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Article Artículo

A Message From Our Co-Directors

As we do every December, we here at CEPR are reaching out to ask that you consider making an end of the year donation to support our work. Usually this entails regaling you with a list of all our accomplishments over the past year.

But this year we decided to do something different (which, given the extraordinary events of this past year, we felt was fitting). We want to talk candidly and honestly about the challenges we progressives face, and discuss where we need to go from here. 

CEPR / December 14, 2016

Article Artículo

Private Equity is Not All Hostess Twinkies

The NYT ran a lengthy piece this weekend on how two private equity (PE) firms, Apollo Global Management and Metropoulos & Company, made a huge return on buying up the rights to Hostess Twinkies and a few of the company’s other brands, following the company’s bankruptcy. There are a couple of issues that deserve somewhat further attention than the article gives them.

First, while the article notes that its bankruptcy occurred under the ownership of Ripplewood Holdings, another PE company, it doesn’t discuss the issues which led to the original bankruptcy. Although the full story of Ripplewood’s control of Hostess would require another article of at least equal length, it provides a useful example of a private equity failure. Ripplewood borrowed heavily, putting the company in a precarious financial state. It also never made the investments necessary to modernize its facilities, putting it at a competitive disadvantage.

As the article notes, the bankruptcy relieved the company of its debts and pension obligations. The latter of which would fall to the Pension Benefit Guaranty Corporation (PBGC), which is run by the federal government. The PBGC is itself under serious strain presently, due to the collapse of many large pension funds. Furthermore, even if the PBGC is able to pay benefits at the legally guaranteed levels, most former Hostess workers will still see large cuts from the pensions they had earned while working.

This point is worth noting in the context of what appears to be the main basis for the huge returns earned by the two PE companies. It appears that they were able to buy the rights to Twinkies and other Hostess brands at a price that was far below the actual market value. While this indicated good insight on the part of the PE fund managers, if these brands had been sold for closer to the correct market value, there would have been more money to pay workers’ pensions and other creditors.

CEPR / December 12, 2016

Article Artículo

Affordable Care Act

Health and Social Programs

United States

Workers

Obamacare and Part-Time Work, Part 3: Part-Time Employment & Unemployment

This is the last blog post in a three-part series on the Affordable Care Act’s potential effects on part-time employment. The first and second posts can be read here and here. 

The first blog post in this series looked at Obamacare’s effect on voluntary part-time employment, arguing that the law may have given workers the freedom to shift from full-time to part-time schedules. The second post said that when some workers cut back on their hours, it likely freed up opportunities for other workers. According to the post, this allowed part-time workers seeking full-time jobs to increase their hours. It may also have given unemployed workers seeking part-time jobs a better shot at being hired.

Instead of advancing a new argument about Obamacare’s effect on part-time work, this post simply examines the changes in different types of part-time employment over the past couple of years. Regardless of whether we believe that Obamacare is behind these positive changes, it’s clear that the forecasts made by the law’s critics simply haven’t come true.

It is worth noting that part-time employment is actually down slightly since before Obamacare went into effect. But more importantly, the experience of working part-time has itself improved dramatically. For instance, the share of part-time workers with health insurance increased nearly 6 percentage-points between 2013 and 2014. And after three years of completely stagnant wages, part-time workers saw significant wage growth beginning in 2014. If Obamacare is supposed to immiserate part-time workers, this misery isn’t showing up in the data; if anything, part-time workers’ wages and benefits both began rising right when the Affordable Care Act (ACA) went into effect.

CEPR and Nicolas Buffie / December 12, 2016