As economies develop, their three main sectors – agriculture, manufacturing and services – tend to follow the same broad patterns viz:
- The agriculture sector shrinks as a % of the economy
- The manufacturing sector grows to dominate the economy (~ 80%) but, once there, its % begins to decline in favour of the services sector
- The services sector grows on the back of manufacturing’s success and most people’s ever-increasing disposable pay, eventually becoming some 80% of the economy
A study of trends in 24 countries over the period 2000-14 by economists Ana Maria Santacreu and Heting Zhu came up with the following results
% CONTRIBUTION OF EACH SECTOR
Agriculture Manufacturing Services
Share employment 2 17 81
Share value added 5 17 78
Share exports 7 92 1
Share R&D spending 1 65 34
Productivity growth 33 42 25
Whilst the broad patterns ring true, the above specific figures, interesting though they may be, raise more questions than they answer
- Which 24 countries were sampled?
- What was the size of each economy?
- What was the mix of undeveloped, emerging and developed economies?
And the productivity growth claims offer further proof that productivity measurement at the national level is not only flawed but misleading
However, we do know that, as nations climb the economic development ladder, they tend to offload their basic industries – those needing more hands than heads such as the manufacture of steel, shoes or clothes – and focus more on hi-tech, hi-skill, hi-pay industries
However, many of the service sectors which grow on their backs have relatively low productivity levels – and are lower paid
So inevitably, as nations develop along this path, their apparent productivity and average wage levels stall