The private equity industry has touted its contributions to the US economy by employing millions of workers. However, since private equity firms acquire companies with existing workers, they often do not create new jobs.
Studies show that private equity takeovers typically result in job losses at companies they buy. A 2019 study by researchers at Harvard Business School and the University of Chicago found that private equity takeovers result in significant job losses. The report found average job losses of 4.4 percent in the two years after a company was bought by private equity, relative to control companies. For example, private equity-owned retail companies like Toys R Us, the Sports Authority, Art Van Furniture, and others have laid off hundreds of thousands of workers due to store closures and bankruptcies.
Based on reports by the private equity industry‘s main lobbying group, the number of US employees at private equity-owned companies has increased substantially in recent years – from 8.8 million in 2018 to 11.7 million in 2020, a 33 percent increase. This increase is striking as overall U.S. employment dropped by 4.5 percent over that same period. But, this increase appears to be driven by private equity firms acquiring more and larger companies – putting the jobs of millions more U.S. workers at risk.
Private equity firms have often taken a low road approach and sought to reduce wages, benefits, and staffing at firms they acquire – with devastating consequences to thousands of workers, their families and their entire communities. The largest number of workers employed by private equity-owned companies are in industries with large numbers of low-wage workers – at least 1.5 million workers in Food Service, 1.1 million workers in Retail, and almost 1 million in both Security and Health Care.
The Private equity industry should take responsibility for its 11 million+ workers.
With $7.5 trillion in assets, the private equity industry can afford to be responsible employers that provide safe and fair workplaces. Increasingly we are seeing large employers are committing to pay all workers, including tipped workers, at least $15 per hour. The private equity industry directly employs more than 11.7 million workers and is large enough to dominate wage markets. We have only seen one small private equity-owned company commit to pay employees at least $15 per hour.
Strikingly, the majority of food service and retail workers in the United States, including many employees at private equity-owned companies, lack paid sick leave, which is especially disturbing considering that these are also frontline workers who have worked through the pandemic.