In July, unions around the world protested against private equity (PE) firms such as KKR, claiming that these firms make huge profits at the expense of workers. However, PE lobby groups have called the unions’ criticism ‘hysterical’.
A new academic study by Andrew Watt of the European Trade Union Institute finds that unions are largely right. While some criticism of PE may be exaggerated and one-sided, there is evidence suggesting that PE takeovers tend to result in job losses, lower pay, increased hostility towards trade unions and more ‘tax efficiency’ (which basically means that taxpayers subsidise PE profits).
Watt emphasises that PE firms are not intrinsically anti-union, but tend adopt a pragmatic approach. Strong unions will be in a better position to negotiate with the new owners. When a PE firm wants to buy a company, unions should try to organise more workers by addressing concerns these workers may have about the takeover.
Over the past years, there has been a huge increase in PE. The European leaders are Sweden, the Netherlands and the UK.
Andrew Watt (2008), The Impact of Private Equity on European Companies and Workers: Key Issues and a Review of the Evidence. Industrial Relations Journal 39(6): 548-68.