Economic Sectors: Definition and Examples (2024)

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Economic Sectors Definition

Imagine some of the different jobs undertaken to make it possible for you to use the electronic device that you are now using. First, miners had to extract minerals from the Earth for many of the parts of the device. Later, these minerals were transformed by factory workers into electronic components such as computer chips. Then, various people employed in services, such as delivery truck drivers, helped get the device to you and other customers. Before your device was even made, people involved in product development at the electronics company designed how your device would work and look. Then there are also the top executives at the company making important and costly decisions. Each type of work just discussed is one example of a job from a different economic sector.

An economic sector is a part of the economy where a particular business activity is undertaken.

Economic Sectors Classification

There are thousands of different jobs performed by people around the world, contributing to the modern global economy. To better make sense of how different types of work contribute to economic development and trade, these jobs can be classified into one of five economic sectors. These sectors are the primary sector, secondary sector, tertiary sector, quaternary sector and quinary sector.

Classifying these sectors is part of the process of economic sector classification. The five economic sectors divide up all economic activity based on the type of work performed and the goods and services produced. The number of sectors grew as new types of work developed, and economists defined new sectors. For this reason, you still find many websites and books that only divide economic activity into the first three sectors and do not mention the more recently developed quaternary or quinary sectors. Overall, as places become more economically developed, they move away from primary sector employment to jobs done higher "up the chain". Primary sector jobs are some of the earliest ever done by people, while most quaternary and quinary sector jobs came into existence relatively recently.

Economic Sectors Examples

There are many different examples of the work included in each of the economic sectors. Let's explore this further.

The Primary Sector

Examples of the primary sector include economic activities that involve extracting or producing raw materials directly from the earth. Food production work such as farming, fishing, and ranching are included in the primary sector. Other industries include mining, quarrying, drilling for resources, forestry, harvesting, and hunting.

In general, goods produced in the primary sector are less valuable than manufactured goods (produced in other sectors, but we'll talk about this later). Countries with many people working in the primary sector tend to be the least economically developed. There are some exceptions, though. Countries, where significant amounts of petroleum (oil) and natural gas are extracted, may have a high level of economic development because of the importance of these two primary goods as energy sources, yet still have a primary sector-based economy. Similarly, precious gems, such as diamonds and emeralds, are quite valuable because of their scarcity and demand for them.

Fig. 1 - sulphur mining is a form of work in the primary sector.

The Secondary Sector

Secondary sector jobs increased rapidly after the Industrial Revolution. Secondary sector activities are those that involve manufacturing and construction. Factory work that involves the production of goods, such as automobiles, furniture, cloth, and steel, would all be examples of secondary sector activities. Construction is also included; this is essentially the manufacturing of buildings and other structures. Some secondary sector activities produce items used by others also in the secondary sector. For example, steel made in steel mills is then sent to a factory to be used in the production of aeroplanes.

Secondary sector goods vary widely in value, and countries often begin manufacturing simpler, less valuable items before they begin to develop economically. Often the clothing and textile industries first appear in a country before more complex ones, such as automobile or electronics production. A great example of this is Japan, which started off with the textile industry and then moved on to car production.

The Tertiary Sector

Many of the service jobs that are in abundance in economically developed countries are examples of tertiary sector economic activity. Most people you interact with every day are employed in the tertiary sector. Bus drivers, restaurant workers, salespeople, and pharmacists all work in the tertiary sector. We'll go into more detail about the tertiary sector later on.

The Quaternary Sector

The quaternary sector was defined more recently as new types of jobs became increasingly based on the knowledge people can provide to others. For quaternary sector economic activities, the specialised knowledge of the worker is the product. For the most part, these are jobs that seem similar to tertiary sector jobs, so differentiating between the two sectors can be difficult. Someone working in a shoe store clearly has knowledge about the shoes being sold, but this knowledge isn't what is actually being sold. This person works in the tertiary sector. On the other hand, a person who helped to design the shoe is mainly providing their knowledge and performing work in the quaternary sector. Jobs in fields such as IT programming, consulting and financial services are also examples of quaternary sector economic activities. Most jobs in the quaternary sector require high levels of formal education at universities and graduate schools. The quaternary sector grows in economically developed countries where access to these educational institutions is readily available.

The Quinary Sector

The quinary sector is a further advancement of the tertiary sector or a further breakdown of the quaternary sector. Theorists say this sector is dedicated to the highest level of certain services or parts of the knowledge economy, such as the government, universities, and healthcare. These are also typically the services that are non-profit, meaning they aren't existing to make money but instead are there to serve the public good, such as the military, police, fire departments etc. This sector can also include non-profit organisations, like NGOs or other smaller-scale charities. Other activities included in the quinary sector are things like childcare, nursing homes or housekeeping.

Tertiary Economic Sector

Employment in the tertiary sector tends to grow after countries have industrialised and experienced more economic development. Service jobs replace jobs in the secondary sector as places experience deindustrialisation or jobs in factories move to other countries. Some jobs in services do not require much formal education, but most do require people to be more literate and have a wider range of skills than in the secondary sector. As countries introduce universal education, the growth of service jobs tends to follow.

Deindustrialisation is when industrial activity goes down.

The percentage of people working in service jobs grew rapidly during the twentieth century, especially in more economically developed countries that had industrialised the earliest. As a country develops further, the tertiary sector will typically grow whilst the primary sector reduces. Most people you know will work in the tertiary sector; whether you've gone to get your hair cut or you're undergoing a medical procedure, you're being served by the tertiary sector.

The tertiary sector can be both profit and non-profit. Profitable services include those which are paid for by a consumer, such as financial services, hotels, haircuts etc. Non-profit services include things like public education provided by the state (not private education). In 2020, the service sector contributed a huge 65.73% to the global Gross Domestic Product (GDP).¹

Fig. 2 - in the US, between 1840 and 2015, agriculture and manufacturing contribute significantly less to the employment statistics than the service sector. This sector has rapidly increased since 1840.

Five Economic Sectors

So, time for a memory refresh! Economic sectors are parts of the global economy where different types of work are undertaken. There are five main economic sectors.

• Primary Sector - raw materials.
• Secondary Sector - manufacturing.
• Tertiary Sector - services.
• Quaternary Sector - knowledge.
• Quinary Sector - an extension of the tertiary/quaternary sector.

Typically, more developed countries have less economic activity (people employed) in primary or secondary sectors. Take a look at the model below. It shows that over time (and we can assume as a country develops), primary activities go down, whilst tertiary activities go up. When deindustrialisation hits, secondary activities reduce too. Quaternary sectors begin to develop later in time.

Fig. 3 - a model showing the changing economic sectors over time

What is meant by economic sector?

An economic sector is a part of the economy where certain business activities occur.

What is an example of a sector?

An example of a sector can be the primary sector. In this sector, work is centred around extracting raw materials or agricultural activities.

Which sector of the economy is most important and why?

All sectors are important for the economy they are supporting, e.g. the primary economy is important for developing countries.

What are primary sector and secondary sector?

The primary sector is where agriculture or raw material extraction takes place. The secondary sector is where raw materials are turned into manufactured items.

What is the tertiary sector?

The tertiary sector is the service sector. This can be anything from bus drivers to nurses.

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