Simone Lawson
Services generate more than two-thirds of GDP in most MDCs, compared to less than one-half in most LDCs. The service sector of the economy is subdivided into three types: consumer services, business services, and public services. The majority of workers in MDCs are employed in the tertiary sector of the economy, which involves the provision of goods and services to people in exchange for payment. This is in contrast to LDCs, where less than 10% of the labor force provides services, and most people work in the primary sector, such as agriculture. The higher percentage of urban residents in MDCs is a result of economic shifts over the past two centuries, including the Industrial Revolution and the growth of the service sector.
| Characteristics | Values |
|---|---|
| Services that constitute up to two-thirds of GDP in MDCs | Consumer services, business services, and public services |
| Percentage of service workers in MDCs | Majority of workers, including three-fourths of workers in North America |
| Percentage of service workers in LDCs | Typically less than one-fourth, with less than 10% in some cases |
| Examples of service-sector jobs | Retailing, banking, law, education, government, supermarkets, and restaurants |
| Consumer spending | The biggest component of GDP, accounting for more than two-thirds of the US GDP |
| Government spending | Equipment, infrastructure, and payroll |
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What You'll Learn
Consumer services
Services constitute up to two-thirds of GDP in MDCs (More Developed Countries). The service sector of the economy is subdivided into three types: consumer services, business services, and public services.
In MDCs, people typically purchase food at supermarkets or restaurants, and the employees working in these places are examples of consumer service workers. The customers, on the other hand, pay for the food with money earned from other service-sector jobs, such as retailing, banking, law, education, and government.
The higher percentage of urban residents in MDCs is a result of changes in the economic structure over the past two centuries. The Industrial Revolution in the 19th century and the growth of services in the 20th century led to rural residents migrating to cities in search of work in factories and the service sector. This shift has resulted in a decrease in the percentage of people living in rural areas.
In LDCs, the percentage of service workers varies and is typically less than one-fourth. In some LDCs, workers employed by the government in agriculture or manufacturing may be counted as part of the service sector. Services in LDCs may be provided at periodic markets, which are temporary gatherings of individual vendors offering goods and services in public spaces on specified days. These markets cater to areas with low populations and incomes where purchasing power may not support full-time retailing.
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Business services
Services generate more than two-thirds of GDP in most MDCs (majority-world countries). In MDCs, the majority of workers are employed in the tertiary sector of the economy, which involves providing goods and services to people in exchange for payment. In contrast, less than 10% of the workforce in LDCs (less-developed countries) provides services.
Another critical aspect of business services is their contribution to the growth of other businesses. B2B (business-to-business) service companies help improve their clients' operations and profitability. For instance, a digital marketing agency can help a business increase its online presence and reach new customers. Similarly, IT services can provide technological solutions to enhance a company's efficiency and security.
The service-based business model offers several advantages. Unlike product-based businesses, service businesses often require less upfront investment in manufacturing or inventory. Instead, they focus on delivering quality services that customers value. As a result, service businesses can be more profitable, flexible, and scalable, allowing them to quickly adapt to new technologies and trends to stay competitive.
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Public services
In MDCs, the majority of workers are employed in the tertiary sector of the economy, which involves the provision of goods and services to people in exchange for payment. This is in contrast to LDCs, where less than 10% of the labour force provides services. In MDCs, people purchase food at supermarkets or restaurants, and the people employed in these places are examples of service-sector workers. The customers, on the other hand, pay for the food with money earned in service-sector jobs, such as retailing, banking, law, education, and government.
In addition to the Maryland PSC, another example of public services in MDCs is the Maryland Department of Public Safety and Correctional Services (DPSCS). The DPSCS is responsible for protecting the public, its employees, and the justice-involved individuals it is responsible for. This includes the custody of pretrial detainees, incarcerated individuals, and supervised offenders. The DPSCS also offers the Incarcerated Individual Locator, which enables members of the public to learn the housing location of incarcerated individuals.
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Urbanisation and the shift to services
Rural residents have been migrating to cities in search of employment opportunities in factories and the expanding service sector. The decline in the need for farmworkers has further pushed people away from rural areas, while the availability of jobs in manufacturing and services has drawn them towards urban centres. Consequently, the percentage of urban residents in MDCs has risen, reflecting the distribution of services and economic activities within these countries.
In MDCs, the majority of workers are engaged in the service sector, contributing significantly to their GDP. Services generate more than two-thirds of GDP in most MDCs, with North America leading the way, where three-fourths of workers are in the service industry. This sector includes a diverse range of occupations, such as retailing, banking, law, education, and government. The service sector can be broadly categorised into three types: consumer services, business services, and public services, each with its own specific subsectors.
The contrast between MDCs and LDCs (Less Developed Countries) is stark in terms of service sector engagement. In LDCs, less than 10% of the labour force typically provides services, with most people working in the primary sector, such as agriculture. The percentage of service workers in LDCs varies and may include government-employed agricultural or manufacturing workers. Services account for less than one-half of the GDP in most LDCs, and the distribution of service workers is opposite to that of primary workers.
The urban-rural divide is also more pronounced in LDCs, where residents may have to travel long distances to access basic services like shops and hospitals. Periodic markets, which offer goods and services for a day before moving to another location, are a common feature of LDCs and rural areas of MDCs, catering to areas with low populations and incomes.
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Consumer spending
The importance of consumer spending in MDCs can be attributed to the economic structure of these countries. Over the past two centuries, MDCs have undergone significant economic shifts, starting with the Industrial Revolution in the nineteenth century and the growth of services in the twentieth. This transition has led to a decrease in rural residents as they migrate to urban areas to work in factories and the service sector. As a result, the percentage of urban dwellers is high in MDCs, and these residents often work in service-sector jobs, purchasing food and other goods at supermarkets or restaurants.
In North America, three-fourths of workers are in the service sector. This is in stark contrast to LDCs, where typically less than one-fourth of workers are in the service sector. The difference in economic structure between MDCs and LDCs is reflected in their GDP composition. Services generate more than two-thirds of GDP in most MDCs, while in most LDCs, it accounts for less than one-half.
The service sector in MDCs can be subdivided into consumer services, business services, and public services, each with its own subsectors. Consumer services, in particular, aim to provide services to individual consumers who desire and can afford them. Examples of consumer services in MDCs include retailing, banking, law, education, and government.
The high proportion of consumer spending in MDCs highlights the importance of consumers' continued spending ability to sustain economic growth. Labor market strength is key to maintaining positive economic momentum.
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Frequently asked questions
Services that constitute up to two-thirds of GDP in MDCs include consumer services, business services, and public services.
Consumer services are services provided to individual consumers who desire them and can afford to pay for them.
A haircut is an example of a consumer service.
Retailing is an example of a business service.
Education is an example of a public service.
