What is the difference between public sector and private sector?
Sometimes back many countries’ economy was dominated by public sectors but due to privatization, it has led to the development of private sectors.
The lesson provides a detailed insight into the difference between the public sector and the private sector with a comparison chart to make understanding easier.
What Is a Public Sector?
The public sector refers to institutions, organizations, and companies where the government is the highest shareholder. These organizations are controlled, operated, and managed by the government.
The main purpose of these organizations is to improve the living standards of people and it tends to be the largest sector in the country.
Some of the key services offered by public sectors include:
- Creation of employment
- Postal services
- Provision of education and health facilities
- Railway services
- Providing security
What Is a Private Sector?
The private sector refers to organizations and institutions owned by private individuals. These private sectors are controlled, operated, and managed by private companies.
The main reason for the emergence of the private sector in a country is to earn profits. Employees earn a good salary package and their promotion is based on merits.
Some of the key services offered by private sectors include:
- Provision of quality education services
- Telecommunication services
- IT services
- Courier Services
- Infrastructure development
Comparison Chart: Public Sector Vs Private Sector
|Basic Terms||Public Sector||Private Sector|
|Definition||Refer to organizations that cover a country’s overall economy and are managed by the government||Refers to an organization that is controlled, managed, and operated by private individuals.|
|Ownership||Owned and managed by the government||Owned and managed by private individuals|
|Primary Purpose||Providing basic public services to citizens at a reasonable cost||Making profits by operating with the rules and compliance of a country|
|Industry Focus||Industries such as education, electricity, defense, mining, oil, and banking among many others||Industries such as technology, banking, manufacturing, financial services, and real estate|
|Financial Support||Get support from the government||Get support from private entities|
|Listing in the stock market||Publicly trade exchanges||Not publicly trade exchange|
|Profitability||Less profitable||Quite profitable|
|Government Interferences||Comparatively affected||Less relatively affected|
|Ease of doing business||Easy to operate||Difficult to operate|
|Resource Mobilization||Tend to mobilized resources easily for funds||Depend on the financial strength of the private sector|
|The work culture of employees||Workers have higher job security||Based on the performance of the employees|
Core Differences between Public Sector and Private Sector
- The main purpose of the public sector is to provide basic public services to larger area whereas the private sector is the profit-driven entity
- The ownership of the public sector is by the government whereas the private sector is by private individuals
- Public sectors list their shares publicly to the stock market unlike the private sector
- Public sectors are prone to government interference unlike private sectors
- The government controls the pricing of services in public sectors unlike in private sectors.
- Public sectors can easily mobilize resources to raise funds whereas private sectors depend on the financial stability of private individuals.
- Public sectors can easily be funded by the government in case of budget deficits which is not the case for private sector
- The job security of the public sector is stable unlike in the private sector
- The promotion of workers in the public sector is based on seniority while in the private sector is based on performance
- The benefits of working in the public sector are job security, retirement benefits, and allowances whereas in private sectors are competitive environment and good salary package
- The main sources of funds for public sectors are public revenue from the tax, duty, and penalty whereas private sectors are issuing shares and debentures
- The main areas of public sectors are police, army, mining, health, manufacturing, electricity, education, transport, telecommunication, agriculture, banking, and insurance whereas private sectors are finance, information technology, mining, transport, education, telecommunication, manufacturing, banking, construction, and pharmaceuticals
The key difference between the public sector and private sector is the public sector is fully funded, controlled, managed and owned by the government whereas private sectors are fully funded by private entities and owned by private individuals.