The professional and business services sector: employment changes across Indiana metros.

• Author: Dufrene, Uric

As the number one manufacturing state in the country, Indiana s economy continues to evolve as manufacturing jobs continue to dwindle. In 1990, manufacturing jobs made up 24 percent of the state's workforce. In 2006, that number was down to 19 percent; meanwhile service-providing jobs increased from 71 percent to 76 percent of the state's workforce.

Education and health care remain two of the largest service sectors in Indiana, but another important service sector, professional and business services, has experienced growth surpassing both the United States and Midwestern neighbors.

Harpel (2006) suggests that the professional and business services (PBS) sector supports economic growth, and sector growth has been largely positive) This article tracks the PBS sector for Indiana metro areas and provides comparative information on Indiana and neighboring states.

Structural Changes in the U.S. Economy

Economies of the world practicing free enterprise almost always evolve along very similar paths but at different time periods in history. As an economy makes the transition from one phase to another, a radical restructuring of its labor force is typically observed. This process can be especially painful for workers in sectors that are slow to adapt to changing conditions.

Economies start out as being almost exclusively agricultural in nature. The United States began this evolutionary process during colonial times when over 90 percent of all workers made their living in farming. As late as the Civil War, more than two-thirds of workers were still employed in agriculture. By the 1920s, more than one-fourth of U.S. workers were still in agriculture, but the percentage of agricultural workers has dropped to about 2 percent since then--with a corresponding massive reduction in the number of farms. States that held on to agriculture as their economic mainstay became economically depressed, particularly when compared to states that embraced the transition to manufacturing economies. By 1925, employment in the manufacturing segment of the economy surpassed employment in agriculture. Manufacturing employment peaked at 19.4 million in 1979 but has subsequently continued to decline to 14.2 million workers as of December 2006. New manufacturing jobs in the United States seem unlikely, with typical projections calling for another half-million or more manufacturing job losses in the coming decade. Such losses can be attributed to increasing automation, improved efficiency, foreign competition, and outsourcing.

Meanwhile the service sector of the economy continued to make significant advances. In 1979, there were 64.9 million U.S. service workers; by December 2006, the number had surged to 113.9 million. The ratio of service workers to manufacturing workers increased from 3.35 in 1979 to 8.05 as of December 2006.

Replacing manufacturing jobs with service jobs often translates into painful wage losses; manufacturing jobs pay 23 percent more than service sector jobs on average. Service jobs are typically thought of as including retail salespeople, food service workers, customer service representatives, janitors, hairdressers, and groundskeepers. U.S. Department of Labor statistics for 2005 verify a significant difference in average mean earnings for these service sector jobs when compared to production jobs. Whereas production jobs paid a mean average annual wage of $29,890 in 2005, food preparation and service jobs paid a mean average annual wage of $17,840 and personal service jobs paid a mean average wage of $22,180.

Fortunately, not all service-related jobs produce lower wages. The service industry also encompasses new job opportunities driven by the transition to a knowledge-based economy. This type of economy is often called an information society where an increasing number of employees work in information jobs that are based on services, education, and creative activities. This transformation is the byproduct of technological progress and the increasing importance of computer...