Tertiary Sector

Your shoes have finally started to fall apart, so it's time to buy a new pair. You pay for a rideshare service to take you to a nearby department store, where, after some deliberation, you purchase some new shoes. Before heading back home, you stop at a restaurant to grab some lunch. After that, you do a little shopping at a greengrocer, then call for a taxi to take you home.

Almost every single step of your journey contributed in some way to the tertiary sector of the economy, the sector that revolves around the service industry and is most indicative of high socioeconomic development. Let's explore the definition of the tertiary sector, take a look at a few examples, and discuss its importance – and disadvantages.

Tertiary Sector Definition Geography

Economic geographers divide economies into different sectors based on the type of activity performed. In the traditional three-sector model of economics, the tertiary sector of the economy is the 'final' sector, wherein heavy investment in the tertiary sector broadcasts high socioeconomic development.

The tertiary sector is also referred to as the service sector.

Tertiary Sector Examples

The tertiary sector is preceded by the primary sector, which revolves around harvesting natural resources, and the secondary sector, which revolves around manufacturing. Tertiary sector activity makes use of the 'finished product' created via activity in the primary and secondary sectors of the economy.

Tertiary sector activity includes, but is not limited to:

• Retail sales

• Hospitality (hotels, inns, restaurants, tourism)

• Transportation (taxi cabs, commercial airline flights, chartered buses)

• Healthcare

• Real estate

• Financial services (banking, investment, insurance)

• Legal counsel

• Garbage collection and waste disposal

Basically, if you are paying someone to do something for you, or you are buying something from someone else, you are participating in the tertiary sector. Depending on where you live, the tertiary sector of the economy may be the sector you come most into contact with on a day-to-day basis: people living in quiet suburbs or highly settled cities may have little or no contact with primary sector (think farming, logging, or mining) or secondary sector (think factory work or construction) activity.

Fig. 1 - A taxi cab in downtown Seoul, South Korea

Read the following example and see if you can identify which activities are part of the tertiary sector.

Did you catch them? Here's the example again, this time with the activities labelled.

It is worth mentioning that economic geographers have defined two further economic sectors because many modern economic activities do not fit neatly into any of the three traditional sectors. The quaternary sector revolves around technology, research, and knowledge. The quinary sector has not been as clearly defined, but can be thought of as the 'leftovers' category, including charities and non-governmental organisations as well as 'gold collar' jobs in government and business. You may see some geographers roll all of these activities into the tertiary sector, though this is less and less common.

Tertiary Sector Development

The notion of distinct economic sectors is strongly tied to the notion of socioeconomic development, the process by which countries develop their economic capabilities to improve social development. The idea is that industrializing – expanding manufacturing capabilities, which is strongly linked to secondary sector activity but dependent upon primary sector activity – will generate the money needed to increase citizens' personal spending power and enable governments to invest in social services like education, roads, firefighters, and healthcare.

Least developed countries tend to be dominated by primary sector activity while developing countries (i.e., countries actively industrializing and urbanising) tend to be dominated by secondary sector activity. Countries whose economies are dominated by the tertiary sector are typically developed. Ideally, if everything has gone according to plan, this is because industrialisation has paid off: manufacturing and construction have created service-friendly infrastructure, and individual citizens have more spending power. This makes jobs like cashier, server, bartender, or sales associate significantly more viable for huge swathes of people because the products and experiences associated with them are more accessible to a larger proportion of the population, whereas before, the majority of people had to work on farms or in factories.

That being said, the tertiary sector does not just magically emerge after a country develops. At every single stage of development, some portion of a country's economy will be invested in each sector. Least developed countries like Mali and Burkina Faso still have retail stores, hotels, restaurants, doctors, and transportation services, for example – just not to the same extent as countries like Singapore or Germany.

Fig. 2 - A popular mall in Subic Bay, Philippines - a developing country

There are also least developed and developing countries that buck the linear template of the three-sector model. For example, many countries have established tourism, a tertiary sector activity, as a major part of their economy. Some of the most-visited countries in the world, like Thailand and Mexico, are considered developing countries. Many developing island countries, like Vanuatu, should hypothetically be mostly invested in the secondary sector, but instead have bypassed it entirely, with economies that mostly revolve around farming and fishing (primary sector) and tourism and banking (tertiary sector). This creates a situation where a country is technically 'developing,' but with an economy that is inextricably linked to tertiary sector activity.

Importance of the Tertiary Sector

The tertiary sector is important because it is the sector of the economy in which the majority of people in developed countries are employed. In other words, it's where the money is. When news reporters (who, mind you, are part of the tertiary sector) or politicians talk about 'supporting the economy,' they are almost always referring to tertiary sector activity. What they mean is: go out there and buy something. Groceries, date night at a restaurant, a new video game, clothes. You have to spend money (and make money) in the tertiary sector to keep a developed government functioning.

Fig. 3 - Citizens of developed nations are encouraged to maintain the tertiary sector by spending

That's because developed countries are so linked to tertiary sector activity they effectively depend upon them. Consider the sales tax you pay on the things you buy at retail stores. Tertiary sector jobs are also typically perceived as more desirable to the average citizen because they do not involve as much 'back-breaking' labour as primary or secondary sector jobs. Many tertiary sector jobs also require significantly more skill and schooling to perform (think doctor, nurse, banker, broker, lawyer). Consequently, these jobs are in higher demand and offer higher salaries – which means more income tax.

As it is now, without the tertiary sector (and perhaps, by extension, the quaternary and quinary sectors), governments would not be able to generate enough money to provide public services at the quality and quantity many people in developed nations are accustomed to.

Disadvantages of the Tertiary Sector

However, there is a price to pay for maintaining this system and for undergoing the process of industrialisation to begin with. Disadvantages of the tertiary sector include:

• Tertiary sector consumerism can generate an incredible amount of waste.

• Commercial transportation is a leading cause of modern climate change.

• For many countries, national well-being is tied to people's participation in the tertiary sector.

• Tertiary sectors in developed countries often depend upon cheap labour and resources from less developed countries – a potentially unsustainable relationship.

• Developed countries may be so determined to maintain their own tertiary sectors that they may actively suppress development attempts by least developed and developing countries (see World Systems Theory).

• Tertiary sectors in developing countries that depend on tourism may falter when financial or environmental conditions discourage tourism.

• Many services (lawyer, financial consultant) are immaterial, and thus, their actual value in the form of services rendered is difficult to qualify.