Private Equity has Minimal Effects on Employment

Discussion in 'Economy' started by Toro, Jul 14, 2012.

  1. Toro
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    Toro Diamond Member

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    What are the Wage and Employment Consequences of Leveraged Buyouts, Private Equity and Acquisitions in the UK? by Kevin Amess, Sourafel Girma, Mike Wright :: SSRN

    Private Equity and Employment by Steven Davis, John Haltiwanger, Ron Jarmin, Josh Lerner, Javier Miranda :: SSRN
     
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  2. Toro
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  3. Widdekind
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    Buyouts cause large layoffs (15-20% of the workforce), initially; and (almost) equally large hirings, within a couple of years. The total job turnover is 10x the net job loss (2% of the workforce):
    Buyouts streamline companies, trimming away unproductive facilities, and expanding productive ones. Most of the workforce is unaffected (80-85%); and almost all of the jobs lost, from unproductive facilities, are regained at expanded productive facilities. Failing corporations are kept afloat, and (in net) 98% of their work-force keep their jobs:
    Again, the flip-side of initial job loss, as unprofitable facilities are closed, is subsequent job gain, as profitable facilities are expanded. Expanding profits requires expanding productive facilities, and their (productive) work-forces. If buyout investors see potential profits, then they will want to expand & grow them.




    RealClearPolitics - Romney and 'Private Equity'
    http://www.bloomberg.com/news/2011-...ipo-market-as-kkr-blackstone-unload-lbos.html
     
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    Private equity firms are half as likely to be liquidated, during bankruptcy buyouts, than non-private equity firms, tending to preserve jobs. (Either way, creditors tend to recover the same amount, namely half, of their investments.)

    Inexpertly, LBOs keep failing firms afloat, preserving most jobs, and recovering nearly all temporarily lost jobs. The alternative would be allowing failing firms to fail -- would that be better for jobs?



    In Tough Times, Private Equity Saves Jobs - NYTimes.com
     

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