fire motivator.

    I will definitely second this. It was once said that freedom was the choice between working or starving, but that was long ago. Today it seems that some large fraction of the population is supported by make-work jobs in government, disability payments from the government, or under-the-table and therefore untaxed employment outside of the government purview.

    That makes it relatively difficult for employers to find people willing to work in hard dangerous jobs that are uncomfortable, or require any sort of competence, or effort.

    This cannot last, if civilization is to continue in the United States or England.

  10. There’s obviously no interest in the U.S. in building things. Look at all the 3D printers, laser cutters, bench top machine tools, etc. just laying on the shelves waiting for anyone to buy them.

    I could go on but it’s been so long since I remember Phil Gramm saying anything worth hearing, I’ve forgotten whatever it might have been.

    I will say that American industry treating employees as expendable cogs, to be set aside as whim dictates serves them poorly. Successful manufacturers will be the ones that can take the people they can hire and turn them into the productive craftspeople they need. This is why you see so many small manufacturers scattered in rural areas Beyond the occasional successful rural development effort, it’s where they can find people not permanently traumatized by a little dirt or a few loud noises.

    Having someone besides lawyers setting industrial policy or any other policy would help.

  11. I will say that our lack of public schools is an existential threat. Not just to manufacturing but every other facet of an advanced society. The farmers that Henry Ford turned into mechanics, machinists and tool makers, who’s education had often ended in the 6th grade, probably had a higher literacy level than the entering class at Harvard today let alone any inner city neighborhood. People that can’t read, can’t learn anything at an acceptable rate.

  12. Phil Graham spent the first half of his career as an academic. Before entering politics he was a professor. Of course he is going to favor careers requiring college degrees. Just like a carpenter is going advocate building a wood palisade to protect a city rather than stone walls.

  14. Boudreaux, Gramm, and others who have fashioned their sinecures advocating for free trade have an enormous blind spot, which, even when it’s pointed out to them, they discount.

    The blind spot is that there is a moral component to trade, and the moral component is what lets the government in the door to dictate what trade happens and how. I’m not thrilled about that and I wish it was different, but there it is.

    China is not merely our economic opponent, they are our enemy. The things their government stands for and actually practices upon their own people are, to our way of thinking, immoral. They use slave labor. They do not recognize property rights, whether their own citizens’ property or foreign companies intellectual property. They do not recognize individual rights, especially to life. Dissenters are imprisoned and/or executed.

    We thought, in the early 90s, that trade would be an insidious agent for change in China, like our products were in the USSR. But the Chinese are different from the Russians. They’re not Europeans like the Soviets were. They have vastly different values than the West has, and they have a chip on their shoulders about the West’s interference in their country going back centuries. All trade did was strengthen a brutal, totalitarian system that just a few years earlier had brutally crushed a pro-democracy movement in Tianenmen Square.

    Many people got rich trading with China, amorally seeking profits because our government thought trade would make China not Communist anymore. Those profits are blood money. Nothing has changed.

    The more effective solution, and the more moral one, would have been to exclude China from world trade, to hinder them, and slowly strangle them. Like we have and are doing with Iran, with Cuba, with North Korea. NK has nuclear weapons and they’re barely on our radar, because it’s one of the poorest countries in the world, because trade is impossible for them.

    Our businesses want to make money. Some are willing to make money by trading with the most evil societies on Earth. That should be prevented by our government. That Gramm and Boudreaux and the rest try to change the conversation when that statement is made is galling to me, and that they cloak their arguments in terms of Americans’ rights is anathema.

  15. One important point that hasn’t been much discussed is the *linkage* between services and manufacturing. GE Aerospace makes considerably more revenue servicing jet engines than it does from making & selling them. But if it didn’t make them in the first place, it wouldn’t have the multiyear service revenue from maintaining and fixing them.

  16. “GE Aerospace makes considerably more revenue servicing jet engines than it does from making & selling them.”

    Maybe what that points out is the inadequacy of the terms “Manufacturing” and “Service”?

    There are many parallels between the guy who works in a factory making a part for a jet engine and the guy who works in a plant maintaining that engine. The maintenance guy in that workshop has a lot more in common with his peer in a manufacturing plant than with a middle-aged female realtor “doing lunch” with a potential client — even though both the maintenance guy and the realtor would be classified as “Service” people.

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