15 Differences between Private and Public Sectors (With Table)

Economies of many countries rely on both private and public sectors. These sectors play a crucial role in contributing towards domestic production (GDP).

There are several institutions in the United States of America that help to track and report the activities of these sectors. It is the reason behind the U.S being among the major superpowers.

The Bureau of Labor Statistics provides reports on marketing activity, price changes in the economy, and working conditions. The Census Bureau report on people and economy data.

So, what is the main difference between private and public sectors? The private sector refers to enterprises that are owned, managed, and controlled by individuals whereas the public sector refers to businesses managed and controlled by the government.

This article attempts to provide further differences between private and public sectors to clear out any doubts. The student will also learn the relationship between the public and private sectors in the economy.

You May Also Like: Difference between Micro and Macro Economics

Differences between Private and Public Sectors

Comparison Table (Private Sector vs Public Sector)

Basic Terms Private Sector Public Sector
Description It is a business organization owned, managed, and controlled by individuals. It is a business organization managed and controlled by the government.
Main Purpose Make profit Offer public utility service
Sources of Funds Loans, Issues of shares, and debentures. Public revenue from taxes, fines, and more.
Ownership Private individuals or Private companies. Government or Government Bodies.
Industry Focus Operate in multiple areas such as technology, banking, real estate, construction, and more. Operates in areas such as education, water, electricity, defense, mining, and more.
Profitability More profitable Less profitable
Government Interference Relatively less expose to government interferences. Experience larger government interferences.
Ease of Operation Quite difficult to operate due to government regulatory issues. Easy to operate due to close proximity with the government.
Work Culture of Employees Competitive work culture with better pay and career growth. Relaxed work culture with high job security.
Job Promotion Merit Seniority and experience.
Job Security Low Quite high.
Benefits of Working Competitive working environment.

Better pay package.

Incentives.

Retirement benefits.

Job security.

Allowances

Paid leaves.

Stock Market Listing No public trade on an exchange Public trade on exchanges
Resource Mobilization Depend on the financial strength of private individuals. Easy to mobilize a large pool of resources for growth.
Types of Workers Employees and independent contractors. Civil servants.

What Is a Private Sector?

A private sector is an enterprise run by private individuals and companies with the aim of making profits. The business organization plays a crucial role in an economy of a country.

Private sectors have a large share in a free market, especially capitalist-based society. Besides that, the organizations have the freedom to collaborate with the government in some areas.

These business enterprises employ more workers than public sectors. These business organizations usually lower the prices of their commodities while competing with other firms.

The United States of America has a free economy and it is the reason behind the larger number of private sectors. China is a capitalist economy and the state control many corporations.

Business entities that belong to private sectors are sole proprietorship, partnership, trade unions, professional and trade associations, large corporations and multinationals, small and mid-size businesses.

Government has regulation measures on private sectors. The intention is to ensure all private enterprises operate under the laws of the country.

You Can Also Read: Difference between Quid and Pound

What Is a Public Sector?

A public sector is an organization, institution, and company controlled by the government. These organizations are in charge of the overall economy of a country.

Public sector entities are run to provide public utility services to the citizens of a country. The cost of attaining the services is the reason for self-sustainable and profitability depending on the industry.

The main areas where public sectors operate are defense, mining, education, water, electricity, insurance, banking, and agriculture.

These institutions usually get financial support from the government during adverse circumstances. But the public sectors are less profitable when compared to private sectors.

The public sector is the largest in the economy. The government work around the clock to mobilize resources regardless of the organization’s financial health.

Civil servants are guaranteed high job security, retirement benefits, allowances, and more. It is the reason why many people prefer working in the public sector despite the low pay package.

Main Differences between Private and Public Sectors

  1. Private sectors are owned, managed, and controlled by private individuals or companies. Public sectors are managed and controlled by the government.
  2. Public sectors provide utility services to the citizens. Private sectors aim to make maximum profits.
  3. Private sectors raise funds through loans, issuing of shares, and debentures. Public sectors raise funds from the public revenue like taxes.
  4. Public sector workers have lower pay with high job security. Private sector workers have higher pay with low job security.
  5. Private sectors have a competitive work culture. Public sectors have a relaxed work culture.
  6. Public sectors are easy to operate in a country. Private sectors are difficult to operate.
  7. Private sector financial strength depends on the owners. Public sectors can mobilize resources with ease.
  8. Public sectors list shares on the stock market. Private sectors rarely list shares on the stock market.
  9. Private sectors do not share their financial statements publicly. Public sectors share their financial statements publicly.
  10. Public sector promotion is based on seniority. Private sector promotion is based on merit.

Similarities between Public and Private Sectors

  1. Both sectors are customer-oriented.
  2. Both sectors embrace technological changes.
  3. Both sectors foster employee growth regardless of their level.
  4. Both have executive support.
  5. Both sectors embrace mentoring others.

You May Also Like: Difference between Demand and Supply

In Conclusion

Private sectors promote talent and quality. It is the reason behind the rapid progression and growth in an economy. Public sectors embrace reservations like persons with disabilities, women, and more.

Public sectors happen to be the reason behind unemployment issues. The high job security in public sectors makes employees relaxed and satisfied.

Job security in the private sector is too low. The competitive work culture makes employees dedicate themselves in the long run. But the pay package is better than that of the public sector.

The work performed in the private sector is the reason behind higher profits than in public sectors. The embezzlement of funds and laziness in public sectors are rampant.

The main difference between public and private sectors is that the former is managed and controlled by the government while the latter is owned, managed, and controlled by private individuals or companies.

More Sources and References

Leave a Comment