What is the Private Sector?

The private sector includes all parts of an economy that are not under the direct control of the government. This sector includes businesses that are owned by individuals or other firms. The private sector is driven by the need to earn a profit. In most countries, the private sector comprises the bulk of the economy.

What is the Public Sector?

Entities that are owned or controlled by the government are classified as being part of the public sector. This sector is driven by the provision of services to the general public.

There can be movement between the two sectors. For example, a government could nationalize a railroad, thereby shifting it from the private sector to the public sector. Or, a government could sell off a business to private investors, thereby shifting it to the private sector.

Employment Differences in the Private and Public Sectors

There are several areas in which the characteristics of employment in the private sector differ from employment in the public sector. First, employees tend to be paid more in the private sector. Second, there tends to be a broader range of available jobs. However, the private sector also tends to demand longer working hours, there is a higher risk of being laid off, and benefits may be lower than in the public sector.