Business Services’ Rising Importance to the US Economy: MBA News

Business services have replaced manufacturing as the most integral facet of the US economy, according to a report from the Georgetown University Center on Education and the Workforce released this week.

In the 40-year period between 1967 and 2007, the study highlighted that manufacturing’s declining importance to the US economy was matched by the rise of business services – a category taken to encompass a number of professional functions, including finance, management and consulting.

By 2007, business services accounted for 26% of all value added in the US economy, up from 12% in 1967. In the same timeframe, the equivalent figure for manufacturing fell from 31% to 16%, in Georgetown University’s analysis.

Georgetown University study reveals shift towards service-orientated economy

The rise of business services is a principal part of the report’s investigation into how the US economy has evolved to become less focused on the production of goods and more service-orientated.

In this, consumer spending has played a major role. Whereas in the immediate post-war period (1947), 56% of consumer spending came in areas described as the “basic necessities of food, drink, clothing and transportation,” by 2007, this proportion had more than halved, to 27%.

As with the role of manufacturing, the declining importance of spending on goods is matched by the rise in spending on services, including business services, healthcare and education. Services accounted for 26% of the US’s total consumption in 1947, rising to 54% in 2007.

Even in the goods-orientated area of food production, the study noted that a mere 5% of the value-added network lay with the farmers, while 20% was tied up in business services that help bring food to market and into people’s homes.

Degree-holders vital to US economy’s output

As one might expect, the US economy’s shift towards services is aligned with an increasing level of education in the workforce, which has grown along with employers’ demand for skilled workers, enabling service employment to become the principal source of job growth within the US economy.

The proportion of the US workforce who hold advanced degrees (master’s level and above) grew from 5% to 11% between 1967 and 2012, with a further 21% holding bachelor’s degrees – up from a mere 8% in 1967, the Georgetown University study revealed.

Together, these degree-holders make up just under a third of the US workforce (32%), yet they are said to be responsible for more than 50% of the nation’s economic output – up from 13% in 1967.

As for the 11% who held advanced degrees by 2012, we know that business (including the MBA) became the most popular postgraduate field of study in the US the very same year. A quarter of all master’s degrees awarded in the US that year were in the field of business, up from just over 10% in 1971.

This serves not only to highlight the numerical significance of business master’s and MBA graduates among postgraduates in the US, but also their importance to the economic output, as identified by Georgetown University’s analysis of what it describes as a “college-educated service economy”.

Indeed, the study also found that as many as 87% of graduate degree-holders were employed in either professional or managerial roles in 2007, whereas this was true for just 64% among those with solely a bachelor’s degree. Conversely, the share of managers and professionals in the US who possess a master’s degree or higher was found to have grown to 28% by 2007.

Georgetown University is home to the McDonough School of Business, which ranks among the top 30 business schools in North America in this year’s regional MBA rankings.