Service Industry

Service industry refers to an industrial sector comprised of firms or other organizations whose main business is the provision of intangible products to clients and customers; this may include provision of access to the tangible products made by other sectors (e.g., the retail trade provides access to manufactured products). Service industries may provide their services to consumers (and the public at large), or to businesses or other organizations.

Consumers not only consume goods like motor cars, TV sets, canned foods. They also consume services—for example, garage services to support drivers, broadcasting services supplying TV content, retail services stocking food. The act of consumption can also be seen in terms of consumers producing some of their own services—driving the car produces a transport service, cooking food a catering service, and so on. The service economy is usually discussed in terms of the services produced through paid work in the formal economy, so this discussion begins here.

Some services involve physical changes in space and time—such as moving people or freight from one location to another, storing or repairing goods, cleaning offices and houses (and clothes, streets, and much else), supplying refreshment and hospitality (e.g., serving meals). Some play more of an organic role, such as medical services, surgery, dentistry, veterinary services, and even personal services such as hairdressing. As well as physical and organic transformations, services can be informational. They are concerned with the two-way flow of information (mail and communications services) or with more one-way broadcasting, cultural, and entertainment services (radio and TV, museums and galleries, cinemas and theaters), while others produce or process information for particular clients and consumers (consultancy, counseling, accountancy and legal services, and a wide range of mainly business services supplying architecture, advertising, computer, engineering, and other professional and technical services). Many services have elements of each type of transformation. Informational features frequently accompany other services—the air transport service provides passenger announcements and in-flight entertainment, the health service provides dietary and lifestyle advice, and so on.

As large organizations became prominent in activities as varied as banking, transport, and retail trade, it became more common to think of many services as being industries. “Industry,” initially describing hard work, and coming to being applied mainly to manufacturing activities and their organization, now became a way of thinking about the organization of any economic activity—especially when large scale and technology intensive. Even so, the tendency to consider services as unproductive activities regularly surfaces. Public services have been particular targets of criticism, as they are funded by taxes that take money away from other parts of the economy, but consumer services may be seen to divert expenditure to consumption rather than investment (and to divert time to leisure rather than production).

The service economy is typically defined in statistical terms as involving an economy in which the majority of the workforce is employed in service industries rather then in other sectors. By this definition, most Western countries became service economies in the second half of the twentieth century. In the mid-twentieth century, statisticians put a great deal of effort into developing ways of monitoring social, and especially economic, development. In their efforts to describe the structure and evolution of economies, they built on traditions of thought going back at least to the beginnings of the Industrial Revolution. The statisticians distinguished between numerous industrial sectors, which were grouped into three major groups—primary industries (extractive industries like [Page 1272]agriculture, mining, and fishing); secondary industries (manufacturing sectors, construction, and, in most frameworks, the utilities of water and power distribution); and tertiary industries (to some authors these were simply a “residual sector,” but over time they became most commonly known as the service industries). The framework has undergone some elaboration, with suggestions that quaternary and even quinary sectors should be identified, and with several rounds of reclassification of the sectors falling within these broad groups.

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