Every step of your journey contributes to the tertiary sector of the economy, which focuses on services and retail. This sector is a key indicator of socioeconomic development. Let's delve into the definition of the tertiary sector, explore some examples, and discuss its significance.
Understanding the Tertiary Sector
In economic geography, economies are categorized into sectors based on the type of activities they involve. The tertiary sector is the final sector in the traditional three-sector model of economics, representing high levels of socioeconomic development.
Tertiary Sector: The sector of the economy centered around services and retail. The tertiary sector is also known as the service sector.
Examples of Tertiary Sector Activities
Preceded by the primary sector (natural resource extraction) and the secondary sector (manufacturing), the tertiary sector utilizes products from these sectors. Tertiary sector activities include:
- Retail sales
- Hospitality (hotels, restaurants, tourism)
- Transportation (taxis, flights, buses)
- Healthcare
- Real estate
- Financial services (banking, investment, insurance)
- Legal services
- Waste disposal
Engaging in any transaction where you pay for a service or product falls under the tertiary sector. Depending on your location, you may interact more with the tertiary sector than the primary or secondary sectors.
Consider the following example to identify tertiary sector activities:
A logging company harvests trees and processes them into wood chips. These chips are used to make fibreboards at a pulp mill, which are then sent to a paper mill for creating copy paper. A banker buys the paper for her bank, which uses it for printing statements.
Here's the breakdown of the example:
The logging company creates wood chips, transformed into fiberboards. These fiberboards are utilized in producing copy paper that is then sold to the banker for her bank's operations.
Economic geographers have introduced two additional economic sectors due to the challenge in fitting many modern economic activities into the traditional three sectors.
The quaternary sector is centered on technology, research, and knowledge, while the quinary sector, less clearly defined, encompasses activities like charities, non-governmental organizations, and 'gold collar' jobs in government and business. Some geographers consolidate these activities into the tertiary sector, but this practice is becoming less common.
Tertiary Sector Development
The concept of distinct is closely tied to the idea of socioeconomic development, which is the process through which countries enhance their economic capabilities to improve social development.
The theory suggests that industrialization – the expansion of manufacturing capabilities, closely related to secondary sector activity but reliant on primary sector activity – will generate the necessary funds to increase individuals' purchasing power and enable governments to invest in social services such as education, infrastructure, emergency services, and healthcare.
Underdeveloped countries typically have a primary sector-dominated economy, while developing countries (i.e., countries actively industrializing and urbanizing) tend to be dominated by secondary sector activity. Economies dominated by the tertiary sector are generally considered developed.
Ideally, successful industrialization results in the creation of service-friendly infrastructure through manufacturing and construction, leading to increased personal spending power for citizens. This increased spending power makes jobs like cashiers, servers, bartenders, or sales associates more accessible to a larger portion of the population, as opposed to a time when the majority of individuals worked in agriculture or factories.
However, the emergence of the tertiary sector does not occur automatically as a country develops. At every stage of development, a portion of the economy is invested in each sector. Even the least developed countries, such as Mali and Burkina Faso, have retail establishments, hotels, restaurants, medical services, and transportation services, albeit not to the same extent as countries like Singapore or Germany.
Some underdeveloped and developing countries do not conform to the linear three-sector model. For example, many nations have incorporated tourism as a major part of their economy, despite it being a tertiary sector activity. Countries like Thailand and Mexico, popular tourist destinations, fall under the category of developing countries.
In contrast, certain developing island nations such as Vanuatu have centered their economies around agriculture, fishing (primary sector), tourism, and banking (tertiary sector), bypassing the secondary sector. This results in a situation where a country is labeled as 'developing,' yet relies heavily on tertiary sector activities.
Significance of the Tertiary Sector
The tertiary sector holds importance as it is the sector where the majority of individuals in developed countries are employed. Essentially, it is where the economic activity thrives. When journalists (who are part of the tertiary sector) or politicians discuss 'boosting the economy,' they are typically referring to activities in the tertiary sector.
Essentially, they are encouraging people to spend money on goods and services like groceries, dining out, entertainment, or clothing. This spending in the tertiary sector is crucial for sustaining the operations of a developed government.
The reliance on the service industry is apparent in developed nations, where the sector plays a vital role in their operations. An example of this is the importance of sales tax collected from transactions at retail outlets. Service sector positions are often viewed as more attractive to the general population since they typically involve less strenuous work compared to jobs in the primary or secondary sectors.
Moreover, many service sector occupations demand elevated levels of expertise and education (such as physician, nurse, banker, broker, lawyer), leading to high demand and higher salaries, consequently boosting income tax earnings.
Without the tertiary sector (and possibly the quaternary and quinary sectors), governments would struggle to generate sufficient revenue to maintain the quality and quantity of public services that many people in developed nations expect.
Drawbacks of the Tertiary Sector
However, there are drawbacks to this system and the process of industrialization. Some disadvantages of the tertiary sector include:
- Excessive consumerism in the tertiary sector can lead to significant waste production.
- Commercial transportation contributes significantly to modern climate change.
- The well-being of nations is often tied to their participation in the tertiary sector.
- Developed countries often rely on cheap labor and resources from less developed nations, creating a potentially unsustainable relationship.
- Some developed countries may hinder the development efforts of least developed and developing nations to protect their own tertiary sectors.
- Tertiary sectors in developing countries dependent on tourism can suffer during economic or environmental downturns.
- The value of certain services (such as legal or financial consulting) is intangible, making it challenging to quantify their actual worth.