What are the Differences Between the Public Sector and Private Sector?

The public sector and private sector are terms used to describe the two main types of business industries within an economy. While they may provide similar services on some levels, the two differ from one another on a variety of factors, including ownership and aim. The largest distinction between them is that the public sector is owned and operated by the government, while the private sector is dominated by private business operators.

One of the easiest ways to tell the difference between a public sector and private sector organization is to look at who is in charge. In a public sector organization, employees, supervisors, and managers all work for the government. The company or organization is not owned by a corporation or a private owner, but rather by the government of the region. Private sector organizations, on the other hand, are operated by private citizens and may answer to a board of directors, owning partnership, or single owner. Employees in private sector jobs are employed by the organization.

In addition to a distinction in ownership, the two types of organizations are often divided by their aims. Public sector groups have a duty to serve the public, and are not usually in direct competition with other groups to meet the same demand. They are not profit oriented, and tend to provide services rather than goods. Private companies, in contrast, usually aim for profit and try to outperform competitive businesses to meet the same demands. While private companies may have some humanitarian goals, their bottom line is typically the profitability of the business, not necessarily serving the public.

There are many different types of private businesses that may be considered part of the private sector. Corporations, retail stores, restaurants, and gas stations are all common types of private businesses. Non-profit organizations, such as charitable foundations or private schools, are also usually considered part of the private sector unless they are created and maintained by government funds.

Public sector organizations tend to focus on providing social services to the public as mandated by law or executive order. Types of public sector organizations include public schools, public health insurance, police, and fire departments. Public transportation systems, road maintenance, and military jobs are also usually under the auspices of the public sector.

Sometimes, public sector and private sector services intersect, offering citizens a choice between relying on publicly provided organizations or paying a premium for more flexible private services. In the security industry, for instance, some people may choose to hire private security agents to guard a bank, store, or residence. In this case, using public resources such as the police might be impractical, as a public police force is answerable to the entire public and cannot put all their efforts toward the needs of one citizen.

Different nations put different emphasis on the roles of the public and private sector. While some countries feature a large public sector that provides a wide variety of services, citizens often pay for these services in the form of high tax rates. Those with a large private sector, on the other hand, may grant more opportunity to choose between providers but may be subject to the whims of the financial market and be more difficult for low-income citizens.