Tertiary and Quaternary Activities

Written and reviewed by Subhra Gupta, Humanities faculty at UniDrill (M.A. Sociology, University of Delhi · 7 years teaching Humanities). Based on NCERT Geography Class XII (Fundamentals of Human Geography), Chapter 6.

What exactly did you pay the doctor for?

You walk out of a clinic with no new object in your hands, yet you paid the bill without complaint. You paid for the doctor's training, judgement and time. The same is true when a lawyer drafts an agreement, a teacher explains a theorem or a driver gets you across town. This chapter is about the part of the economy that sells skill and service instead of things, why it grows as countries get richer, and how its top layers (knowledge work and decision making) now move across the globe through phone lines and fibre cables.

The big idea: more development, more services

In the early stages of development most people work in the primary sector (farming, mining, fishing). In a developed economy the majority work in tertiary activities, with a moderate share in the secondary sector. The reason is simple. Once farms and factories can produce enough with fewer workers, the extra labour and income flow into things people want after their basic needs are met: health care, education, travel, banking, entertainment.

Tertiary activities have two sides. Production means the provision of a service that is consumed on the spot, and its output is measured indirectly through wages and salaries, because there is no tangible product to count. Exchange means trade, transport and communication, which are used to overcome distance. Either way, tertiary activities do not process physical raw materials. They deliver commercial output of services.

The line between secondary and tertiary work is skill. A factory's output depends on machinery, production techniques and factory processes. A service depends on the specialised skills, experience and knowledge of the worker. Plumbers, electricians, barbers, shopkeepers, drivers, cashiers, teachers, doctors, lawyers and publishers are all tertiary workers.

Types of tertiary activity

Tertiary activities are grouped into trade and commerce, transport, communication and services. Above them sits the knowledge-oriented segment of the service sector, which splits into quaternary and quinary activities. The chapter walks through these in that order, so the rest of the notes follow the same path.

Trade and commerce: where buying and selling happens

Trade is buying and selling goods produced elsewhere. Every retail and wholesale service in it is meant to earn a profit. The towns and cities where this takes place are trading centres, and they are of two kinds.

Pause and predict: why do periodic markets rotate between places instead of operating daily in each village?

Check your answer: a small village does not have enough buyers to keep a shopkeeper busy every day, but a large area collectively does. By moving from place to place on fixed dates, the shopkeepers stay busy all week and the whole area is served, while villagers buy their accumulated needs on market day.

Retail and wholesale trading. They sit at two ends of the same chain, and CUET likes to mix up their features.

Retail itself has changed in stages. Consumer cooperatives were the first large-scale innovation in retailing. Departmental stores give department heads the authority to buy and oversee sales in their own sections. Chain stores buy most economically, sometimes directing goods to be made to their specification, employ highly skilled specialists and can experiment in one store and apply the results to many.

Transport and communication: the services that shrink distance

Transport is the organised service that carries people, materials and manufactured goods from one place to another, and at every stage it adds value to the material. Chapter 7 covers the modes in detail. Here you need the ideas of distance and network.

Distance can be measured in three ways, and the one that matters depends on what you are deciding.

In choosing a mode of transport, distance in terms of time or cost is the deciding factor. When many places are joined, they form a network made of nodes and links. A node is a meeting point of two or more routes, a point of origin, a destination or a sizeable town along a route. A link is any road joining two nodes. A developed network has many links, which means its places are well connected.

Demand for transport rises with population size. The route pattern depends on the location of cities, towns, villages, industries and raw materials, the pattern of trade between them, the landscape and climate in between, and the funds available for overcoming obstacles.

Communication is the transmission of words, messages, facts and ideas. Writing made messages dependent on transport because they had to be carried by hand, animal, boat, road, rail and air, which is why transport routes are also called lines of communication. Mobile phones and satellites have freed communication from transport, but not completely: post offices still handle huge volumes of mail because the older systems are cheap.

Telecommunication cut the time to send a message from weeks to minutes, and mobile telephony made it direct and instant. Radio and television relay news and pictures to vast audiences, which is why they are called mass media. Satellites relay information to and from space, and the internet has revolutionised global communication.

Services: from the grocer to the consultant

Services work at many levels. Some serve industry, some serve people and some serve both, like the transport system. The textbook separates them by order and by the kind of labour.

Four kinds of service need separate mention. Professional services are mainly health care, engineering, law and management. Recreational and entertainment services locate according to the market: a multiplex or restaurant may sit in or near the Central Business District (CBD), while a golf course chooses a site where land costs less than in the CBD. Governments or companies supervise or perform many services, such as highways and bridges, fire fighting, education and customer care, and state and union legislation has set up corporations to control transport, telecommunication, energy and water supply. Personal services help people in daily life and employ unskilled workers who have migrated from rural areas as housekeepers, cooks and gardeners. This group is generally unorganised. Mumbai's dabbawala (tiffin) service, which serves about 1,75,000 customers across the city, is the textbook example.

Who works in services today?

Most people today are service workers, and services exist in every society. Developed countries employ a higher percentage of workers in services than less developed countries do. Across the world, employment in services keeps rising while it stays unchanged or falls in primary and secondary activities.

Tourism: the world's largest service activity

Tourism is travel undertaken for recreation rather than business. The textbook calls it the world's single largest tertiary activity in total registered jobs (250 million) and revenue (40 per cent of total GDP). It also employs many local people in accommodation, meals, transport, entertainment and special shops, and it grows infrastructure industries, retail trade and craft industries (souvenirs). Some regions have seasonal tourism because holidays depend on favourable weather, while others attract visitors all year.

Why do tourists go where they go? Four pulls explain most destinations.

The warmer places around the Mediterranean coast and the west coast of India are popular tourist destinations. Others are winter sports regions in mountainous areas and various scenic landscapes and national parks.

Beyond the textbook. For the exam: tourism is the largest tertiary activity, with 250 million jobs and 40 per cent of the total GDP. Write these numbers as given. In reality: the share of tourism in world output depends on how it is counted, and industry bodies usually put the combined direct and indirect contribution at around a tenth of world GDP. Why it matters: when a number looks very large, a quick check of the definition tells you why different sources disagree, which is a useful habit for data-based questions.

Medical tourism and outsourced medical services

When medical treatment is combined with international tourism, we call it medical tourism. About 55,000 patients from the USA visited India in 2005 for treatment. That is a small number compared with the millions of surgeries performed in the USA each year, but India has emerged as the leading country of medical tourism in the world, with world class hospitals in the metropolitan cities. Developing countries such as India, Thailand, Singapore and Malaysia benefit from it.

A related trend is the outsourcing of medical tests and data interpretation. Hospitals in India, Switzerland and Australia perform services ranging from reading radiology images to interpreting MRIs and ultrasound tests. Outsourcing helps patients when it improves quality or provides specialised care.

Quaternary activities: the knowledge sector

A CEO of a multinational in Copenhagen or New York and a medical transcriptionist in Bangalore have something in common: both work in the knowledge-oriented part of the service sector. Quaternary activities are the collection, production and spread of information, centred on research and development. They are an advanced form of service that needs specialised knowledge and technical skills.

Along with the tertiary sector, the quaternary sector has replaced most primary and secondary employment as the basis of economic growth. In developed economies over half of all workers are in the "knowledge sector". Mutual fund managers, tax consultants, software developers and statisticians, and the people working in offices, schools, university classrooms, hospitals, doctors' offices, theatres and accounting and brokerage firms all belong here. Like some tertiary functions, quaternary activities can be outsourced. They are not tied to resources, affected by the environment or necessarily located near a market.

Quinary activities: the "gold collar" jobs

At the top are the quinary activities, performed by the highest level decision makers and policy makers. They are services that focus on creating, re-arranging and interpreting new and existing ideas, interpreting data and using and evaluating new technologies. They are often called gold collar professions, a subdivision of the tertiary sector representing special and highly paid skills of senior business executives, government officials, research scientists, and financial and legal consultants. Their importance in the structure of advanced economies far outweighs their numbers.

Collar colours are an easy way to remember job types, though usage varies a little between books.

Two views. For the exam: the quaternary and quinary activities are separate levels, with quinary as the top layer of decision making. Another reading: some geographers treat the quinary layer as simply the highest part of the quaternary, because both deal with information and ideas. The exam question usually gives a clear clue, such as "highest level decision makers" for quinary or "research and information" for quaternary.

Outsourcing, off-shoring, BPO and KPO

Outsourcing (contracting out) means giving work to an outside agency to improve efficiency and reduce costs. When the work moves to overseas locations it is called off-shoring, though the two terms are often used together. Outsourced activities include information technology (IT), human resources, customer support and call centres, and at times manufacturing and engineering.

Why does it happen? Comparative advantage is the main reason it continues. A company in Hyderabad or Manila can do a project based on GIS techniques for a client in the USA or Japan, because IT skilled staff with good English language skills are available at lower wages than in developed countries, and overhead costs are much lower. Data processing is an IT service that can be carried out in Asian, East European and African countries. Even a less populous country like Botswana can take up such work.

Outsourcing has led to a large number of call centres in India, China, Eastern Europe, Israel, the Philippines and Costa Rica. It has created new jobs there. It tends to come to countries where cheap and skilled workers are available, and these are also out-migrating countries, so outsourced work may reduce migration from them. At the same time, job-seeking youth in the outsourcing countries show resistance.

KPO and home shoring, which is an alternative to outsourcing, are new trends in quinary services.

Pause and predict: a Hyderabad firm carries out a GIS based project for a company in Japan. Which two terms apply?

Check your answer: it is outsourcing because the Japanese firm contracts the job out, and off-shoring because the work is moved to an overseas location. Since GIS analysis needs specialised skill, it also leans towards KPO-type work.

Two views. For the exam: outsourcing reduces costs, increases efficiency and creates jobs in the receiving countries. Another reading: economists also point to adjustment costs in the countries that give the work out, where some job-seekers resist it, and to the question of how long the wage advantage of the receiving countries lasts. Questions on this usually test the textbook position; the second view helps you write a balanced long answer.

The digital divide

Opportunities from information and communication technology (ICT) are unevenly distributed around the globe because countries differ economically, politically and socially. How quickly a country can provide ICT access and benefits to its citizens is the deciding factor. Developed countries have surged ahead while developing countries have lagged behind, and this gap is the digital divide. It exists inside countries too. In a large country like India or Russia, metropolitan centres have better connectivity and access to the digital world than peripheral rural areas.

Exam traps

60-second revision

Where this chapter connects

• Previous: Secondary Activities covers manufacturing, which tertiary activities serve and distribute.
• Next: Transport and Communication expands the transport and communication services introduced here into modes, routes and networks.
• Also read: International Trade extends trade and commerce to the world scale, and Human Settlements shows how functional towns grow around these services.