Service Industries
| Author | Alan Krabbenhoft, Amy Devault |
| Pages | 659-662 |
Page 659
Every year the service industries make significant contributions to the U.S. economy. These contributions appear in a myriad of ways such as a letter carrier delivering the mail, a physician treating a patient, or an airline pilot transporting passengers to their destinations. Taken on an individual basis, these service providers are only a small part of a very big picture. When the service industries as a whole are examined, however, their critical role in the everyday lives of millions of people and businesses throughout the United States and abroad becomes evident.
The U.S. Department of Commerce's Bureau of Economic Analysis (BEA) offers a broad definition of service industries—service industries provide products that cannot be stored and are consumed at the time and place of purchase. Typically, the "products" sold by the service industry providers are intangible and thus little if anything physical is involved in the transactions. For example, an airline company may sell tickets allowing passengers to occupy seats on an airplane while it flies from one city to another. Upon the completion of the flight, the passengers deplane with no more than what they boarded the flight with, but are indeed in a different location from where they started. In other instances, transactions within the service industries may result in the delivery of something tangible.
For example, every year millions of Americans purchase tax-preparation software on a compact disk (CD) that facilitates the completion of annual federal and state tax returns. The basis for the inclusion of such transactions within the service industry is that the BEA allows tangible items to be included, provided that any tangible
Page 660
Table 1
U.S. gross domestic product and service industry product
| U.S. gross domestic product and service industry product | |||
| BILLIONS OF DOLLARS | |||
| Year | Gross domestic product | Service industry product | Percentage of GDP from service industry |
| SOURCE: 2005 Ecomomic Report of the President. | |||
| 1960 | $526.4 | $217.9 | 41.4% |
| 1970 | $1,038.5 | $481.9 | 46.4% |
| 1980 | $2,789.5 | $1,322.5 | 47.4% |
| 1990 | $5,803.1 | $3,113.7 | 53.7% |
| 2000 | $9,817.0 | $5,425.6 | 55.3% |
| 2003 | $11,004.0 | $6,384.7 | 58.0% |
item(s) offer minimal contribution to the total cost of the service. In the case of the tax software, the cost of the CD is likely to be extremely low. The item of value in this instance, and what the purchaser is truly paying for, is the programming electronically stored on the CD that allows for easier completion of what can become a very arduous annual task.
Within the United States, for-profit businesses, not-for-profit organizations, and the government all provide services. Of these, for-profit businesses are the largest providers of services, followed by the government, and then not-for-profit organizations. Critical in the determination of which sector provides such services are questions such as:
Can the service be profitably offered for sale?
Are sufficient levels of services provided by the for-profit market?
Can nonpaying third parties be excluded from benefiting from the provision of the service?
Is the service of such vital importance that it must be...
To continue reading
Request your trial