Private Equity Buyouts and Employee Health

Abstract

We examine the role of employee health in Private Equity buyouts using employee-level data on employment, wages, medical prescriptions, and health expenditures.We conduct matched-sample difference-in-differences estimations including more than 55,000 buyout employees. Employees with a lower health status before the buyout face the most substantial losses of income and employment from buyouts, and these losses are predicted by health-related estimates of employees’ productivity. Buyouts influence employees’ career paths, and health outcomes after buyouts are associated with career path outcomes: Those who become unemployed are in poorer health and the health of those who find new jobs is better. More than half of the negative effect of buyouts on employees’ incomes is buffered by social transfers and this insurance effect is strongest for employees in poor health. We conclude that buyout-related restructuring has a stronger negative impact on the careers and human capital of employees with health problems.

Keywords: Private Equity, Buyouts, Restructuring, Health, Human Capital Risk, Wages, Unemployment Insurance

JEL Classification: G30, G34, I12, J65, J24, J31, M51