Updated July 10, 2023
Difference Between Public vs Private Sector
People looking for employment often get confused between opportunities in the public sector and the private sector. The public sector companies offer services to the nation, while the private sector companies focus on the wealth maximization of their shareholders and stakeholders. To decide which of the two agrees with their needs and interests, the prospective candidates need to understand the sectors and their differences. This article will discuss the key differences between the public and private sectors, which will help the candidates pick their future employer.
What is Public Sector?
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.
These organizations include local government authorities, municipalities, state-owned enterprises, government agencies, and other public service institutions. While many are non-profit organizations, their remaining entities participate in commercial activities. Typically, this sector focuses on providing social welfare, such as offering goods and services to the public at relatively cheaper rates than their private counterparties.
What is the Private Sector?
Private sector enterprises refer to businesses owned, managed, and controlled by individuals or other business entities. Small, medium-sized, or even large corporates form these entities to generate significant profit from business and compound investors’ wealth faster.
Some business entities in the private sector category include partnership firms, sole proprietorship firms, cooperative societies, companies, and multinational corporations. These organizations usually focus on customer needs to survive in the market in the long run.
Head To Head Comparison Between Public Sector vs Private Sector (Infographics)
Below is the top Comparison between Public Sector vs Private Sector:
Key Differences Between Public Sector vs Private Sector
These two sectors sometimes partner with each other to complete many social goals, such as the construction of toll gates, bridges, etc. Nevertheless, some key differences between these two sectors have been briefly explained below.
Nature of Ownership
The primary difference between the private and public sectors is their respective owners. In the case of the public sector, the businesses are owned by the state or central government, which means they only control the operations. On the other hand, the companies falling under the private sector are owned, controlled, and managed by individuals or other private companies.
Purpose of Existence
Although some government-owned enterprises participate in commercial activities to make healthy profits, many public sector organizations primarily provide benefits to the general public. On the other hand, private sector businesses tend to fulfill their shareholders’ wealth maximization objective by booking significant profits.
Source of Financial Support
Public sector organizations typically receive financial support from the government, which collects these funds through direct and indirect taxes. 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.
Employment Benefits
Employees in the public sector, working for local, state, or federal government agencies, enjoy job security, better housing facilities, decent retirement benefits, etc. On the other hand, private sector employees, who work for a publicly-traded company or a privately owned business, are offered higher salary packages, better chances of recognition & promotion, and a competitive environment.
Public Sector vs Private Sector Comparison Table
Below are the five topmost comparisons between Public Sector vs Private Sector:
|
Basis for Comparison |
Public Sector |
Private Sector |
| Definition | These organizations are owned and controlled by state or federal government entities. | Individuals or other private entities own, manage, and control these companies. |
| Nature of Ownership | The ownership of these entities remains with the central, state, or local government bodies – either full or partial. | The ownership of these companies remains with the individuals or other companies, but no interference by the government. |
| Purpose of Existence | The main purpose is to engage in activities that result in the welfare of the general public. | The main objective is to earn healthy profits from the business and grow shareholders’ wealth. |
| Source of Financial Support | These organizations primarily get their financial support from the government. | These entities must raise funds from bank loans, new equity share issuance, and profits. |
| Employment Benefits | These employees enjoy several benefits, including job security, better housing facilities, good retirement benefits, etc. | These employees are offered higher salary packages, better recognition & promotion, competitive culture, etc. |
Conclusion
The public and private sectors are distinguishable based on their ownership, the purpose of existence, source of financial support, and employment benefits. However, there is no doubt that businesses operating in both sectors are equally critical to the economic growth of any country. Despite many differences, there are certain industries where the government has to take charge of the business and manage it accordingly for the greater good. Examples of such industries include the likes of the defense sector, which is very sensitive as it handles many things about national security. 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.
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