Tertiary Industry

Definition

The tertiary industry, or service sector, comprises businesses that provide services rather than producing physical goods. Examples include healthcare, education, finance, hospitality, transportation, and personal services.

How the Tertiary Industry Fits the Economy

Economies are often described in three sectors:
* Primary: extraction of raw materials (agriculture, mining).
* Secondary: manufacturing and processing of goods.
* Tertiary: provision of services.

As economies develop, activity typically shifts from primary toward secondary and then tertiary sectors. The tertiary sector now represents the largest share of employment and value added in many advanced economies.

Key Points

• The tertiary sector includes both for-profit firms (banks, hotels, consultancies) and nonprofit or public services (public education, health services).
• Services are intangible and often require ongoing human expertise, which affects how they are priced and evaluated.
• Some high-knowledge, technology-driven services are increasingly classified as quaternary activities (information and knowledge-based services).

Examples of Tertiary Activities

• Financial services: banks, investment firms, insurance providers
• Health and social care: hospitals, clinics, nursing services, veterinarians
• Education: schools, universities, vocational training
• Hospitality and food service: hotels, restaurants, catering
• Transportation and logistics: passenger transit (taxis, buses, subways), freight carriers
• Personal services: hairdressers, fitness trainers, repair services
• Business services: legal, accounting, consulting, advertising

Pricing and Measurement Challenges

Services are intangible and heterogeneous:
* Intangibility makes it harder to assign fixed prices compared with physical goods.
Quality often depends on individual providers’ skills and discretion, creating variability.
Measuring value added in services can be complex, particularly for new digital and knowledge-based offerings.

From Tertiary to Quaternary

Rapid growth in information, telecommunications, software, and data-driven businesses has led to a further subdivision: the quaternary sector. Quaternary activities emphasize knowledge, research, information processing, and high-value professional services that rely on specialized expertise and data.

Global Tertiary Output

The service sector is the largest contributor to value added in many countries. According to World Bank data, the largest service economies include (by service value added): United States, China, Japan, Germany, United Kingdom, France, India, Italy, and Canada.

Why It Matters

The tertiary industry drives employment, innovation in customer-facing and knowledge-based services, and economic complexity. Understanding its structure and challenges is essential for policymakers, businesses, and workers responding to technological change and shifting demand.