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This essay provides information about the Economy: Essay on Knowledge Based Economy !
The post-industrial information society knowledge and information are the major sources of productivity and growth. The Asia-Pacific Economic Co-operation (APEC) Economic Committee extended this idea to state that in a knowledge based economy “the production, distribution and use of knowledge are the main driver of growth, wealth creation and employment across all industries”. There is a growing belief in the past few decades that knowledge can do more than increasing economic growth; it can also lead to structural change in an economy and therefore society.
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Such change differs from the incremental changes to which all economies are constantly subjected. Need states that the new products and services resulting from technology growth may bring about profound changes in the way we live and work. He argues that this economic transition is characterised by the changing nature of work from low skill to high skill. This is reflected in the rapid growth in the services sector since the 1960’s and in more recent changes in the goods-producing sector towards employing higher-skilled employees.
It is important to note here that the classical theory of post-industrialism combines three statements which show the trend in the shifting employment pattern:
i. The source of productivity and growth lies in the generation of knowledge, extended to all realms of economic activity through information processing.
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ii. Economic activity would shift from goods production to services delivery. The demise of agricultural employment would be followed by the irreversible decline of manufacturing jobs, to the benefit of service jobs, which would ultimately form the overwhelming proportion of the employment. The more advanced an economy, the more its employment and its production would be focused on services.
iii. The new economy would of occupations with high information and knowledge content in their activity. Managerial, professional and technical occupations would grow faster than any other occupational position and would constitute the core of new social structure.
According to Toffler, the “second wave” formed an entirely new concept the “massification” in which we find mass production, mass markets, mass consumption, mass religion, mass political parties, weapons of mass destruction etc. He argues that the third wave will show a reverse trend where minority interests will come to the fore. The economy will be based on the productivity of knowledge work and knowledge worker. Whereas the organisations in second wave were built around the availability of land, labour and money, the third wave company will be firmly based on development of knowledge and imaginative use of technology.
Hence it is obvious that in the information age there will be a change in the economic structure where there will be tilt towards the more openings in knowledge based economic sector, i.e. service sector. The contribution of high value added manufacturing and services to the national economy is measured as one of the key indicators of a knowledge economy. This is because they are more knowledge intensive and less labour intensive.
Manuel Castells roughly classify service economy into different categories. This includes producer services (banking, insurance, real estate, engineering, accounting, miscellaneous business services and legal services), social services (medical, health services, hospital, education, welfare and religious services, non-profit organisations, postal service and miscellaneous social services), distributive services (transportation, communication, and whole scale and retail services) and personal services (domestic services, hotel, eating and drinking places, repair services, laundry, beauty and barber shops, entertainment, and miscellaneous personal services). He argues that there is a significant increase of job participation in these services in G7 countries in the past few decades.
According to him, the evolution of employment during post-industrial period (information age) shows at the same time, a general pattern of shifting away from manufacturing jobs, and two different paths regarding manufacturing activity: the first amounts to a rapid phasing away of manufacturing, coupled with a strong expansion of in producer services (in rate) and in social services (in size), while other services activities are still kept as source of employment. A second, different path more closely links manufacturing and producer services, more cautiously increases social services employment and maintains distributive services.