Service industries are the business firms and government and nonprofit organizations that produce services rather than manufactured goods or agricultural products. Services consist mainly of such activities as selling goods in a store and providing financial advice. Service industries may be grouped into such broad categories as amusement and recreation, automobile services, education, health care, and household services.
Since the mid-1900’s, service industries have played an increasingly large role in the economy of many industrial nations. The United States, for example, has many more service companies than manufacturing companies. Service industries account for about 80 percent of the U.S. gross domestic product—the value of all goods and services produced in a year. They employ about 85 percent of the country’s workers.
Today, the fastest-growing service industries include fast-food restaurants, government, health care, and amusement and recreation. Computer, legal, and other business services also are expanding rapidly. Production and employment have decreased in gasoline stations, housecleaning businesses, and laundries.
Most economists believe that the growth of service industries represents an advanced stage of national economic development. They say that a nation develops service industries on a large scale only after its agricultural and manufacturing industries have reached high levels of production and can maintain those levels with fewer and fewer workers. Agricultural and manufacturing industries can reduce their payrolls by substituting machines for workers. This is more difficult to do in service industries.
