AIC Responds to Joint Economic Committee Chairman’s Recent Issue Brief Regarding Private Equity
“Private equity investments are a critical driver of economic growth and benefit public pension beneficiaries, small businesses, workers, and communities in New Mexico and nationwide”
WASHINGTON, DC – Today, the American Investment Council (AIC) published a letter responding to a recent one-sided issue brief from the Joint Economic Committee (JEC) Democratic staff, chaired by US Sen. Martin Heinrich (D-NM), unfairly attacking the private equity industry. In 2022, the private equity industry employed 12 million people who earned a collective $1 trillion in wages and benefits. The average employee of U.S. private equity firms and private equity-backed companies earned $80,000 in wages and benefits, equating to roughly $41 per hour for a full-time worker—well-above the national average wage. Contrary to the notion that they are all behemoths, 85% of businesses funded by private equity had fewer than 500 employees in 2022.
“While we welcome the opportunity to engage with and educate the committee on the benefits of private equity investments to businesses and workers nationwide, we were disappointed to see the Joint Economic Committee (JEC) engage in a one-sided attack on the private equity industry,” said AIC President and CEO Drew Maloney. “The JEC was created to offer balanced, well-informed views so policymakers can better understand the economy and pass common-sense legislation. Advancing one-sided views discredits the organization and threatens to limit productive private equity investments that benefit millions of public pension beneficiaries nationwide.”
Click here to read the full letter.
Copied below are excerpts from the letter.
Private Equity Investments Support Workers, Small Businesses, and Public Pensions
In 2022, the private equity industry employed 12 million people who earned a collective $1 trillion in wages and benefits. The average employee of U.S. private equity firms and private equity-backed companies earned $80,000 in wages and benefits, equating to roughly $41 per hour for a full-time worker—well-above the national average wage. Contrary to the notion that they are all behemoths, 85% of businesses funded by private equity had fewer than 500 employees in 2022.
As a result of the private equity industry’s success, 88% of U.S. public pension funds, serving 34 million public sector workers and retirees, have enjoyed returns that far exceed those of other asset classes. In fact, the Public Employees’ Retirement of New Mexico’s private equity portfolio delivered a 10-year annualized return of 17.35 percent. This helps to secure the retirement of New Mexico’s police, firefighters as well as other state employees.
The JEC cites the Private Equity Stakeholder Project’s “Stake Risk Index.” But independent research has found numerous “methodological flaws with their research. Specifically, “PESP’s State Risk Index contains conspicuous data omissions, significant inconsistencies in data sampling that may introduce mathematical errors, and is built on data uncorrelated to economic outcomes for citizens. Stakeholders, decisionmakers, and media should be aware of these deficiencies before drawing any sort of conclusions from this purported Index.” Recently, the Private Equity Stakeholder Project has also said, “PESP does not believe that private equity firms are the primary drivers of the failures of the US health system….”
Empowering Workers and Supporting Well-Paying Jobs
Private equity supports American workers by providing strong wages, professional development opportunities, safe work environments, and investments in underrepresented talent. Private equity-backed workers make more than $80,000 in annual wages and benefits, exceeding the national average. Private equity firms are on the forefront of offering workers a stake in their own companies, giving them the chance to build long-term wealth for themselves, their families, and their communities.
Multiple AIC members have partnered with Ownership Works, a nonprofit initiative that builds employee wealth by expanding shared employee ownership of companies, enabling employees to directly benefit from the company’s success . Since its founding in 2021, Ownership Works has impacted nearly 112,000 employees nationwide, generating over $130 million in payouts to low- and moderate-income workers.
Private Equity’s Limited but Important Role in Health Care
America’s health care system has tremendous challenges – but the private equity industry is not the source of these. Instead, our investments are helping to improve care across America and fund lifesaving innovation. Private equity investments have funded research into deadly diseases like Alzheimer’s and Parkinson’s, expanded and renovated facilities, modernized medical records and health care data, and made other needed investments.
Giving Doctors and Nurses the Resources To Treat Patients
In 2021, the Medicare Payment Advisory Commission (MedPAC) released a report, originally requested by the Chairman of the House Ways and Means Committee, examining the role private equity investments play in the health care sector. MedPAC reported to Congress that “rapid changes in the health care market have created an environment of uncertainty and higher expenses for independent practices. Private equity investment offers these practices ‘shelter from the storm” by providing them with access to capital and expertise in financial management, operations and practice acquisition.”
