What’s it: The secondary sector includes manufacturing and construction activities. Manufacturing involves processing inputs such as raw materials into finished goods or semi-finished goods – requiring further processing to produce finished goods. Meanwhile, construction provides finished buildings and infrastructure by turning raw materials such as concrete, wood, and cement into structures such as roads and buildings.
Some manufacturers produce goods for sale to consumers. Others sell them to other businesses, such as office supplies. Then, some goods are also sold to other manufacturers, such as industrial, capital, and semi-finished goods.
Businesses in the secondary sector buy inputs and process them into products such as cars, textiles, and electronic devices. Some process raw materials from the primary sector into semi-finished materials and components such as semiconductors. Others buy and process these semi-finished goods into finished goods the way an automaker buys tires and mechanical, electrical, and electronic components to build a complete car.
Manufacturing activity is essential in driving economic growth and development. This sector creates jobs and produces higher output than the primary sector. Our daily goods mostly are output from this sector, ranging from canned food and drinks to smartphones and laptops.
Secondary sector contribution to the economy
Countries are transitioning from a primary sector based to a manufacturing sector based. The process we call industrialization is the key to economic growth and increased incomes by creating household jobs and output on a large scale.
The secondary sector contributes to the economy through the output and jobs it creates. Based on data from the World Bank, manufacturing adds value to around 16% of world GDP in 2022. Moreover, it also creates 23% of the total employment, citing data from the International Labor Organization (ILO).
Due to higher added value, manufactured products contribute more significantly to exports than the output from the primary sector. Thus, manufacturing product-exporting countries can generate higher marginal GDP growth.
Higher marginal GDP growth ultimately contributes to achieving higher incomes. Manufacturing growth facilitated greater social mobility for the next generation as the service sector expanded, growing a middle class.
In addition, increased manufacturing activity also contributed to increased tax revenues by expanding the taxpayer base. Governments can use it to fund vital government expenditures such as security, defense, infrastructure, education, and health care.
Secondary sector output and activity
The secondary sector takes raw materials from the primary sector to be processed into finished or semi-finished goods for sale to domestic businesses or consumers and for export. Some manufacturing businesses also assemble inputs from other manufacturing businesses (semi-finished output) into finished goods.
Activities in the secondary sector include:
- Construction
- Purification
- Refinery
- Synthesis
- Fabrication
- Assembly
Because it is vital to spur economic development, several countries continue to try to grow the secondary sector. They encourage local companies to invest.
In addition, some also invite foreign companies to set up factories in their countries. They may also invite foreign workers to work to support the activity because qualified workers are limited in the domestic market.
Investment and foreign workers are among the ways to transfer knowledge from abroad to within the country. It allows a country to transition into a developed country.
Classification of manufacturing activities
Businesses in the secondary sector can be both capital-intensive and employee-intensive. For example, large manufacturers such as automobiles and electronic devices are capital-intensive examples. They rely on advanced equipment and technology, such as robots and computer-assisted machines, to produce output.
Large-scale manufacturing requires significant financial capital to invest in plants and equipment. They also usually have complex organizations and need a skilled, specialized workforce.
Meanwhile, employee-intensive manufacturing is usually household-based. It produces simple goods, such as food, and non-standard goods, such as personalized work or designs.
Some manufacturers may operate on a larger scale but still rely on human labor or simple machines such as cigarette manufacturing. Apparel, furniture, and jewelry are other examples of labor-intensive manufacturing.
Examples of output from manufacturing
Manufacturing produces various goods such as:
- Food and beverage products such as food, meat, milk
- Tobacco such as cigarettes and cigars
- Textiles and apparel
- Leather and footwear products
- Wood-based products such as veneer sheets and panels
- Paper and tissue
- Coke and refined oil
- Fertilizers and pesticides
- Plastics and synthetic rubber
- Paints, varnishes, and printing inks
- Soap and detergent
- Artificial fiber
- Drugs and pharmaceutical products
- Tires and vehicles
- Electronic devices
- Industrial goods and equipment, such as heavy machinery
You can check the classification more in the International Standard Industrial Classification (ISIC) issued by the United Nations.
Criticism of the secondary sector
Some manufacturing processes consume large amounts of energy, for example, metallurgical processes in steelmaking. Meeting them requires large-scale coal, oil, and natural gas mining, which encourages over-exploitation of natural resources and results in environmental damage.
In addition, manufacturing also pollutes the environment because it emits waste. Its activities cause pollution to land, land, and water.
Apart from manufacturing activities, waste can also come from manufactured products. Plastic is an example. It is difficult to decompose naturally, causing waste to accumulate on land and in the oceans.
Another example is pesticides, which are responsible for killing microorganisms important for soil fertility. It damages the soil system and harms the ecosystem.
Long story short, activities in the secondary sector have been criticized for contributing to greenhouse gas emissions and other natural damage through:
- Burning fuel to produce energy to make things like steel, cement, and plastic
- Deforestation for industrial land and raw materials
- Transportation to deliver raw materials and goods
- Manufacturing product waste, which is difficult and takes a long time to decompose naturally
- Sectors Where The Business Operates
- How Does The Government Play A Role In The Economy?
- External Sector: Its Effect on the Economy
- Household Sector: Definition and Role in the Economy
- Macroeconomic Sector: Types, Roles
- Government Sector: Meaning, Budget, and Impact on the Economy
- Economic Sector and Its Classification
- Tertiary Sector: Examples and Its Contribution to the Economy and Employment
- Quaternary Sector: Examples, Contributions, and How It Grows
- Primary Sector: Output and Economic Activities Involved
