Learn To Like The Services Industries

We have become a nation of services industries.

More than 75 per cent of employment in Australia comes from the services sector, according to data from the OECD. In comparison, services account for 81.1 per cent of employment in the US, 79.7 per cent in the UK and 34.6 per cent in China.

I find that when I discuss the economy of a particular country, often the conversation involves how “we don’t manufacture anything, anymore”. But some of those service companies do produce a product, although its not made of wood, cement steel or plastic.

Why do we place such a premium on manufacturing jobs and industries?

Is this “premium” due to historical reasons, ’cause my dad worked at Ford Motor Company and thus it’s noble and good?

Is it because they are “things we can touch”?

Does it make it more believable and trustworthy that it actually exists, if you can “touch” it?

Does having plant and machinery make managers and investors feel better because its a tangible asset on their balance sheet?

Financially speaking, service businesses surely have higher margins, less fixed costs, require a smaller amount to get started and seem to be more flexible, while the manufacturing industry seems to have the opposite attributes.

Unless you wish to live in a socialist economy (whilst lining up for your weekly ration of bread & milk), free market capitalism and its forces determine the most efficient place (source, cost & delivery) where manufacturing takes place.

Has it been that terrible to have lived in those clean, free, safe, progressive, enriching and prosperous high service employment countries that I mentioned earlier?

The numbers say it all

Heard a radio story yesterday that was interviewing a knitwear manufacturer in Melbourne, Australia.
At his factories peak production several year ago, it employed 70 workers and now he employs 20 people.
Why?
To knit and assemble a jumper (sweater for North American readers) in his Australian factory, excluding the cost of the raw material, the cost is between $30 & $35.
In China, the cost of manufacturing the same garment is between $7 and $8, while it’ll cost you a $1 in Cambodia or Bangladesh.
In a globalised world of free trade, it’s difficult to argue against the numbers.
Import Tariffs anyone?
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