Difference between Public Sector and Private Sector

Many organisations that provide goods and services are part of what is known as the public sector. A public-private partnership is when various stakeholders from the public and private sectors work together, such as the U.S. response to the COVID-19 pandemic. The U.S. Department of Defense and the Department of Health and Human Services launched Operation Warp Speed (OWS) early in the pandemic, providing $18 billion in funding for the development of a vaccine. OWS shrunk a 73-month vaccine approval cycle down to just 18 months. In many countries, there is considerable overlap between the public and private sectors.

  • Each employer can set its own employment rules, as long as they abide by federal and state employment laws, like OSHA, wage and hour laws, and equal pay and benefits laws.
  • Thus, both public and private sectors are the fundamental sources of building the economy of the country.
  • They are financed by private money from shareholders and by bank loans.
  • The private sector is perceived as being quicker to adopt and develop new technologies than public sector organizations, but that isn’t always the case.
  • The private sector companies are divided on the basis of sizes like small & medium enterprises and large enterprises which are either privately or publicly traded organizations.

By providing good quality training schemes, the government can help increase labour productivity and provide private firms with educated workers. For political reasons, it is sometimes more difficult to get rid of surplus workers in the public sector than the private sector. Private businessmen don’t have to worry about political popularity and so are more willing to make people redundant if it helps efficiency. The public sector, on the other hand, is more likely to employ surplus workers in unproductive jobs. Private sector companies also collaborate with public sector and government to gain access to resources and develop new products.

What is the private sector?

In the private sector a significant proportion of low paid jobs, such ascleaning and catering, are carried out by women. A cut-throat competition between both the sectors, to prove itself better over the other sector. So, the article attempts to outline the differences between public sector and the private sector in tabular form. If the economy is at full employment new hire paperwork checklist and growing strongly, higher government borrowing and spending will cause crowding out. However, in a recession, there may be a sharp rise in consumer saving. In this situation, an increase in government spending financed by government borrowing doesn’t cause crowding out because the government is using private sector savings that would otherwise remain idle.

  • The figures also show that there is much more gender equality in the public sector – with women earning much more than they do in the private sector.
  • It is important to understand the difference between the private sector and public sector because your privacy rights will differ depending on the legislation that an organization is governed under.
  • For example, most cities only have one police force, and the FBI is the only federal law enforcement agency.
  • The public sector is often less efficient because it is not driven by profits and does not have the same incentive to cut costs and increase revenues.
  • The public sector also contributes to economic growth, but its impact is not as great as the private sector.
  • The governments (either central or state) enjoy full or partial ownership and control of these organizations.

Therefore, it encompasses all for-profit businesses that are not owned or operated by the government. Companies and corporations that are government run are part of what is known as the public sector, while charities and other nonprofit organizations are part of the voluntary sector. The private sector is the segment of a national economy that is owned, controlled, and managed by private individuals or enterprises. The private sector has a goal of making money and employs more workers than the public sector. A private sector organization is created by forming a new enterprise or privatizing a public sector organization.

Arguments for the Public Sector

The primary factor in the public sector is that the purpose of the institution isn’t to make a profit. The people who work there are paid enough to support themselves – and for the amount of responsibility they take on – but there isn’t any overhead or profit that goes to the owners. There are pros and cons to choosing a job in the private sector as opposed to the public sector.


The Department of Labor distinguishes between the two types of employers for specific regulations like meal break requirements and labor laws (like the Occupational Safety and Health Act (OSHA), for example. The major employment law, the Fair Labor Standards Act (FLSA), covers only employees of private-sector companies—those engaged in interstate commerce, which is pretty much every business. As private-sector businesses are owned and managed by private individuals or enterprises, businesses within this category focus on entrepreneurial activities, taking risks to create jobs and generate a profit. Public sector workers tend to be older, as you can see in the chart above.

The private sector is driven by profits, while the public sector is not. The private sector’s goal is to make money, while the public sector’s goal is to serve the public good. The private sector is the main driver of economic growth, as businesses are constantly innovating and expanding. The public sector also contributes to economic growth, but its impact is not as great as the private sector. Government workers also tend to earn better compensation than their private-sector counterparts; however, certain private-sector occupations can earn far more than the average public-employee salary. The majority of these businesses (with the exception of some nonprofits and not-for-profits) are to make money.

However, some public sector organizations generate healthy toplines and more than decent profits. In the private sector, very organizations receive financial support, so they usually fund their needs using their profits, issuing equity shares, or taking out bank loans. There are several advantages to working in the public sector, including job stability and the various high-quality benefits packages available. These include excellent retirement benefits and favorable insurance policies. Public employees typically enjoy better job security than private employees, except during major budget cuts.

Third sector organisations are owned and run voluntarily by trusteesclosetrustees An individual entrusted to run a charity for no personal gain.. These different categories of ownership make up what we call the sectors of the economy. Private sector businesses are generally run “for profit” – to earn returns for the business owners (e.g. shareholders). The Bureau of Labor Statistics tracks and reports both private and public employment for the United States. Like all of these jobs, they are paid by the government that they serve.

Types of Public Sector Enterprises

For better results, both the private sector and the public sector have to work hand in hand. In order to develop the country, both these sectors are required to work simultaneously. It is interesting to note that there is always a competition going on in between these sectors. Therefore, it is essential for them to understand that both are the fundamental sources of growth and development of the country.

The private sector offers excellent services to the community in order to gain people’s confidence and goodwill in order to thrive and compete in the long term. A private sector company may be established by privatizing a public organization or by forming a new corporation by private individuals. Companies of this sort are beholden to their stockholders, which means that fluctuations in the market can have a large impact on their profits and business model. That can lead to layoffs or restructuring, which can cause workers to lose their jobs or be dropped to a lower-salary position. Third sector organisations can be run as a social enterpriseclosesocial enterpriseAn organisation that is run like a business but that is “not for profit”. Public sector business are not generally run ”for profit”, but exist to provide goods and services to the public using public funds.

How is the private sector regulated?

Public sector enterprises give so many facilities to their employees, which makes them satisfied that their job is secured, due to which, all the people are running after it like it is a marathon. However in the Private Sector, your job is never secured, even if you give years to it, you can be fired anytime just because of a single mistake. Private firms have a profit incentive to cut costs and develop products demanded by consumers. Therefore government bodies have a greater tendency to be overstaffed and inefficient. In conclusion, deciding between a public- or private-sector job will depend on your career goals, values, and lifestyle needs. What matters most is finding a career path that aligns with your unique skills, interests, and long-term goals.

So, these are the major types of private sector and public sector enterprises. Both these sectors work hand in hand to economically develop the nation. The major difference between them is government control, i.e., the public sector is fully under the control of the government/ state, unlike the private sector. Thus, both public and private sectors are the fundamental sources of building the economy of the country.

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On the other hand, nobody can deny the importance of the private sector in the global economy, given their participation at multiple levels of the value chain of almost all businesses/ industries. Employees in the public sector, working for local, state, or federal government agencies, enjoy job security, better housing facilities, decent retirement benefits, etc. The public sector is the sector which includes both public companies and services. In other words, the public sector is the sector that is under government’s control. The public sector includes agencies, enterprises, banks, companies, etc., that are controlled by the government.

The private sector is usually more efficient than the public sector, as businesses are always looking for ways to cut costs and increase revenues. The public sector is often less efficient because it is not driven by profits and does not have the same incentive to cut costs and increase revenues. Public sector companies refer to the businesses owned and controlled by the country’s government in which they operate. The governments (either central or state) enjoy full or partial ownership and control of these organizations. In either case, the government holds a majority stake and has its say in every decision regarding running the entity.