11.5: Tertiary Sector

Tertiary Sector

Jobs in the service industries have grown faster than any other part of the American economy since 1970. These jobs are in the tertiary sector and people working in these jobs handle the products created in the primary and secondary sectors of the economy. So you work in the service sector if you transport goods, sell goods or somehow help others use those goods. Service sector jobs include things like flipping hamburgers or selling shoes, but it involves a lot more. Entertainment, tourism, media, healthcare, financial and legal industries, and education are all in the broadly defined service sector. Before the 1980s, far more Americans worked in the primary and secondary sectors of the economy. Around 1970, a dramatic increase in the service sector, which now accounts for more than three fourths of all jobsin the US. In some regions, that percentage is even higher.

Figure : Ruston, LA - Wal-Mart has come to dominate the retail landscape of many small towns in the US, and their treatment of employees emblematic of the post industrial, service economy of the US.

Some service sector jobs are well-paying, but others are not. The growth of the service sector has been in part responsible for a bifurcation of the American economy. In the 1950s, nearly one-third of all US jobs were in manufacturing. Many of those jobs were relatively low skill, not requiring a college degree, but still paid good wages. As those jobs disappeared in the 1970s, Americans turned to service sector jobs. For workers in some places, manufacturing jobs were replaced by clean, safe, well-paying service sector jobs, like computer programming. Many regions in the US haven’t been so lucky. Workers in those locations were forced to either move or to accept low-paying service sector jobs, like working at Wal-Mart. As a result, since the early 1980s, the lower middle class has gotten much smaller, while the size of the lower class (working poor) has exploded. At the same time, pay for people in the upper-middle class has grown somewhat. The wealth of the tiny upper class, or so-called “one percent” has skyrocketed. The result is a widening gap between the haves and the have-nots.

Kondo, et. al. "Income inequality and health: the role of population size, inequality threshold, period effects, and lag effects. "Journal of epidemiology and community health 66.6 (2012): e11-e11.

Gini coefficient

Social scientists measure wealth inequality with a statistic called the Gini coefficient and graphing the change in the Gini coefficient shows how the gap between the rich and poor has widened over time. The Gini coefficient is a relative measure of wealth not an absolute measure of income. In other words, the average American may or may not be poorer than they used to be. They may even make a bit more money, or have a few more things. What is certain though is that average Americans are poorer relative to the wealthiest among us.

Figure : Infographic. Households in the top percentiles of the economy have made great strides in improving their situation, while those at the bottom of the social ladder have improved only marginally (inflation adjusted to 1970 dollars). Source: US Census, Wikimedia.

The gap has grown much faster since 1980, as the United States underwent both economic restructuring away from manufacturing and adopted the logic of supply-side economics (Reaganomics) to restructure both the tax structure and how we spend tax money. The economy has grown greatly since 1980, but little of the benefits of this growth has gone to average Americans. The Great Recession of the late 2000’s made it worse. Most Americans therefore just feel poorer, which may seem a silly thing to worry about, but feeling poor has significant effects on things like health outcomes, crime, and psychological health. In recent years the pattern of income equality in the United States has come to look much less like the pattern found in Europe, and more like that found in developing economies of Latin America.

The Gini coefficient also varies considerably within the United States. As noted earlier in this text, income inequality is lower in many of the farming states where the national grid system created a vast array of equal-sized farms. Utah, with its unique religious, cultural and ethnic profile has the lowest (most equitable) Gini coefficient. Other states with homogeneous populations also have low Gini coefficients. In some wealthy states (New York, California, Connecticut), where there is a great variety in ethnicity, religion, and culture coupled with exceptionally lucrative industries (software, banking, entertainment, etc.) wealth inequality is high. States in the Deep South (Louisiana, Mississippi, Alabama, Florida) with a strong legacy of racism and minimal government investment in education also rank high in terms of inequality; while at the same time counting among the poorest states in absolute terms.

Figure Gini Coefficient by County. Source: Wikimedia

In many of the poorest regions of the United States, low-paying service sector jobs dominate the local economy. Most of these service sector jobs, especially in retail, are non basic, which you will recall, indicates that they do not bring money in from outside the local area. Depending on the ownership of the retail operation, some retail stores, like WalMart, effectively remove more money from the local economy than the jobs create, helping impoverished local people via a process opposite the multiplier effect.

Neckerman, Kathryn M., and Florencia Torche. "Inequality: Causes and consequences." Annu. Rev. Sociol. 33 (2007): 335-357.

Wal-Mart

Locally owned and operated businesses tend to circulate money within a local economy. Large retail chain stores, though they may employ many dozens of people, often pay little and rarely do their profits stay local. This effect has been called the Wal-Martization (sometimes Wal-Marting) of the economy by some observers because Wal-Mart pays poor wages and provides few benefits.

Wal-Mart’s business model has negative consequences for the economic structure of many small towns. Wal-Marts are accused of bleeding local economies dry by squashing locally owned (mom and pop) competition in the retail sector using their massive advantage in economies of scale. Wal-Mart also undermines businesses that do business with locally owned rivals of Wal-Mart. Manufacturers, transportation workers, and even local radio/newspaper businesses often suffer when Wal-Mart comes to town.

A large service sector can be beneficial if jobs are well-paying quality and/or function as generators of basic income. Los Angeles, for example, has a large service sector. A significant number of service sector jobs in L.A. are in the entertainment industry. People that work in television, movie, and music production are numerous and many are well-paid. Tourism also thrives in Los Angeles and though there are many more low paying jobs (hotel workers, e.g.) within the tourism industry, these jobs represent a significant source of basic income for the economy of Southern California, which generates a multiplier effect.

Figure Natchitoches, LA - This general store manages to remain open in this small town in Louisiana, thanks to its touristy appeal. Most similar "mom and pop" operations fail competing with Wal-Mart.

Tourism

Tourism is likely the world’s largest industry, employing more people and generating more revenue than any other economic activity. Locations attracting numerous visitors are lucky. Not every place is attractive to tourists. Tourism can be great because it functions as a valuable source of basic income, especially in locations where extractive industries and/or manufacturing is not possible or profitable. Remote locations, in mountains or along sea coasts with nothing but great scenery and relaxation can attract visitors and their money.

Tourists are defined by their spatial behavior. Generally, if you stay more than 24 hours in a location outside your hometown, then you are considered a tourist. California is, by a wide margin, the top destination for Americans traveling within the US. If you stay a day or more in another country, then you are an international tourist. While European countries rank consistently high for the total number of international tourists, the United States easily outpaces all other countries in terms of the amount of money spent by international tourists. International tourists favor New York, Florida, and California by wide margins. Domestic tourism is important as well.

Tourism geography is an exciting sub-discipline within geography. Part of what makes it so interesting is analyzing the variety of strategies and tactics used to attract visitors. Nice beaches and warm weather are major attractions(Hawaii, Florida, California), but people also will visit a desert wasteland if the right type of entertainment can be provided (Las Vegas). Amusement parks (Disney), historic sites (the Alamo, the Washington Monument), unusual natural features (Niagara Falls, Grand Canyon) sporting venues, and even museums can be major attractors. In recent years, festival mall spaces, like the Mall of America near Minneapolis, Minnesota have become significant tourist hot spots, attracting tens of millions of visitors annually. Small towns and locations without exceptional natural resources frequently market themselves as “historic” or “quaint”, or rely upon themed festivals to attract people from out of town. Most are not successful.

Figure Ft. Stockton, TX - Paisano Pete, a statue of a roadrunner, serves as a tourist attraction in a remote town in West Texas. It reminds us of the lengths some locations will go to attract tourist dollars.

Tourism, if well managed, may also be minimally damaging to the environment and even promote ecosystem conservation (ecotourism). Yosemite National Park, for example, draws nearly four million visitors yearly, and in turn, generates millions of dollars for the regional economy all the while ensuring the maintenance of an exceptional natural resource. Meanwhile, the neighboring Hetch Hetchy Valley, dammed by the Federal Government in 1923, attracts only a few visitors (though it does supply water to the Bay Area). Ecotourism may serve to help protect endangered rainforests, the Serengeti Plains in Africa, glacial regions of the Arctic and Antarctica, among others.

Poorly managed, tourism fails to benefit local economies, causes environmental havoc and endangers local cultural traditions. Tourist destinations in many developing economies are almost completely run by outside interests. If you were to visit Cozumel, Mexico for example, you might arrive on an American-owned cruise ship or airline. You might go snorkeling, but you may find the coral reefs damaged by the construction of the deep water port where your cruise ship docked, and the effluent from an overtaxed sewage system not designed to handle thousands of tourists. If you stay in an “All-Exclusive” resort (and there are many), your vacation dollars probably pay local housekeepers, kitchen workers, and maintenance men, but the profits probably go back to the ownership group in the US or Europe. This is part of a classic economic problem known as the multiplier leakage. The overall benefit to locals might be minimal or even harmful in the long-run. Still, most locations work very hard to establish a vibrant tourist economy.