Sunday, May 7, 2017

PEU Employs Millions of People (for Now)

Financial Review reported:

What are the biggest private sector employers in America today? If you toss that question to most voters or politicians they would probably point to some iconic corporate names: Walmart, say, General Electric, IBM or Citigroup.

But according to Michael Milken, the junk-bond-king-turned-philanthropist, the answers are mostly wrong. Mr Milken last week delivered a speech at the annual conference that bears his name, and produced a list of America's top 10 private sector employers.

Walmart tops this list. But the next eight - yes eight - largest employers, according to Milken data, are private equity groups
Private equity exploded during the Bush-Obama years.

The Carlyle Group and KKR, for example, are each estimated to employ about 700,000 people in their portfolio companies, which probably ranks them just below Walmart. 

Blackstone has "around 600,000" employees, as Steve Schwarzman, its founder, told the Milken event. 

Apollo, another private equity group, has 300,000 workers in its portfolio companies, and Warburg Pincus, General Atlantic and TPG are only slightly smaller

Lobby groups estimate that private equity firms now employ 11 million people inside America (the data are not very transparent).
Private equity underwriters (PEU) turned employment into a low wage, no raise, deteriorating benefit environment.  PEU Mavens like Carlyle co-founder David Rubenstein promote artificial intelligence as a way to reduce employment and further enrich the billionaire class.

Financial Review is clearly aware of private equity practices:

Is it time for voters and politicians to demand that private equity groups come out of the shadows and contribute more to public policy debates? Until now, they have generally refused to do so. That is partly because of a secretive culture, but also due to their ruthless focus on efficiency and profit; these are entities better known for cutting jobs, not talking about social cohesion.
PEUReport communicated with a former business reporter in 2011.  They wrote:

I have seen so many people -- particularly those in their 50s - 70s -- taken apart by what has happened in their industry as greed has hollowed out the economy. These are people took pride in their jobs and held themselves to this invisible standard that we all just took for granted, but is being wiped out.
The Carlyle Group scares me more than anything I've ever seen on Wall Street. It seems to exist to corrupt politicians and it's hard to know who they even represent.
The greed and leverage boys are now America's largest employers.  That's the Faustian bargain elected officials struck long ago.  Both Red and Blue White Houses proudly hosted PEU founders.  Congress kept PEU preferred taxation low for over a decade when a majority of Americans felt this practice unfair.

Private equity employs business practices that optimize sponsor profits, often at the direct expense of workers.  President Trump plans to enrich the billionaire boys further with super preferred pass through entity taxation.  They'll pocket whatever break Uncle Sam provides.

Workers will get the same raw deal they've had, crumbs at the foot of the PEU table. Since workers have crumbs might they want what's served on plates at the PEU partners' table?  Was Micheal Milken setting the stage for private equity to claim their right to invest on behalf of their millions of workers' 401(k) accounts?  If so, he's a good stooge.