Q&A: Changes in pattern of national output

A student posts this question:

Sectoral contribution to the national income and employment have changed over a period. Explain in context of structural changes in economy.

Thanks for just posting an exam question! How imaginative! Briefly here are my thoughts:

“Sectoral contribution to the national income and employment have changed over a period.”

All economies go through a process of structural change
The contribution made by a sector / industry to a nation’s GDP is calculated by measuring their value added
In the case of the UK for example, the share of GDP taken by manufacturing industry has declined and is now less than 15%
Similar long run declines have been seen in farming and fishing. Agriculture now produces less than 1% of our national output
Services now contribute more than 75% of UK national output

These structural changes are the result of many economic factors including:

Changes in the pattern of world trade linked to changes in the pattern of global demand for different products
Shifts in global production
Different income elasticities of demand for different goods and services
Changes in the price and non-price competitiveness of domestic producers in international markets

Shifts in output inevitably lead to changes in the pattern of employment - as our chart below shows

These longer term changes can bring about the problem of structural unemployment resulting from geographical and occupational immobility of labour
The extent to which output changes feed through to employment shifts is also dependent on what happens to labour productivity. Consider an industry where output is essentially flat over time (i.e. neither rising or falling). If output per worker is increasing, employment in that industry will contract since more can be produced using fewer workers.