Introduction
In July 2019, Senator Elizabeth Warren introduced the Stop Wall Street Looting Act, a bill she framed as a response to the private equity (“PE”) industry “looting” the companies it buys. Labor unions and Democratic lawmakers were quick to support the act, arguing PE investors profit to the detriment of rank-and-file employees, and the bill was reintroduced in 2021, 2024, and 2026.[1] The American Investment Council, the industry’s lobbying arm, has argued each time that the legislation’s real effect would be to “Stop Main Street Investment,” and that PE fuels small businesses, jobs, and retirements across the country.[2]
Academic research on the topic points to a more nuanced view. On net, buyouts don’t destroy or create jobs; they reallocate the economic surplus a firm produces. Who benefits and who loses depends on how the deal is structured, how the outcome is measured, and how exposed the affected workers’ roles are to restructuring. However, most of the results in the literature are based on deals that closed before 2014, and the industry has changed drastically in the last decade. As a result, scholarly findings will likely continue to evolve as researchers gain access to more recent data.
“Does PE cut jobs?” is the wrong question
A multitude of factors contribute to changes in net headcount at a target firm: layoffs, new hiring, and the creation or sale of whole divisions often occur simultaneously. A firm that lays off 100 employees and acquires a division employing 200 is labeled as a job creator, while a firm growing organically that divests a non-core business is considered a job destroyer. Because many datasets cannot separate these elements, published estimates of the effect of buyouts on employment vary greatly from study to study.
Recent high-quality research on the topic separates these factors. Davis et al. (2025) report employment effects both with and without post-buyout acquisitions and divestitures. Across all channels, they find that target firm employment rises by a statistically insignificant 1.8% relative to a control group two years post-buyout, and falls by a statistically insignificant 2.3% once acquisitions and divestitures are stripped out.[3]
Divisional buyouts highlight that the choice of measure matters. Across all channels, employment at divisional targets decreases by a negligible 0.2% compared to a control group. After netting out divestitures and acquisitions, the same targets drop 5.3% of workers.[4] These figures both come from the same firms and over the same timeframe, but tell entirely different stories.
Thus, the answer to “did employment go up or go down?” is determined as much by accounting practices as it is by company hiring policies, and most public arguments over policy proceed without a precise definition of job growth.
Average figures and why they don’t tell the full story
The Davis study is the most extensive of its kind. It identifies ~9,800 US buyouts taking place between 1980 and 2013, matches ~6,000 of them to Census Bureau microdata, and builds a buyout employment model using ~3,600 target firms. Each target firm is matched to a control firm using its industry, size, age, multi-unit status, and year.
Even with this breadth of data, no single result emerges from the research. Including acquisitions and divestitures and relative to controls, employment shrinks by 11.9% over two years when a PE firm takes a public company private (a “public-to-private” deal), but grows by 14.9% when it buys a privately held firm (“private-to-private”). Divisional deals sit near zero at -0.2%, and secondary deals grow 10.6%.[5] These are not draws around a common mean – the variations reflect different transactions doing different things to different firms.
The wage literature is just as varied. An earlier 2019 working-paper version of the same Davis et al. study also examined wages, a topic not discussed in the published paper. It finds that average annual earnings per worker decrease by 1.7% after buyouts, counteracting a pre-buyout wage premium of 2.5% at target firms. However, that average hides an 11% wage increase at divisional targets and a 6% wage decrease in private-to-private deals. The authors attribute the divisional gain partly to “job title upgrading,” where a newly standalone firm turns the divisional general manager into a CEO, the controller into a CFO, and so forth, with increased pay to match the new titles.[6] A firm-average wage figure can rise because the people at the top got new titles, without necessarily benefiting the average employee, so the outcome variable should be taken with a grain of salt.
The authors conclude that historical deals do not support simple narratives about a single, sweeping effect of PE buyouts, and that generalizing from a few high-profile cases can mislead. Because different deals tend to have different effects on total employment and wage levels, we must examine which groups are impacted in each situation rather than relying on average figures.
Who bears the cost
Research to identify which workers absorb the cost of buyouts has been conducted across several countries, and, as expected based on job and income heterogeneity, the findings vary. The consistent trend is that the cost falls on the most easily “replaceable” workers, and there are dependable criteria in the literature that determine who that group is.
The first determinant is the task. In Sweden, Olsson and Tåg (2017) use granular employer-employee data and find that buyouts do not affect unemployment incidence on average. But workers who perform routine tasks at low-productivity firms (those with output per employee below their industry’s median) see an average increase in the probability of unemployment of 10.2 percentage points after a buyout, double that of workers in the control group. Additionally, the point estimate for workers performing offshorable job tasks shows an 8.6 percentage point (or 97.0% in relative terms) increase in unemployment incidence.[7] The authors attribute this to buyouts reducing agency problems, which in turn triggers automation and offshoring. By this reasoning, PE is not creating new unemployment trends but rather removing the managerial slack that was delaying layoffs.
Another factor is employee position. Antoni, Maug, and Obernberger (2019), analyzing German administrative data on 152,057 buyout employees, find lower overall employment, higher turnover, and earnings declines equal to about 2.8% of median earnings by the fifth year compared to controls. This largely falls on white-collar staff, whose employment drops nearly 12% and whose annual earnings fall by roughly €700, consistent with buyout firms removing unnecessary layers of administration. But the authors observe no evidence that investors gain by transferring wealth away from employees.[8]
A third criterion is bargaining power. In the United States, Gornall et al. (2025) analyze employee reviews and find that leveraged buyouts (“LBOs”) reduce perceived job quality despite no change in average base pay. Both job quality and employee incentive pay track firm performance more closely under PE ownership than at comparable public firms, with a 1% higher deal return associated with 0.7% more employee incentive pay.[9] Tying pay to returns shifts risk onto employees, which leads to a perceived loss of job security. The decline in satisfaction is concentrated in highly leveraged deals and is not seen in standard mergers and acquisitions (“M&A”) or growth equity deals. It is also concentrated among employees who would have a harder time finding a comparable job elsewhere. Leverage, rather than private acquisition itself, drives a shift in risk that comes at the expense of workers least able to leave.
The same forces can also benefit employees. According to Agrawal and Tambe (2016), many employees of acquired US firms gain technology skills, and these workers experience higher long-run employability and wages than they would otherwise. The authors argue this reflects PE mitigating skill obsolescence under technological change.[10] Positive effects are also documented by Boucly et al. (2011), who find that French LBO targets grew employment 12% relative to matched controls four years after the transaction, with the effect concentrated in firms that were restricted by credit before the deal.[11] When the constraint facing a firm pre-buyout is capital instead of excess headcount and cost, the restructuring mechanism adds workers.
Although these results may seem conflicting, the underlying theme is that there is not a monolithic replaceable group of people who always lose during a buyout. The losses fall on whoever the restructuring logic renders redundant, which is dependent on the type of deal and the firm. When employees are responsible for a task essential to the firm or credit constraints are capping growth, workers can benefit from buyouts.
The data are changing
Figure 2 sets each study’s sample window against annual US buyout activity and shows how little of the industry the worker-outcomes evidence covers. Roughly 69% of all US buyout-type deals closed since 1990 happened after 2013, the year the Davis et al. sample ends. The structure of the industry has also evolved in the past decade, with most post-2013 growth stemming from add-on acquisitions by (already) PE-owned platforms: there were 2,708 add-ons in 2025 and 1,106 standalone buyouts, the opposite of the late 1990s pattern (see Figure 2).[12] Holding periods have lengthened too, from an average of 5 years in 2010 to 7 in 2024,[13] so the short post-buyout window measured in most studies now covers a smaller share of the typical ownership period than it did. The evidence base is not simply older than the industry it describes; it is drawn from a period when the dominant deal structure of today was marginal.
No study captures even half of the deals in the US buyout industry. The broadest samples, Gornall et al. and Davis et al., cover 42% and 31% of 1990–2025 deals, respectively. This is not a criticism of the papers, which are limited by the opaque nature of the PE asset class and difficulties accessing quality data. However, it does mean claims about what PE does to workers are being made about the industry as it is now, on evidence drawn from the industry as it was.
Conclusion
Both proponents and critics of the Stop Wall Street Looting Act cast the effects of buyouts as a universal constant. Instead, research has shown that effects are disparate: different groups win and lose in different situations. Debt and concentrated ownership put pressure on new owners to find inefficiencies, so they cut what they see as excess cost and invest where the business was being held back. Whether employees gain or lose depends on what that turns out to be: an administrative layer in Germany or a routine task in Sweden. And when access to capital is the thing holding a firm back, buyouts can lead to employment growth.
That reframing changes what a useful question looks like. Asking whether PE cuts jobs lets people pick the deal type and the measure that suit them, and the literature is wide enough to supply both. Asking which workers are exposed, in which deal structures, and under how much leverage produces answers that are more meaningful than a population average. The evidence behind all of this comes largely from deals closed before 2014, in an industry that has evolved significantly in the last decade. Future analysis may reveal new trends in today’s data that are not visible by extrapolating from older deals.
For PE firms, this data gap is also an opportunity. Published research can say little about how today’s add-on-heavy, longer-hold deals affect workers, but investors have the data to answer that question for their own portfolios. Looking at changes in employment, diversity, and job quality within portfolio companies, and benchmarking them against peer firms, lets a firm contextualize its impact with evidence from its own deals rather than averages from decade-old deals.
This is a familiar analysis for Bella Private Markets. For some clients, we combine portfolio company data on employment, revenue, wages, workplace safety, R&D spending, diversity, productivity, and other metrics with peer data from various publicly available and commercial sources, using predictive modeling to fill gaps where peer coverage is incomplete. The result is a benchmark of how each company’s performance and workforce change under PE ownership, measured against peer firms and public markets. We let academic research drive our analysis, and, since the research shows the answer depends on what you measure, we measure more than one thing to deliver analytically rigorous and holistic results. Get in touch with Bella to learn more about how we can support your own analyses and assessments.
Summary of each study
[1] Thea Lee, “Written Testimony in Support of the ‘Stop Wall Street Looting Act of 2019’” (testimony before the House Committee on Financial Services, hearing on “America for Sale? An Examination of the Practices of Private Funds,” Washington, DC, November 19, 2019), Economic Policy Institute, https://www.epi.org/publication/written-testimony-private-equity-nov-2019/; Stop Wall Street Looting Act of 2019, S. 2155, 116th Cong. (2019); Stop Wall Street Looting Act, S. 3022, 117th Cong. (2021); Stop Wall Street Looting Act, S. 5333, 118th Cong. (2024); Stop Wall Street Looting Act of 2026, S. 5512, 119th Cong. (2026).
[2] “The Warren Bill Will Destroy Jobs, Hurt Small Businesses, Threaten Retirements,” American Investment Council, October 20, 2021, https://www.investmentcouncil.org/the-warren-bill-will-destroy-jobs-hurt-small-businesses-threaten-retirements/.
[3] Steven J. Davis et al., “The (Heterogeneous) Economic Effects of Private Equity Buyouts,” Management Science 71, no. 11 (2025): 9569–87, table 2.
[4] Ibid.
[5] Ibid.
[6] Steven J. Davis et al., “The Economic Effects of Private Equity Buyouts” (NBER Working Paper No. 26371, National Bureau of Economic Research, Cambridge, MA, 2019), https://www.nber.org/system/files/working_papers/w26371/revisions/w26371.rev0.pdf.
[7] Martin Olsson and Joacim Tåg, “Private Equity, Layoffs, and Job Polarization,” Journal of Labor Economics 35, no. 3 (July 2017): 697–754, https://doi.org/10.1086/690712.
[8] Manfred Antoni, Ernst Maug, and Stefan Obernberger, “Private Equity and Human Capital Risk,” Journal of Financial Economics 133, no. 3 (September 2019): 634–57, https://doi.org/10.1016/j.jfineco.2019.04.010.
[9] Will Gornall et al., “Do Employees Cheer for Private Equity? The Heterogeneous Effects of Buyouts on Job Quality,” Management Science 71, no. 5 (2025): 4287–317, https://doi.org/10.1287/mnsc.2022.00951.
[10] Ashwini Agrawal and Prasanna Tambe, “Private Equity and Workers’ Career Paths: The Role of Technological Change,” Review of Financial Studies 29, no. 9 (2016): 2455–89.
[11] Quentin Boucly, David Sraer, and David Thesmar, “Growth LBOs,” Journal of Financial Economics 102, no. 2 (2011): 432–53.
[12] Authors’ analysis of Preqin data, accessed August 2026.
[13] Hugh MacArthur et al., “Private Equity Outlook 2026: Gaining Traction,” Bain, July 3, 2026, https://www.bain.com/insights/outlook-gaining-traction-global-private-equity-report-2026/.
