There is more than one way to classify businesses by sector. Some economists divide businesses by corporate, government and nonprofit organizations. But most prefer to divide the economy into three broad sectors: primary, secondary and tertiary. However, this doesn’t take into account a fourth sector, which includes governmental agencies and government-controlled organizations.
The primary sector serves as the foundation of all business. Think of this as the raw materials that support everything else. Mining, agriculture, fishing, farming, forestry and mining all fall under the primary sector. In developing areas of the world, the primary sector takes up a sizable chunk of the overall economy. In the U.S., though, the primary sector is seeing a gradual transformation thanks to technology. For this reason, employment has shifted in recent decades to the secondary and tertiary sectors.
Once those raw materials have been cultivated, the secondary sector turns them into products. This sector involves manufacturing and industry, which has traditionally employed a decent section of the U.S. workforce. However, employment in manufacturing has dropped in recent years, with the Bureau of Labor Statistics expecting this downward trend to continue. Like the primary sector, the secondary sector’s job growth has been negatively affected by technology, which has allowed manufacturers to accomplish more with far fewer resources.
The vast majority of U.S. workers are employed in the tertiary sector, which is the business segment that provides services to customers. The tertiary sector includes those working in retail, restaurants, hotels, sales and similar fields, often relying heavily on the goods produced by the primary and secondary sectors. The tertiary sector also includes the very transportation industry that carries manufactured goods to other tertiary businesses, and then provides those products to the consumers who want them. The rapid growth of the telecommunications industry has led to a possible subset of the tertiary sector, called the quaternary industry sector. This subsector includes internet, cable and phone providers.
Although government agencies and their employees technically provide services to consumers, this section of the economy differs so dramatically from the tertiary sector that it’s worth separate consideration. The pubic sector includes organizations that are owned and operated by government agencies, including schools and libraries. Unlike private-sector businesses, these organizations rely heavily on taxpayer dollars allocated by politicians, rather than revenue coming in from customers paying specifically for services. Through the use of requests for proposals, these agencies can also outsource work to private companies, which may perform work for a combination of public and private sector clients.
- Management Mania: Primary Sector (Raw Materials)
- World Atlas: What Are Primary, Secondary, Tertiary, Quaternary, And Quinary Industries?
- Management Mania: Secondary Sector (Manufacturing and Industry)
- Bureau of Labor Statistics: December 2015 Industry Employment and Output Projections to 2024
- Financial Times: Most US Manufacturing Jobs Lost to Technology, not Trade
- Investopedia: Tertiary Industry
- PrivacySense.net: Public Sector
Stephanie Faris is a novelist and business writer whose work has appeared on numerous small business blogs, including Zappos, GoDaddy, 99Designs, and the Intuit Small Business Blog. She worked for the State of Tennessee for 19 years, the latter six of which were spent as a supervisor. She has written about business for entrepreneurs and marketing firms since 2011.