Understanding the Service Economy and Offshoring Trends

Deindustrialization

Decline of manufacturing jobs in an economy.

Service Economy

Economic sector focused on intangible services.

GDP Composition by Sector

Proportion of GDP from agriculture, industry, services.

Intangible Goods

Products that cannot be physically touched.

Global GDP

Total economic output of all countries.

Employment in Services

Service sector employs half of global workforce.

Canadian Workforce in 1867

Half employed in agriculture at confederation.

Shift in Employment Ratios

Reversal of goods and service sector employment.

Industrial Revolution

Transition from agriculture to industrialized economies.

Mechanization

Use of machines to increase production efficiency.

Detroit's Population Growth

Rose to 1.8 million during auto industry boom.

Pittsburgh Steel Industry

Once produced 60% of America's steel.

Unemployment Spike in Pittsburgh

Reached 27% during deindustrialization in 1980s.

Health Care Growth

Expanded in Pittsburgh post-steel industry decline.

World Trade Organization Estimate

Service sector accounts for two-thirds of GDP.

Depopulation in Detroit

Significant population decline due to job losses.

Auto Industry Competition

US manufacturers faced challenges from Japanese firms.

Social Issues in Detroit

Poverty and inequality increased post-industrialization.

Pittsburgh's Population Decline

Half of population left by 1990.

Service Sector Importance

Increasingly vital for economic development globally.

Labor Force Changes

Younger workers left, older population remained.

Economic Transition

Shift from manufacturing to service-oriented jobs.

Historical Economic Beliefs

Goods production once deemed most important.

Telecommunication Advancements

Facilitated faster service trade globally.

Service Sector Examples

Includes education, health care, tourism, finance.

Job Losses in Detroit

Manufacturing decline led to widespread unemployment.

Carnegie and Pittsburgh

Founded US Steel, pivotal in steel production.

Economic Resilience

Service sector growth amidst industrial decline.

Global Cities Rise

New York, London, Tokyo became economic hubs.

Health Care Employment

Surpassed steel as largest employer in 1980.

Precarious Jobs

Health care jobs often part-time and low-paid.

Surplus Economy

Trend of poorly paid care work, mainly by women.

Service Sector Growth

Pittsburgh's economy shifted towards health care and education.

U-Shaped Returns

Service economies show extreme pay disparities.

Global Cities

New York, London, Tokyo emerged as economic hubs.

Advanced Services

Fastest growing sectors in 1980s economies.

Globalization Impact

Cities became more interconnected economically and culturally.

Offshoring Definition

Producing goods outside home market for sale back home.

Foreign Direct Investment

Building facilities abroad for local market production.

Outsourcing

Purchasing from independent foreign suppliers.

Corporate Control

Offshoring involves managing own foreign facilities.

Tax Havens

Offshoring of finance, notably Panama's scandal.

Customer Service Outsourcing

Companies reduce costs by outsourcing non-core functions.

Historical Offshoring

Started in 1500s with European trade in commodities.

Post-WWII Offshoring

Accelerated due to trade agreements and technology.

General Agreement on Tariffs and Trade

Facilitated reductions in international trade barriers.

International Monetary Fund

Promoted currency stability and capital flows.

World Bank

Supported economic development in global South.

Transportation Advances

Improved shipping and logistics post-war enhanced trade.

Telecommunications Improvements

Reduced communication costs, aiding overseas operations.

Satellite Technology

Expanded international phone networks by 1960s.

Global Production Process

Goods managed within multinational enterprises.

Labor Cost Competition

Globalization pressures led to offshoring manufacturing.

Care Economy

Sector characterized by low wages and female labor.

Pittsburgh's Economic Transition

Shift from industrial to service-based economy.

Executive Interactions

Global cities facilitate face-to-face business meetings.

Offshoring

Relocating production to lower-cost countries.

Electronics Industry

Sector where offshoring began around 1960.

East Asia

Primary destination for offshore manufacturing.

Consumer Electronics

Products like radios and semiconductors.

Protectionism

Trade policy to protect domestic industries.

Japanese Firms

Companies like Sony and Sanyo led offshoring.

Hong Kong

Key location for Japanese manufacturing expansion.

Taiwan

Country where assembly of electronics grew.

Transair

American radio maker that offshored to Hong Kong.

Global Production

Strategy of spreading production across countries.

Labor Costs

Wages influencing decisions on production locations.

Complex Tasks

Higher-level operations moving offshore over time.

Backward Integration

Traditional method of production consolidation.

Market Conditions

Factors influencing production location decisions.

Research and Development

High-value tasks often retained in home countries.

Customization

Focus on tailored products over mass production.

Inefficiencies

Problems arising from split production stages.

Worker Protections

Regulations impacting labor bargaining power.

Wage Gaps

Disparities in earnings due to offshoring.

Offshore Finance

Moving banking to avoid regulations and taxes.

Tax Neutral

No taxes levied on money leaving a jurisdiction.

IMF Definition

Criteria for identifying offshore financial centers.

Cayman Islands

Example of a tax-neutral offshore jurisdiction.

De Beers Case

Legal precedent influencing offshore financial practices.

Inequality

Increased disparity due to offshoring practices.

Globalization Predictions

Speculations about future of worldwide production.

Fragility of Global Systems

Risks associated with interconnected production networks.

Offshore Banking

Banking services located outside the home country.

Cross Border Banking Assets

Financial assets held across national borders.

Tax Revenue Loss

Government income reduction due to offshore practices.

Panama Papers

2016 leak exposing offshore tax evasion practices.

Bretton Woods System

International monetary system ended in the 1970s.

Service Sector

Economic sector focused on non-material activities.

Inseparability

Service delivery and consumption occur simultaneously.

Inventory in Services

Services cannot be stored for future use.

Inconsistency

Each service experience is unique and variable.

Involvement

Both provider and consumer participate in service.

Environmental Impact of Services

Services can cause significant ecological damage.

Cruise Industry Pollution

Cruise ships generate massive amounts of waste.

Waste Incineration at Sea

Cruise ships burn waste, emitting toxic pollutants.

Air Pollution Deaths

84,000 annual deaths linked to shipping emissions.

Bunker Fuel

Fuel used by ships, highly polluting.

Quaternary Sector

Knowledge-based economic activities like IT and R&D.

Quinary Sector

Top-level decision-making activities in the economy.