Private vs public sector pay: who really gets more? | MoneyWeek (2024)

FAQs

Do you make more money in the private or public sector? ›

Direct wage comparisons show that public-sector employees earn, on average, around 15% more than private-sector employees. The vast literature on the public-private wage gap focuses on point-in-time differences in wages.

As private-sector companies are usually profit-driven, you may find more jobs with a higher salary than government or non-profit positions. Ensure your ideal job entails a salary that will meet your needs. Private-sector jobs in larger cities may have a higher salary.

Private and Public Sector Differences

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.

Many companies contribute to market pay studies, and these data help to determine what employers pay to people doing similar work in a similar region and industry. Employers use market data to inform their decision regarding salaries.

In the public sector, the lack of competition makes it is far easier to pass along higher costs, including employee costs. Not surprisingly, the unionization rate among public-sector workers in the state is about five times higher than in the private sector.

Evidence from high-income countries is inconclusive. Evidence from low- and middle-income countries suggests private provision is more efficient than public provision. Private providers often have more recruitment autonomy, lower pay levels, and market-like conditions. These may contribute towards better efficiency.

Private Company Benefits

The top benefits of working in the private sector are greater pay and career progression. Most companies, depending on the size, will invest in the learning and development of employees who show potential to further help the growth of the company and that individual's career.

The primary advantage of a publicly-traded company is that it can tap into the market by selling more shares. The primary advantage of a privately traded company is that it does not need to answer to any stockholders, and there is no need for disclosures. Publicly traded companies are big companies.

Why private businesses are better than public? ›

Lower corporate governance and capital structure complexity: Private companies have significantly fewer shareholders than public ones and their boards are typically much smaller. This reduces corporate governance and capital structure complexity, which should increase management's ability to act quickly and decisively.

The public sector can provide a lot of employment benefits like job security, allowances, and retirement benefits. The private sector can benefit from a higher salary, bonuses, and a competitive environment. The main areas which come under public sectors are police, healthcare, education, banking, transport, etc.

The average pay raise is 3%. A good pay raise ranges from 4.5% to 5%, and anything more than that is considered exceptional. Depending on the reasons you cite for a pay raise and the length of time that has passed since your last raise, you could request a raise in the 10% to 20% range.

If you are unhappy with your salary at your job, you may be wondering if the HR team is to be held responsible for this. Many people believe that HR creates salaries, but in most cases, this is not true. While HR has the ability to create salaries as well as raise them, this is usually left to the employer.

A good rule of thumb is to keep the lower end of your range at least 10 percent above your current salary, or the number you determine is a reasonable salary for the position. For example, if you currently earn $50,000, you may say that your range is $55,000 to $65,000.

In the most recent period, the private companies earned net profit margins, on average, of 8.6%, compared with 7.5% average margins for public companies.