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Lobbying Arm of Private Equity Industry Pays E&Y for Misleading Report on PE’s Economic Contributions

Summary:
Let’s unpack the E&Y study. Employment  E&Y touts that the private equity industry supports 8.8 million jobs. You could mistakenly think this means that PE created 8.8 million jobs or that PE increased employment at the companies it took over. That may be the industry’s intention, and E&Y seems happy to create this misimpression, but ...

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Let’s unpack the E&Y study.


Employment 

E&Y touts that the private equity industry supports 8.8 million jobs. You could mistakenly think this means that PE created 8.8 million jobs or that PE increased employment at the companies it took over. That may be the industry’s intention, and E&Y seems happy to create this misimpression, but it’s not true. 

A careful study of “The Economic Effects of Private Equity” by economists at Harvard and the University of Chicago looked at what happens to jobs when a PE firm buys out a Main Street company with offices, stores, warehouses, supermarkets, or other establishments and takes it over. The study found that, overall, when private equity takes over companies, employment in the establishments of those companies goes down by 4.4 percent in the first two years following the buyout. When private equity buys out big companies with lots of employees that trade on a stock market, the job loss is even more dramatic – 13 percent in the first two years. 

If you are a worker at a company that has been acquired by a private equity firm, these are the numbers that matter to you – these numbers reflect the probability that you or some of your colleagues will lose their jobs.

So, what is E&Y talking about? 

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