Government and Business (LC 2026) (Leaving Cert Business): Revision Notes
The Public Sector
What is the public sector?
The public sector includes all businesses and organisations that are funded and operated by the government. This encompasses essential services like education, healthcare, defence, and local councils, as well as state-owned companies and agencies.
The public sector refers to businesses and organisations financed and run by the state, including areas such as education, defence, health, local authorities, state-owned enterprises like RTÉ, and state agencies like IDA Ireland.
Examples of Irish public sector organisations include:
- RTÉ (state broadcaster)
- IDA Ireland (industrial development agency)
- Local county councils
- Public hospitals and schools
The public sector plays a crucial role in providing essential services that might not be profitable for private companies to operate, ensuring universal access to education, healthcare, and other vital services.
Understanding the private sector
In contrast to the public sector, the private sector consists of businesses established by entrepreneurs and funded through private investment. These companies operate to make profit for their owners and shareholders.
The private sector refers to businesses and organisations set up by entrepreneurs and financed by private investors.
Common examples of Irish private sector companies include:
- Applegreen (petrol stations)
- Aldi (supermarket chain)
- Glanbia (food and nutrition company)
Public-private partnerships (PPPs)
Public-private partnerships represent a collaborative approach where government and private companies work together to deliver services or projects that would traditionally be handled by the public sector alone.
Public-private partnerships (PPPs) are partnerships between the public and private sectors for delivering projects or services that would traditionally have been provided by the public sector alone.
Key features of PPPs
- Long-term agreements: Typically lasting 25-35 years
- Shared responsibility: Both sectors contribute resources and expertise
- Risk sharing: Financial and operational risks are distributed between partners
- Infrastructure focus: Often used for major projects like motorways and schools
Advantages of PPPs
- Access to expertise: The public sector can benefit from private sector knowledge, skills, and innovation
- Risk distribution: Risks are shared between both sectors rather than falling entirely on the government
- Efficiency: Private sector involvement can bring greater efficiency to project delivery
Disadvantages of PPPs
- Increased costs: Can be more expensive for the government than traditional procurement
- Reduced competition: May create monopoly situations where private partners have significant market control
- Complex management: Require careful oversight and management of the partnership relationship
Worked Example: M3 Motorway PPP
The M3 motorway was built through a public-private partnership. Eurolink Motorway Operations manages road tolls on this route, generating over €19 million in operating profits in under seven months.
This demonstrates how PPPs can be profitable for private partners while delivering essential infrastructure for the public.
The labour force and government impact
The labour force represents all people in a country who are either employed or actively seeking employment. This includes everyone except those under 18, over 65, full-time students, and people unable to work due to illness or disability.
The labour force refers to the part of the population that is employed or available for employment.
The Irish government is the country's largest single employer, with more than 300,000 people working in the public sector. Government policies and actions significantly influence employment levels and opportunities across the entire labour force.
With over 300,000 public sector employees, government decisions about hiring, wages, and working conditions have a substantial impact on Ireland's overall economy and labour market.
How government affects the labour force
National minimum wage
The government sets a minimum wage to protect low-paid workers and ensure fair compensation. This policy:
- Increases labour supply: More people are willing to work when wages are decent
- May reduce employment: Some employers might cut jobs if wage costs become too high
- Creates redundancies: Higher labour costs may lead some businesses to reduce staff numbers
The minimum wage creates a balance between protecting workers and maintaining business competitiveness. Setting it too high can reduce employment opportunities, while setting it too low fails to protect workers adequately.
Taxation policy
Government tax rates influence both employers and workers:
- Corporation tax: Ireland's low 12.5% corporation tax rate attracts foreign direct investment (FDI), creating more jobs
- Personal taxation: Lower PAYE rates and reduced tax on savings (DIRT) give people more disposable income, increasing demand for goods and services and boosting employment
- Investment incentives: Tax breaks can encourage businesses to expand and hire more staff
Ireland's competitive tax regime is a key factor in attracting multinational companies, which has been crucial for the country's economic development and employment growth.
Education and training
Government investment in education and skills development supports the labour market:
- Third-level education: Free tuition fees ensure a steady supply of highly skilled workers, making Ireland attractive to international companies
- Training programmes: Organisations like SOLAS provide retraining and upskilling opportunities for unemployed people, helping them return to work
- Skills matching: Government programmes help match worker skills with employer needs
State agencies
Various government agencies actively support business development and job creation:
- Enterprise Ireland: Helps Irish businesses grow and expand internationally
- Local Enterprise Offices (LEOs): Support small business start-ups and development
- IDA Ireland: Attracts multinational companies to Ireland through grants and support, creating employment opportunities
These state agencies work together to create a comprehensive support system for businesses at different stages - from start-up support through LEOs to international expansion assistance from Enterprise Ireland.
Laws and regulations
Government legislation shapes the business environment:
- Employment law: Protects workers' rights while providing clarity for employers
- Health and safety regulations: Ensure safe working conditions
- Competition law: Prevents monopolies and encourages fair competition
- Better regulation: A supportive regulatory environment encourages business growth and expansion
Infrastructure investment
Government spending on infrastructure creates both direct and indirect employment:
- Construction jobs: Building roads, schools, and hospitals directly employs construction workers
- Business attraction: Good infrastructure makes Ireland more attractive for businesses to locate here
- Economic multiplier: Infrastructure investment encourages other businesses to expand, creating additional employment opportunities
Infrastructure investment has a multiplier effect - every job created directly in construction can lead to additional jobs in related industries and services, amplifying the overall employment impact.
Key Points to Remember:
- The public sector is government-funded while the private sector is privately funded by entrepreneurs and investors
- Public-private partnerships (PPPs) combine the strengths of both sectors but can be costly and create monopoly situations
- The labour force includes all people who are employed or available for work
- Government affects employment through six main methods: minimum wage, taxation, education and training, state agencies, laws and regulations, and infrastructure investment
- Ireland's government is the country's largest employer with over 300,000 public sector workers