A book: private equity at work.

Does private equity kill jobs? Four conclusions from the book, “Private Equity at Work” by economists Elieen Appelbaum and Rosemary Batt.

  • Private equity owners cut more jobs than other companies, but the net effect is minimal. One paper cited, led by university of Chicago economist Steven Davis and reviewing 3,200 firms acquired between 1980 and 2005, found that buyouts lead to more job creation and destruction than companies that were not bought by private equity investors. The destruction arises from firing workers at existing establishments (such as stores or plants), while the creation comes from PE-owned companies investing in new facilities. On balance, employment within two years of the buyout shrinks at PE-owned firms relative to the control group, but the difference is less than 1%.

  • Executives fare worse in terms of job retention. One study found that 39% of CEOs were replaced in the first hundred days of a buyout, and 69% were replaced at some point during PE ownership. “When private equity takes over a company, they put their people on the board of directors, draw up a 100-day plan and say to the managers, “If you can meet our targets, we’ll make you richer than you thought you could ever be, and if you don’t, you’ll be out of a job,’” said Appelbaum on a recent conference call about the book.
  • For rank-and-file workers, wages fall. More research from Davis and his co-authors indicates that wages dip in the two years after private-equity buyouts (though the results vary by industry) even though productivity rises. This suggests that financial gains from higher productivity are being converted into returns for owners rather than salary bumps for employees.
  • Private-equity owners are no more hostile to labor unions than executives of public companies. “While some PE firms market themselves as union-friendly, others are hostile, and still others are agnostic,” the authors write. “Their range of attitudes does not seem to differ substantially from those of U.S. employers more generally.”

Original post: The Wall Street Journal.


The gender wage gap.

“Full-time working women earn 77% of what their male counterparts earn”
 The White House

The trends in the gender pay gap in the United States form an extremely interesting picture and it is important to dig into what those numbers are made of. While we see a substantial increase in women’s relative earnings since the late 1970s, there is still a gender pay gap today and the convergence that began in the late 1970s slowed significantly in the 1990s.

Three common explanations economists have developed for group differences in pay are (1) differences in human capital investments; (2) labor market discriminations, which refers to the differences in treatment of equality qualified men and women; and (3) overall trends in wage structure, which refers to the wage the market sets for employment in a particular occupation or industry.

The trends in wage structure are particularly important in understanding the gender wage gap we see today. The increase in overall wage inequality, for both men and women, has been associated precisely with an increase in market rewards to skills and employment in high-paying male sectors. This is key.

During the 1980s women as a group were moving up in a labor market – higher labor force participation rate and moving out of clerical and service occupations and into professional and managerial jobs; however, the market itself was growing increasingly unfavorable for workers with below-average skills and for workers employed in disproportionately female-dominated industries. Despite the unfavorable market shift, as women came into the labor market, improved their relative level of measured skills and experience, the gender wage gap continued to shrink (until the 1990s). These were massive demographic changes that took place in the course of 10 years:

  • Increase in women’s labor force participation,
  • Shift into professional and managerial positions,
  • Increase in work hours,
  • High percent of women pursing formal education,
  • Decline in discrimination against women…

Even though women have increased their presence in higher-paying jobs traditionally dominated by men, as a whole, women continue to work in lower-paying fields than men. This is a large part of why women continue to earn considerably less than men on average.

In addition to these wage gap factors, there are also the choices women make when they have children that have a significant impact on earnings. Women are more likely to take career interruptions to care for their family, which has shown to have an impact on long-term earnings.

According to a study by PewResearch, 39% mothers say they have taken a significant amount of time off from work and 42% reduced their work hours to care for a child or other family member. 27% of monthers say they have quit work altogether to take care of these familial responsibilities. This varies significantly from men, where only 24% of fathers say they have taken a significant amount of time off to care for a child or other family member.

There are certain choices women make that impact work experience and long-term wages. If an employee leaves the work force for n-number of years, there will be a cost to that in wages down the line. The focus and drive that many young women bring to their careers can diminish as they get older and take on more responsibility outside of the workplace. It is not simply having children that impacts women’s careers. It’s the steps they take to accommodate the demands that go along with being a parent. There is no disagreement among young women and men that become a parent will pose a challenge in career advancement.

All of this to say, when the White House is throwing around the statistic that “full-time working women earn 77% of what their male counterparts earn” does not mean that a man and a woman doing the same job, in the same place, working the same number of hours are getting paid different salaries. That’s not the case, at all.


Source: Bureau of Labor Statistics; Pew Research Center.


There are two main types of legal immigration into the United States:

  1. Work-based and,
  2. Family-based.

Both of these rely on sponsors who already live in the United States.

(1) On the work-based side, employers apply to sponsor “potential” employees for temporary visas. These visas are capped. There are 65,000 H1B visas issued each year (the most common for high-skilled workers). The time it takes for the cap to be reached varies from year to year. For FY 2013, visas were available for about 10 weeks after the petition period began, while for FY 2014, all available visas were issued within the first 7 days. In addition to the shorter time, the visas were issued through a “lottery” system.

When USCIS receives more petitions than it can accept (as it did for FY 2014, when 124,000 petitions were submitted during the first week), USCIS uses a lottery system to randomly select the number of petitions required to reach the numerical limit. The first lottery is limited to those applicants who hold advanced degrees from U.S. institutions.

At the moment, companies hit this cap very quickly.

(2) On the family-based side, US citizens and permanent residents with green cards can apply to sponsor their relatives for green cards. The wait time can vary based on the sponsor’s citizenship status, the relationship, and the countries involved.

If a would-be immigrant does not have a relative or employer in the United States willing to sponsor him or her, there are a few other options, but they involve a lot of wealth or a lottery.

An interesting flow chart:

Immigration [flow chart]

Source: USCIS.
Image: Reason magazine.

March employment report.

U.S. non-farm payrolls grew by 192,000 in March 2014, close to expectations. January and February payrolls were revised up by a combined 37,000. Despite the growth, the average for the first quarter of 2014 was just 178,000, below the 2013 full-year average of 194,000. The latest employment report shows an economy that is adding jobs but not at a very strong pace.

The unemployment rate held steady at 6.7% in spite of an increase in total employment. This could be attributed to the labor-force participation rate rising to 63.2% in March. The labor force participation rate had been trending lower in the the last decade and went into free-fall during the recession.

Despite the increase in the employment-population ration and rise in the labor-force participation rate, there are still key issues that need to be addressed in order to reach the desired levels of growth. The number of long-term unemployed changed little in March, accounting for 35.8% of the unemployed, at 3.7 million. There is still a lot of work to be done.


Source: Bureau of Labor Statistics.

Most popular job in each state.


overrepresented jobs state map

This map shows the most over-represented job in each state, using the Bureau of Labor Statistics’ May 2013 Occupational Employment Statistics. Each state has far more of these jobs per capita than the nation as a whole.

These are not the most common jobs in these states but jobs that are disproportionately concentrated in each state.

Source: Business Insider.

IMF: the importance of being boring.

The role of the IMF, how it’s perceived, and who it is influenced by.

The International Monetary Fund is an immensely useful organization, able to deliver substantial amounts of financial and technical assistance at short notice to almost any place in the world. It also has the great advantage of almost always being perceived as incredibly boring.

Unfortunately for the IMF, it now needs a slightly higher public profile to convince the US Congress to agree to some important reforms. […]

In the realm of international economics, being perceived as boring confers power to the extent that it allows major decisions to be made without a great deal of external scrutiny. […]

Of course, in countries receiving assistance – such as Greece in the last few years – the IMF excites great passion. But in the halls of the US Congress, few people pay any attention.

In the highly charged partisan atmosphere of Washington, DC, this is without question almost always an advantage. Imagine if the disbursement of all assistance to countries in trouble required Congressional approval, let alone spending from the US budget. Nothing good would ever happen – and certainly not for the US.

The IMF is founded on the premise that it represents cooperation between all of the countries of the world. The reality is that it stands for and operationalizes US power, in cooperation with America’s closest allies.

The US does not dictate what happens at the IMF, but it does have a disproportionate influence. […] One major goal in recent decades has been to shift representation at the IMF somewhat away from Europe and toward the world’s emerging markets. […]

Original post: Project Syndicate.