The tertiary sector of the economy: definition, industries and interesting facts

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:47

All of us have long been accustomed to such concepts as agriculture, industry and the service sector. But why do we consider them in our article? This is how the three-sector model looks simplified. It was developed back in 1935-1949. The tertiary sector of the economy just includes what we mean by the service sector. Depending on which sphere is dominant in terms of production, it is possible to determine the stage of development of society.

Today, in addition to the primary, secondary and tertiary sectors identified by Fisher, Clark and Fourastier, the Quaternary is also considered - a product of the modern stage, the so-called knowledge economy.

Concept

The theory of sectors, or structural change, was developed in the 1930s and 1940s by Alan Fisher, Colin Clark and Jean Fourastier. Scientists have divided the economy into three sectors of implementationactivities:

• Primary. Its main purpose of functioning is the extraction of raw materials. It includes agriculture. Also, the primary sector is some types of industry. Among them are fishing, mining and forestry.
• Secondary includes all other manufacturing and construction business.
• The tertiary sector of the economy is the service sector, education and tourism business.

According to the Fisher-Clarke theory of structural change, with the development of society there is a shift in focus from the primary sector to the secondary, and then to the tertiary. Scientists believed that this was due to a change in the nature of consumer demand. With an increase in per capita income, the demand for agricultural products decreases, for industrial products it first increases and then begins to fall, but for services it constantly increases. Therefore, it is not surprising that the tertiary sector is the dominant sector in rich countries.

Clark identified three stages in the development of states. The first is agricultural. With it, productivity grows at a slow pace. The second is industrial. It is associated with the development of the secondary sector and its peak growth. The third stage is based on the predominance of the service sector. It was with her that Fourastier connected the dream of a new flowering of education and culture, the humanization of society and overcoming poverty.

Which industries are included in the tertiary sector of the economy?

It includes activities in which people apply their knowledge toto improve the productivity, efficiency, potential and stability of labor. The industries that make up the tertiary sector of the economy do not provide a finished product, but provide services. They are involved in non-material production. The tertiary sector of the economy used to include information processing, but now all data operations are considered separately. This is due to the emergence of the concept of the knowledge economy. It is a new stage in the development of post-industrial society. Therefore, the production of information is now usually attributed to the quaternary sector.

However, some economists do not consider it necessary to complicate everything and use the standard Fisher-Clark model. The tertiary sector includes the provision of services not only to enterprises, but also to end consumers. This can be as the transportation of goods from the manufacturer to the buyer, as well as pest control or the organization of recreational activities. In the process of providing services, goods are often modified, as in the restaurant business. However, the focus is still on interacting with people and serving them.

Difficulties in defining

Sometimes it is difficult to figure out where the secondary ends and the tertiary sector of the economy begins. Sometimes the latter also includes the police, the troops, the government itself, charitable organizations. Therefore, special classification systems have been developed in international law. They allow you to determine whether the product is tangible or not. One ofsuch systems is the International Standard Industrial Classification developed by the UN.

Theory of Progress

Over the past hundred years, the tertiary sector of the economy has gradually become dominant in the developed world. They have become post-industrial. The primary and secondary sectors have completely lost their positions. Fourastier identified three stages in the development of countries. In a pre-industrial society, 70% of people are employed in the primary sector, 20% in the secondary, and 10% in the tertiary. Then comes the second stage. Fourastier called it industrial.

At this stage, about 40% of people are employed in the primary sector, 40% in the secondary sector, and 20% in the tertiary sector. It is associated with deep automation of production. This leads to the fact that the importance of the tertiary sector of the economy is becoming more and more. In a post-industrial society, 70% of the economically active population is employed in it, while in the primary - only 10%, in the secondary - 20%. Some modern scholars recognize two more stages of development associated with the allocation of the Quaternary and Five sectors.

Today, the service sector in developed countries is developing most dynamically. Those employed in it often earn more than industrial workers. Gradually shifting the focus from agriculture and extractive industries to industry, and then to the service sector is typical for all economies. The United Kingdom was the first to join this trend. The rate at which countries become post-industrial over time is onlyincreases. The world is changing faster in a few years than before in a hundred.

Problems of the tertiary sector of the economy

Companies that provide services often face problems that are unknown to manufacturers of goods. What is the tertiary sector? This is primarily non-material production. And consumers have a hard time understanding what they will get and what the cost will be. Many companies that provide consulting services do not give any guarantees of the quality of their work, but require payment for it. It all depends on the qualifications and experience of people.

The remuneration of the personnel involved in the provision of the service is a significant part of its cost. And here the companies of the tertiary sector are unlikely to be able to save. Manufacturers can use new technologies, simplification, economies of scale to reduce costs. But the company that provides services is forced to raise prices in order to improve their quality. Another problem is product differentiation. How to choose between consulting firms? At first glance, it seems that they provide identical services. Therefore, only the most reputable firms that are a recognizable brand and deserve recognition can often inflate the price.

Examples

It is easier to understand what this is if we consider which industries are part of the tertiary sector. Among them:

• Entertainment.
• Government.
• Telecommunications.
• Hotel and restaurantbusiness
• Tourism.
• Media.
• He althcare.
• Information technology.
• Waste disposal.
• Consulting.
• Gambling.
• Retail and wholesale.
• Franchising.
• Real estate transactions.
• Education and more

Financial services include banking, insurance and investment management. Professional - accounting, legal and business management assistance.

List of countries by size of service sector

Estimating the size of the tertiary sector allows you to see the stage of development of society. Consider a list of countries by the contribution of their services to the gross domestic product. The United States comes first. In 2015, the value of the services provided amounted to 14.083 trillion US dollars. Thus, the USA is the state with the most developed tertiary sector. In second place is the European Union. In 2015, the countries included in it, together provided services in the amount of 13.483 trillion US dollars. China is in third place. The value of its tertiary sector in 2015 was $5.202 trillion. On the fourth - Japan. The contribution of its service sector to the country's GDP in 2015 amounted to 3.078 trillion dollars. On the fifth - Brazil. It provided services in the amount of 1.340 trillion in 2015.

In RF

The tertiary sector of the Russian economy in 2015 was the fifteenth largest in the world. Its contribution to the country's GDP amounted to 720billion US dollars. It employs 58.1% of the economically active population. This means that the country is not yet post-industrial.

Agriculture employs 9% of the population, industry - 32.9%. However, the tertiary sector is responsible for the largest part of Russia's gross domestic product. About 58.6% of GDP is generated in it. The contribution of agriculture to the gross domestic product of Russia is 3.9%, industry - 37.5%.

Knowledge economy

In the quaternary sector of the economy, some modern economists prefer to single out operations related to the creation, receipt and processing of information. For example, consulting, education, financial planning, blogging, design.