Private Sector

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What is the 'Private Sector'

The private sector encompasses all for-profit businesses that are not owned or operated by the government. Companies and corporations that are government run are part of what is known as the public sector, while charities and other nonprofit organizations are part of the voluntary sector.

The Bureau of Labor Statistics tracks and reports both private and public unemployment rates for the United States.

BREAKING DOWN 'Private Sector'

The private sector is the segment of a national economy owned, controlled and managed by private individuals or enterprises. The private sector has a goal of making money and employs more workers than the public sector. A private-sector organization is created by forming a new enterprise or privatizing a public sector organization. A large private-sector corporation may be privately or publicly traded. Businesses in the private sector drive down prices for goods and services while competing for consumers’ money; in theory, customers do not want to pay more for something when they can buy the same item elsewhere at a lower cost.

Private and Public Sector Differences

The private sector employs workers through individual business owners, corporations or other nongovernment agencies. Jobs include those in financial services, law firms, newspapers, aviation, hospitality or other nongovernment positions. Workers are paid with part of the company’s profits. Private-sector workers tend to have more pay increases, more career choices, greater opportunities for promotions, less job security and less-comprehensive benefit plans than public-sector workers. Working in a more competitive marketplace often means longer hours in a more demanding environment than working for the government.

The public sector employs workers through the federal, state or local government. Typical civil service jobs are in health care, teaching, emergency services, armed forces and city council. Workers are paid through a portion of the government’s tax dollars. Public-sector workers tend to have more comprehensive benefit plans and more job security than private-sector workers; once a probationary period concludes, many government positions become permanent appointments. Moving among public-sector positions while retaining the same benefits, holiday entitlements and sick pay is relatively easy while receiving pay increases and promotions is difficult. Working with a public agency provides a more stable work environment free of market pressures, unlike working in the private sector.

Private and Public Sector Partnerships

The private and public sectors sometimes work together while promoting common interests. Private-sector businesses leverage governmental assets and resources while developing, financing, owning and operating public facilities or services. For example, a private company might pay a state a one-time fee to operate a specific length of freeway for a set time in exchange for revenue from tolls.

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