I could tell you, but then I’d have to kill you. Dan Primack writes at Fortune:
It turns out there is a way to determine how many jobs Mitt Romney helped to create or destroy while running Bain Capital. Unfortunately, we aren’t allowed to do it.
A handful of academics – including Harvard’s Josh Lerner and the University of Chicago’s Steve Davis – last year published a working paper titled Private Equity and Employment. It basically defied conventional wisdom on both sides, arguing that private equity investment only has “a modest net impact on employment.”
To arrive at that conclusion, the researchers constructed a dataset that relied on U.S. Census Bureau’s Longitudinal Business Database (which is derived from IRS records). It then used Capital IQ and other financial sources to match up the LBD employment records with thousands of private equity transactions. In other words, while Bain Capital and other PE firms didn’t keep track of their portfolio payroll data, the government did. And some academics connected the dots.
Unfortunately, it seems that access to the LBD is highly conditional. Lerner and Davis were required to use the data only in the aggregate, promising not to report any identifying information about any specific organization – even if that organization was not specifically included in the LBD (i.e., financial sponsors). In fact, Census and the IRS screen all such working papers before they can be released, in order to make sure no identifying data is disclosed.
And, since neither Lerner nor Davis seems interested in going to jail, we remain unable to specifically determine the jobs record of Bain or any other PE firm.
It was noted by a Corner poster some time ago that the Census Bureau is the most tight-clenched when it comes to releasing any kind of identifying data about anything. While the State Dept. and CIA don't seem to mind national secrets being leaked to major media, you'll never see individual Census information. They should be applauded for their diligence. While it may make it harder to figure out things like how many jobs a certain equities firm created, it keeps private information private. Good for them.
Reply to this commentLinkReport AbuseWhich, of course leaves this rife for countless questionable "studies" from either side. Before this campaign is done, right and left think tanks will come out with estimates ranging from Romney-at-Bain being a Steve Jobs-league job creator, to Bain wiping out the GDP of small countries.
Reply to this commentLinkReport AbuseUnfortunately, this article, like so many, completely miss the point. Capitalism is not about creating jobs. Capitalism is the ideal way of using human nature to create a thriving economy. A business doesn't prosper because of the number of jobs it creates. It thrives because it accomplishes what the owner or owners (investors) set out to do. Make money! And by it's success, it nurtures the community, state, or locality to which it spreads. As a business grows, it requires the addition of employees, either directly or indirectly. If the business produces a product, then that product must be distributed. And if the product is intellectual, then that also must be communiticated. Each product may contain elements which the producer had procured from other sources. Each of these other sources in turn employ others to produce it's own product. All of the different businesses each have one goal in mind. To make money to enrich their personal lives. Each of the employees have no other interest in the business and related service businesses other than to enrich their own lives. Which is human nature defined. And refined to make a working society which contributes to the overall good of thar society. While it may sound noble to urge others to create jobs, the fact is that real jobs are created to serve one purpose. To supply the labor to a thriving business that needs that labor to make more money for its owner or it's investors. When government steps in to "create' jobs, it does so to serve it's own need. And that need is always to increase it's power.
Reply to this commentLinkReport AbuseIt's probably somewhere in the middle.
If you leave a large failing company in a failing position+you are assured of large job loss, the company is going to go out of business someday=large job loss, everybody is losing their job, from CEO to the janitor. Yep, the CEO is going to land on his feet easier then the janitor, but that's life.
If you take a large failing company + fix it= some job loss, the failing company is likely overstaffed or cannot afford the level of employees it had. Yep, the CEO keeps his job, gets huge raise, janitor loses his job. We have heard this one a million times too.
Up and coming new company +new capital = some job growth. Not as much as the "experts" say, but some growth. Hiring slow largely due to regulations making planning difficult. Government ends up being the one limiting job growth.
A story by someone I know. He runs a warehouse. Employed about 40-50 minimum wage people, running things like forklifts etc. Lots of turnover and lots of problems with employees with no skills, drug problems or work ethics. Very low productivity and tons of constant and daily problems like having to hire (and fire) almost daily.
Decides that this just isn't going to work anymore. He figures he has seven people that are good and are doing most of the work anyway. Fires everybody else. With useful training, some labor saving equipment and big wage increases for those decent people (since he isn't employing so many goldbricks), they managed to do the work that 50 did before. He has about 10 people now, they aren't problems, do the work, make far more money, and have far fewer problems. Hasn't hired or fired since.
Most people don't understand productivity. My friend figured it out the hard way, but he did. There is a reason factories increased production but restaurants haven't. Productivity! Restaurants have very low per person productivity, most manufacturing in the US has very high per person productivity. Number 1 reason restaurant work pays so little at times.
Reply to this commentLinkReport Abuse"I could tell you, but then I’d have to kill you."
But you plainly stated that you _can't_ find out, and so _couldn't_ tell us.
No-one believes that sort of analysis anymore anyway - the authors always have an axe to grind before they get anywhere near looking at the data.
captcha: mexican wave. What?
Reply to this commentLinkReport AbuseThis study, of course, says nothing. Some PE firms will do well with their portfolio companies, others not so well. Aggregating data includes both effective an ineffective PE firms, so the result will be.... no effect. Publishing a study on the basis of aggregate data, under these circumstances is itself highly misleading. You could do the same with any sector or industry.
Example: Use of investment advisors, good or bad? Well, if you aggregate data from all investment advisors, I bet the answer is that they perform in a mediocre fashion as a sector. They all will trend toward simply meeting the general performance of the market. This is because for every Warren Buffet, there are 10,000 Joe Idiots. Are investment advisors good or bad for individuals? Yes, provided you get the right one. Are they good or bad in whole? Who knows.
Are PE firms good for the economy? In my opinion (and purely in my opinion), they are. I'm sure people will come up with all kids of studies, but they have a role in the greater economic ecosystem that is akin to decomposing agents in nature. They help break down dead or dying material/companies to act as fertilizer for the flora and fauna that are living and growing. They are part of the economic circle of life, and analyzing them in a manner that is divorced from this is meaningless.
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