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Nonstandard Work Arrangements and Older Americans, 2005–2017

February 28, 2019

Nonstandard or alternative employment relations refer to employment by a temporary help agency or contract company or as an on-call worker or day laborer. We refer to these nonstandard employment relations (which involve an employer and employee) and independent contracting collectively as nonstandard or alternative work arrangements in this report. Contingent workers are workers who do not expect their job to last or who report that their jobs are temporary. Contingent workers and workers in alternative work arrangements are measured separately. Both have become increasingly prominent in theoretical and policy thinking about how employment has changed in recent years in the United States and other post-industrial countries.Until recently, only relatively poor information on the extent of contingent work and nonstandard work arrangements and how this has changed during the past several decades has been available. The May 2017 Contingent Worker Supplement (CWS) — conducted by the Bureau of Labor Statistics (BLS) 12 years after the last CWS and 22 years after the first — provides an opportunity to examine how contingent work and nonstandard work arrangements have changed over the last two-plus decades. This report examines these changes between 2005 and 2017, with special attention to how older workers — ages 55 to 65 and 65+ — have fared.

Passing Paid Leave Laws Is Just the Beginning: Lessons from the Field on Raising Awareness

February 4, 2019

In the absence of national paid leave laws, some states have responded by creating programs that provide partial replacement of lost wages when urgent health or family needs mean workers must miss work. The three states with the longest track records are California, which implemented paid family leave in 2004; New Jersey, which implemented it in 2008; and Rhode Island, which followed in 2014. All three have had paid medical leave to address a worker's own serious illness for 70 years or more. Today, six states and the District of Columbia have enacted laws that provide workers with paid family and medical leave. Despite the existence of these state laws, both awareness and usage — especially among workers in low-paid jobs and members of minority communities — have been low.This report examines a number of innovative projects in California, New Jersey, and Rhode Island designed to produce usable knowledge about what works — and what doesn't — in raising awareness among workers most likely to need paid family leave and least likely to know about it. It draws the lessons learned in the field and provides guidance to advocates in states with paid family and medical leave programs as they design interventions to address this challenge.

What's Behind the Increase in Inequality?

September 26, 2017

The focus of this paper is the increase in earnings inequality over the last 30-plus years. Economists have well-developed theories that explain differences in wage levels among different categories of workers. Differences in educational attainment and skills are a major source of these differences; large organizations typically employ workers with a wide range of skills and responsibilities and pay them accordingly. As a result, the level of wage inequality within organizations is quite large. This paper does not challenge these results. It argues, however, that these theories are not adequate to explain a relatively recent phenomenon: the increase in recent decades in wage inequality among workers with similar levels of education and similar demographic characteristics who are employed in similar occupations but in different firms or establishments. These differences in wages are how most people experience inequality. Yet much of the analysis by economists has focused on developments that have enabled leading firms in the U.S. to increase their ability to extract monopoly rents.This paper reviews a wide-ranging literature that examines the increased ability of leading firms to extract monopoly rents. It also reviews the more recent and still thin literature on the increase in inequality among workers with similar characteristics but different employers. The contribution of this paper is the identification of a mechanism that reconciles these two strains of economic research and explains how the increase in rent extraction is linked to the increasingly unequal pay of U.S. workers with similar characteristics. I draw on joint work with Rosemary Batt (2014) to identify new opportunities for rent seeking behavior, and on joint work with Annette Bernhardt, Rosemary Batt and Susan Houseman (2016, 2017) on domestic outsourcing, inter-firm contracting and the growing importance of production networks to establish a mechanism that connects the increase in rents with this new type of increase in wage inequality.

Organizational Restructuring in US Healthcare Systems: Implications for Jobs, Wages, and Inequality

September 1, 2017

The healthcare sector is one of the most important sources of jobs in the economy. Healthcare spending reached $3.2 trillion in 2015 or 17.8 percent of GDP and accounted for 12.8 percent of private sector jobs. It was the only industry that consistently added jobs during the Great Recession. In 2016, the private sector healthcare industry, which is the focus of this report, added 381,000 private sector jobs, the most of any industry. It is a particularly important source of employment for workers without a college degree, most of whom, as we document in this report, earn low wages.This report describes how organizational restructuring is affecting the job opportunities and wages of healthcare workers. We focus on changing employment and wages in hospitals and outpatient clinics, where the most profound restructuring is occurring. Over the last decade or more, hospitals have restructured the organization of care delivery in response to major technological advances, regulatory changes, and financial pressures. This restructuring has occurred at two levels: the consolidation of hospitals and providers into larger healthcare systems on the one hand; and the decentralization of services and the movement of jobs to outpatient facilities on the other. Outpatient care facilities include a wide range of services — from primary care centers to specialized units such as urgent care centers, ambulatory surgery centers, free-standing emergency rooms, dialysis facilities, trauma and burn units, and other specialty clinics. These organizational changes began before the 2010 passage of the Patient Protection and Affordable Care Act (ACA), but have accelerated considerably since then, and are likely to continue even as the ACA is revamped in the future.This shift to outpatient care centers offers benefits to patients — convenience as well as opportunities for preventative care — and most healthcare providers and unions have supported the move to more community-based care. But in this report, we show that workers are bearing the costs of this organizational restructuring.

Update: Are Lower Private Equity Returns the New Normal?

February 1, 2017

This report updates a version released in June 2016.U.S. private equity fundraising had its best year ever in 2015 -- raising $185 billion. But is the enthusiasm of investors warranted? Do PE buyout funds deliver outsized returns to investors and will they do so in the future? This report answers this question by reviewing the most recent empirical evidence on buyout fund performance; the answer is no. While median private equity buyout funds once beat the S&P 500, they have not done so since 2006 -- despite industry claims to the contrary.

Domestic Outsourcing, Rent Seeking, and Increasing Inequality

January 6, 2017

An increasing share of the economy is organized around financial capitalism, where, in contrast to the past, capital market actors actively assert and manage their claims on wealth creation and distribution. These new actors challenge prior assumptions of managerial capitalism about the goals and governance of firms. The focus on shareholder value is credited with increasing firm efficiency and shareholder returns. This lecture analyzes the changes in organizational behavior and value extraction under financial capitalism.

No Big Deal: The Impact of New York City's Paid Sick Days Law on Employers

September 6, 2016

In June 2013, New York City became the seventh -- and the largest -- U.S. jurisdiction to provide workers with paid sick days, with the passage of the Earned Sick Time Act, which took effect in April 2014. Under this law, covered workers employed in New York City private-sector companies and non-profit organizations with five or more employees accrue job-protected paid sick leave at a rate of one hour for every 30 hours worked. Employees of companies with one to four workers are entitled to unpaid sick leave. The law covers about 3.9 million workers employed in the City, 1.4 million of whom did not have access to paid sick days prior to its passage. When it was first proposed, critics of the paid sick time law argued that it would lead to a loss of jobs in the City and impose a major cost burden on employers, especially small businesses. They also predicted that such a law would invite widespread abuse by employees. However, as this report shows, these fears have proven unfounded. By their own account, the vast majority of employers were able to adjust quite easily to the new law, and for most the cost impact was minimal to nonexistent. Indeed, a year and a half after the law took effect, 86 percent of the employers we surveyed expressed support for the paid sick days law.

Everyone Wondered How a Private Equity Firm Would Make Money in a Leveraged Buyout of a Struggling Non-Profit Hospital Chain - Now We Know

September 1, 2016

On Monday, September 26, private equity firm Cerberus Capital Management announced that Medical Properties Trust Inc. (MPT) would buy all of Steward Health Care's hospital properties. The real estate investment firm agreed to pay $1.2 billion for the properties and a further $50 million for a 5 percent equity stake in the health care system. Still struggling financially after six years of private equity ownership, Steward will lease back the properties for its hospitals and other facilities, paying rent to MPT. The deal will pay back Cerberus' initial investment in Steward and more, although the total amount the PE firm and its investors will receive has not been revealed. The deal will also pay down all of the company's more than $400 million debt and provide a payoff for top executives. Steward will receive an undisclosed amount to try once again to revive its failed strategy to acquire additional hospitals outside of Massachusetts and grow into a national powerhouse.

Are Lower Private Equity Returns the New Normal?

June 29, 2016

U.S. private equity fundraising had its best year ever in 2015 -- raising $185 billion. But is the enthusiasm of investors warranted? Do PE buyout funds deliver outsized returns to investors and will they do so in the future? This report answers this question by reviewing the most recent empirical evidence on buyout fund performance; the answer is no. While median private equity buyout funds once beat the S&P 500, they have not done so since 2006 -- despite industry claims to the contrary.

Fees, Fees and More Fees: How Private Equity Abuses its Limited Partners and U.S. Taxpayers

May 11, 2016

The private equity industry receives billions of dollars in income each year from a variety of fees that it collects from investors as well as from companies it buys with investors' money. This fee income has come under increased scrutiny from investigative journalists, institutional investors in these funds, the Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS), and the tax-paying public. Since 2012, private equity firms have been audited by the SEC; as a result, several abusive and possibly fraudulent practices have come to light. This report provides an overview of these abuses -- the many ways in which some private equity (PE) firms and their general partners gain at the expense of their investors and tax-payers. Private equity general partners (GPs) have misallocated PE firm expenses and inappropriately charged them to investors; have failed to share income from portfolio company monitoring fees with their investors, as stipulated; have waived their fiduciary responsibility to pension funds and other LPs; have manipulated the value of companies in their fund's portfolio; and have collected transaction fees from portfolio companies without registering as broker-dealers as required by law. In some cases, these activities violate the specific terms and conditions of the Limited Partnership Agreements (LPAs) between GPs and their limited partner investors (LPs), while in others vague and misleading wording allows PE firms to take advantage of their asymmetric position of power vis-à-vis investors and the lack of transparency in their activities. In addition, some of these practices violate the U.S. tax code. Monitoring fees are a tax deductible expense for the portfolio companies owned by PE funds and greatly reduce the taxes these companies pay. In many cases, however, no monitoring services are actually provided and the payments are actually dividends, which are taxable, that are paid to the private equity firm.

Domestic Outsourcing in the United States: A Research Agenda to Assess Trends and Effects on Job Quality

March 15, 2016

The goal of this paper is to develop a comprehensive research agenda to analyze trends in domestic outsourcing in the U.S. -- firms' use of contractors and independent contractors -- and its effects on job quality and inequality. In the process, we review definitions of outsourcing, the available scant empirical research, and limitations of existing data sources. We also summarize theories that attempt to explain why firms contract out for certain functions and assess their predictions about likely impacts on job quality. We then lay out in detail a major research initiative on domestic outsourcing, discussing the questions it should answer and providing a menu of research methodologies and potential data sources. Such a research investment will be a critical resource for policymakers and other stakeholders as they seek solutions to problems arising from the changing nature of work.

Private Equity and the SEC after Dodd-Frank

January 16, 2015

A new report by Senior Economist Eileen Appelbaum of the Center for Economic and Policy Research (CEPR) shows just how much the recnt SEC investigations of private equity funds has revealed and why it remains important to continue to regulate the industry. The report reviews the widespread practices in the industry that have unfairly enriched some private equity firms at the expense of pension funds and other investors in their funds.