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What is a Tertiary Industry?

By Dale Marshall
Updated May 16, 2024
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A tertiary industry is one which provides services to the other sectors of the economy — the primary and secondary sectors — as well as to other tertiary industries and consumers. Difficult to define at times, a tertiary industry operates within what economists call the tertiary sector of the economy. The primary sector is occupied by those industries that extract raw materials from the earth, whether in agriculture, fishing, or mining. The secondary sector converts the raw materials delivered by the primary sector into products like automobiles, ethanol, and bacon. The tertiary sector serves all industries and the people in them, both by delivering products produced in the other two sectors and providing services such as health care, accountancy, education, and entertainment.

The difficulty of defining any particular industry's place is illustrated by the many farms that both grow fresh produce and sell it directly to the public in their own shops, or by public utilities that generate energy, as well as deliver it to customers. Is the farm primary because it grows fresh food, or tertiary because it sells that food to the public? Is the utility secondary because it converts raw materials into energy, or tertiary because it sells that energy? On the other hand, many industries are truly tertiary in nature, neither extracting, growing, or manufacturing, and yet contributing significantly to the economy and to society. Some examples of strictly tertiary industries are education, banking, transportation services, entertainment, and charitable services.

The fact that an industry is classified as a tertiary industry doesn't diminish its importance in the economic overview, because a large economy requires each of the sectors to remain viable. Historically, economies progress from a heavy reliance on agriculture, fishing, and extraction, to the development of a manufacturing base, the secondary sector. The tertiary sector is always a component of the economy, but it grows with the manufacturing sector, and eventually grows larger, as the economy focuses more and more on the different services offered by tertiary industries.

When the economy performs poorly, employment within a tertiary industry may be more vulnerable than others, but this isn't a hard-and-fast rule. Education is a tertiary industry whose employment and other indices of economic activity will respond more to changes in the population of school-age children than the stock market, for instance. Travel and entertainment, on the other hand, is a tertiary industry that's very vulnerable to economic performance overall. As confidence in the economy's performance declines, consumers will refrain from discretionary spending, instead saving for the proverbial rainy day.

Some observers have noted that the tertiary sector has two components: one involved in the delivery of tangible goods, and the other devoted to the delivery of intangible goods — things like education, health care, financial services, and entertainment. These are all services the value of which is difficult to determine, yet overall, these industries comprise a significant percentage of the economy, which is why the tertiary sector is often called the service sector.

Considerable controversy exists among economists about the proper role of the tertiary sector and the industries it includes in a maturing economy. As the primary sector consolidates and globalizes, and the secondary sector loses employment to cheaper labor in developing economies, the labor displaced from them gravitates toward generally lower-paying jobs in the tertiary sector, raising questions about the quality of life for future generations.

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