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What is the difference between the public sector and the private sector?

By Business OutstandersPUBLISHED: June 10, 21:29
definition of private sector

Few people can claim to have a thorough understanding of the terms 'public' and 'private sector'. While we've all likely heard these terms, the difference between the Public sector and the Private Sector is often misunderstood. If you're unclear about the difference between public and private sectors, don't worry - we're here to solve it. 

What is the Private Sector?

The private sector therefore is a composite of all the business forms, activities and undertakings that are within the private domain. The motive of the private sector is mainly to make profits for owners and shareholders . Private companies can be start-ups or local companies and can be multinational and large firms. Private business exists across the different sectors such as information technology, banking and finance, healthcare and retail sectors.

What is the Public Sector?

The public sector incorporates government owned companies and operations that are conducted for the purpose of delivering public services and/or goods. Supported by taxes, the concept of the public includes federal, state and local government, public school and national defense. Thus, while for the private sector, profit is an important motivation to perform its activities, for the public sector, the key motivation is the wellbeing and safety of the population.

Difference between Public and private sector as follows:

Public Sector:

The public sector is largely controlled by the government and is financed by taxes, subsidies, and government income. In terms of its main goal, it is designed for contributing to public interest, service provision, and social utility. Decision-making in the public sector can be political and the decision makers are accountable to the public. While working for the government usually offers secure and certain positions with benefits, wages in the public sector may be considered lower than in the private sector. One may argue that the public sector is highly transparent because it is answerable to the public and regulated.

Private Sector:

On the other hand, the private sector is one in which the assets and liabilities are owned by private individuals, groups or shareholders. It provides funds through private capital and other sources of income, and the main goal is to generate profits for owners and shareholders. Organizational decisions in the private sector are dictated by the market, and organizational objectives, and they are generally more flexible and creative. The key difference between the private and the public sector is that employment in the private sector provides a potential for greater salaries and bonuses and job insecurity than in the public sector. In this regard, the private sector is not as lenient as the public sector in terms of disclosure.


It is therefore important that members understand the differences that exist between the public sector and the private sector in order to be able to understand how sections of the economy are structured and provide for the society. Whereas the public sector is targeted towards service delivery with an emphasis on the public interest, the private sector fuels economic growth and development by the use of profit motivation. These two sectors are important as they have their part to play in the well-being and development of any country. Equally, the role of the public sector weighed against the private sector is significant for development and economic success.


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