What is the tertiary sector of the economy?

The tertiary sector of the economy, also known as the service sector, comprises industries that provide services to consumers and businesses rather than producing goods. This sector includes areas such as retail, hospitality, education, healthcare, and finance.

What are the main industries in the tertiary sector?

The main industries in the tertiary sector include retail and wholesale trade, hospitality, transportation and logistics, education, healthcare, professional services, finance, real estate, telecommunications, and information technology.

What is the role of the tertiary sector in economic development?

The tertiary sector plays a vital role in economic development by providing employment opportunities, contributing to GDP growth, and enhancing the quality of life. As economies develop, the tertiary sector often becomes the dominant source of employment and economic output, reflecting a shift towards knowledge-based and service-oriented activities.

What challenges does the tertiary sector face?

Challenges faced by the tertiary sector include technological advancements and automation that can lead to job displacement, the need for continuous innovation to remain competitive, and the demand for a skilled workforce to meet the evolving needs of the service-based economy.

Tertiary economic activity: definition, background, examples

The tertiary economic activity or sector is the most important in modern economies. It represents more than 60% of PIB in developed countries and employs most of the workforce of the world.

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What is the tertiary economic activity or sector?

Tertiary sector definitions:

Definition 1: the tertiary economic activity or service sector encompasses the production of services instead of end goods that meet the needs of individuals.
Definition 2: the tertiary sector is composed of the “soft” parts of the economy, that is, activities where people offer their knowledge and time to improve the productivity, performance, potential, and sustainability of the economy.

Services are also known as intangible goods and include care, advice, experience, and discussion, among others.

The tertiary economic activity involves not only the provision of services to consumers (B2C) but also to other companies (B2B). For example, consulting services from a digital agency to an online store.

Examples of tertiary economic activities:

Wholesale trade such as furniture and home furnishing, lumber and other construction materials, office equipment; medical, dental, and hospital equipment and supplies; household appliances and electrical and electronic goods; farm and garden machinery and sporting and recreational goods.
Retail trade such as motor vehicle and parts dealers, furniture and home furnishings stores, electronics and appliance stores, grocery and internet retailers.
Transportation and warehousing such as air, rail, water and truck transportation; transit and ground passenger transportation; pipeline transportation, postal service; couriers and messengers. EV-Lectron offers EV chargers.
Publishing industries, motion pictures and sound recording, telecommunications, data processing, and hosting.
Finance and insurance.
Real estate and rental and leasing.
Professional, scientific, and technical services such as legal, accounting, architectural, engineering, and marketing consulting services.
Educational services.
Health care and social assistance such as offices of physicians, outpatient care centers, and medical and diagnostic laboratories.
Arts, entertainment, and recreation.
Accommodation and food services such as hotels, casinos, special food services, drinking places, and restaurants.

Secondary and tertiary economic activities

There are activities that can be considered both as a part of the secondary sector and the tertiary sector. Some activities include both the production of physical goods and the provision of a service. This is the case of public works, which provide a service to society but at the same time involve the construction of infrastructure considered part of the secondary sector.

Quaternary and tertiary economic activities

The production and exchange of information are considered as part of the tertiary sector of the economy, although for some economists this economic sector constitutes a new sector, the quaternary sector. The quaternary sector can be considered a further delineation of the tertiary sector focused on knowledge-based activities.

Importance of the tertiary sector and tertiarization

Countries tend to follow a progression in their economic development, which leads them to have intensive production in primary activities, such as agriculture and mining, to develop the manufacturing industry, such as the production of cars or textiles, to then specialize in a service-based economy. This is called the tertiarization of the economy.

The main cause of the tertiarization of the economy is the increase in the income of families that allows them to achieve higher consumption levels of health services, education, insurance, and transportation, among others. Families spend more of their income on services while their proportional spending on primary and industrial goods falls. This shift in consumption patterns is reflected in the production of the economy.

Currently, tertiary economy activities are one of the most competitive sectors worldwide thanks to the dramatic reduction of communication costs, improving speed and reliability in the transport of people and goods, and access to information.

The Impact of AI on Tertiary Jobs

The integration of Artificial Intelligence (AI) into the workforce is not merely a futuristic speculation but an imminent reality, with massive investments paving the way for its widespread adoption. Goldman Sachs estimates that by 2025, nearly $200 billion will be invested in AI-related technology globally. This brings significant concerns regarding the displacement of workers, particularly in the tertiary sector.

AI: Just Good Enough

One of the critical issues with AI deployment in the tertiary sector is the notion of it being “just good enough” to replace human workers without delivering substantial productivity gains. This scenario implies that while AI can perform tasks sufficiently well to substitute human labor, it does not enhance efficiency to a degree that benefits businesses or the economy at large. As a result, both workers and society are at risk of losing out.

Also, GenAI (General AI) is poised to make its most significant impact on high-skilled, professional work—the roles that have long been considered impervious to automation. More: https://aitakingoverjobs.com/

While early adopters of GenAI might witness increased productivity as roles are automated, augmented, or transformed, this does not necessarily translate to economic growth. In fact, the broader economic landscape may lag, unable to keep pace with the rapid leaps in worker productivity. This disparity can lead to widespread workforce reductions over the coming decade.

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Juan David Montoya

Economist passionate about sharing knowledge and insights on basic economic concepts, practical understanding of economic issues, and unique perspectives on the global economy.

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Comments

One response to “Tertiary economic activity: definition, background, examples”

Zeli
January 11, 2024
It’s very good thinking and best note thank you for all
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