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September 2008, Vol. 131, No. 9
The effect of business ownership change on occupational employment and wages
Every year, thousands of U.S. businesses are bought, sold, or merged to raise profits, reduce costs, increase market share, or otherwise interact in the dynamic economy. The national level of business ownership change peaked in the late 1990s, when the Nation was experiencing rapid economic growth, and declined gradually through 2002.1 After 2003, the number and asset trade value of ownership changes rose steadily again. Volume in 2006 exceeded that in 2005 by 38 percent and surpassed a 2000 record. The year-over-year asset trade volume of ownership change as of July 2007 was up 60 percent globally and 41 percent in the United States.2
Existing literature and anecdotal evidence have found varying effects of ownership changes on company profits, labor productivity, wages, and staffing in specific industries. For example, research using Census Bureau data on manufacturing companies found that ownership changes led to reductions in employment and wages at auxiliary (support) offices, but had little effect on employment at production plants.3 Two other studies—one of manufacturing firms4 and the other of food-manufacturing firms5—found that ownership changes resulted in employment and wage increases overall, but led to job losses in large firms.
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1 Counts include mergers, full- or partial-interest acquisitions, divestitures, and leveraged buyouts valued at $5 million. See Statistical Abstract of the United States, 2006 (U.S. Census Bureau, 2007), Table 751, "Mergers and Acquisitions—Summary, 1990 to 2003."
2 "What Goes Up, Must Come Down?" Mergers & Acquisitions: The Dealermaker’s Journal, July 2007, pp. 10-11; on the Internet at search.ebscohost.com.proxy2.library.jhu.edu/login.aspx?direct=true&db=buh&AN=25593842&site=ehost-live (visited Sept. 8, 2007).
3 Donald Siegel and Frank Lichtenberg, "The Effect of Ownership Changes on the Employment and Wages of Central-Office and Other Personnel," Journal of Law and Economics, October 1990, pp. 383–408.
4 Robert McGuckin and Sang Nguyen, The impact of ownership changes: a view from labor markets (U.S. Census Bureau, Center for Economic Studies, 2001).
5 Robert McGuckin, Sang Nguyen, and Arnold Reznek, "On Measuring the Impact of Ownership Change on Labor: Evidence from U.S. Food-Manufacturing Plant-Level Data," in John Haltiwanger, Marilyn Manser, and Robert Topel (eds.), Labor Statistics Measurement Issues, NBER Studies in Income and Wealth, vol. 60 (Chicago, University of Chicago Press, 1998).
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