This kind of theory is as weak as trickle down economics. It doesn't work that way at all. Most service jobs don't pay diddly. The guy that owns the business that provides the service might make good money, but the guy who actually provides the service, doesn't make diddly in most cases.
I'm no economist (who are actually just high paid witch doctors/weather foreecasters than anything else), but if you look at the percentage of GDP that manufacturing used to account for in say the '70s, then look at the percentage now, then compare the median income for Americans then and now, then look at the unemployment and under employment figures today and it sort of paints a picture of what really happened.
Good paying jobs got turned in to crappy paying jobs, or no jobs at all. How can this be when the want ads are full of positions for high paying tech jobs and the like and many of these companies are having to import talent from overseas?? It's happening because the "retooling of America" isn't working.
Bottom line is, in any society anywhere in the world, not just America, a certain percentage of the population is just not cut out to be brain power. They are better suited to muscle power. 40 years ago we had a pretty good ratio going on and we did well as a whole, but our pursuit of higher corporate profits, new technology and the consumers thirst for everyday low prices has lead to our decline and a huge rift in wealth.
I don't have any great answer to this problem as it's a tough nut to crack, but one thing is for sure, the service sector can not take up the slack left from the decline of the manufacturing sector.