The 5 Sectors Of The Economy

The 5 Sectors of the Economy

by Matt Rosenberg

Updated August 19, 2017

A nation’s economy can be divided into various sectors to define the proportion of the population engaged in the activity sector. This categorization is seen as a continuum of distance from the natural environment. The continuum starts with primary economic activity, which concerns itself with the utilization of raw materials from the earth such as agriculture and mining. From there, the distance from the raw materials of the earth increases.

PRIMARY SECTOR

The primary sector of the economy extracts or harvests products from the earth, such as raw materials and basic foods. Activities associated with primary economic activity include agriculture (both subsistence and commercial), mining, forestry, farming, grazing, hunting and gathering, fishing and quarrying. The packaging and processing of raw materials are also considered to be part of this sector.

In developed and developing countries, a decreasing proportion of workers are involved in the primary sector. Only about 2 percent of the U.S. labor force is engaged in primary sector activity today, a dramatic decrease from the mid-19th century when more than two-thirds of the labor force were primary-sector workers.

SECONDARY SECTOR

The secondary sector of the economy produces finished goods from the raw materials extracted by the primary economy. All manufacturing, processing, and construction lie within this sector.

Activities associated with the secondary sector include metal working and smelting, automobile production, textile production, chemical and engineering industries, aerospace manufacturing, energy utilities, engineering, breweries and bottlers, construction and shipbuilding.

In the U.S., a little less than 20 percent of the working population is engaged in secondary sector activity.

TERTIARY SECTOR

The tertiary sector of the economy is also known as the service industry. This sector sells the goods produced by the secondary sector and provides commercial services to both the general population and to businesses in all five economic sectors.

Activities associated with this sector include retail and wholesale sales, transportation and distribution, restaurants, clerical services, media, tourism, insurance, banking, healthcare, and law.

In most developed and developing countries, a growing proportion of workers is devoted to the tertiary sector. In the U.S., about 80 percent of the labor force are tertiary workers.

QUATERNARY SECTOR

Although many economic models only divide the economy into three sectors, others divide it into four or even five sectors. These final two sectors are closely linked with the services of the tertiary sector. In these models, the quaternary sector of the economy consists of intellectual activities often associated with technological innovation. It is sometimes called the knowledge economy. 

Activities associated with this sector include government, culture, libraries, scientific research, education and information technology. These intellectual services and activities are what drives technological advancement, which can have a huge impact on short- and long-term economic growth.

QUINARY SECTOR

Some economists further subdivide the quaternary sector into the quinary sector, which includes the highest levels of decision making in a society or economy. This sector includes top executives or officials in such fields as government, science, universities, nonprofit, healthcare, culture and the media. It may also include police and fire departments, which are public services as opposed to for-profit enterprises.

Economists sometimes also include domestic activities (duties performed in the home by a family member or dependant) in the quinary sector. These activities, such as childcare or housekeeping, are typically not measured by monetary amounts but contribute to the economy by providing services for free that would otherwise be paid for.

  The 5 Sectors Of Economy