Employees with health problems more likely to lose their jobs after private equity buyout

A study by Professor Pilar Garcia Gomez and Associate Professor Stefan Obernberger from Erasmus School of Economics, together with Professor Ernst Maug from the University of Mannheim, examines the relationship between employee health and private equity buyouts. 

Productivity levels after a buyout 

Private equity (PE) buyouts are often associated with drastic corporate restructuring: the new owners streamline operations, cut costs, and push for higher productivity. This process can make firms more efficient but also raise concerns about the human cost. Employees may face higher workloads, lower job security, and potential stress-related health problems. Policymakers and the public often view buyouts as profit-driven takeovers that ignore worker welfare. 

Yet, surprisingly little has been researched about how buyouts affect workers’ health, as opposed to just their jobs or wages. By linking detailed health records with employment data, the authors investigated whether the restructuring that follows PE buyouts harms employees’ physical or mental wellbeing, and how personal health status influences workers' fortunes after these ownership changes. 

Looking at employee health over time 

The study drew on a rich set of data from the Netherlands. The researchers identified 274 buyout firms between 2007 and 2013, covering 55,752 employees, and compared each worker to a similar employee from a non-buyout firm based on factors like age, gender, job history, and pre-buyout health. 

Because the Netherlands tracks prescribed medications for the entire population, they could objectively measure health based on drug use (for example, antidepressants or cardiovascular medication) and health-care spending over time. We followed both groups of employees for up to four years after the buyout to compare how their jobs, earnings, and health developed.  

The Netherlands provided an ideal setting: its universal health insurance meant that any health effects couldn’t be explained by loss of employer-provided insurance, which is common in other countries like the United States. 

Lower wages and fewer employees 

Employees from a buyout firm, regardless of whether they stayed there or not, saw their annual earnings drop by about €1,300, or nearly 4% of their pre-buyout income. This was mainly because they were more likely to leave the firm than employees from a firm that didn't get sold.  

These losses in income were much larger for workers already in poor health. For example, employees taking cardiovascular drugs lost an additional €2,500 annually, and those on antidepressants about €2,000.  

Employees who lose their jobs after a buyout are more likely to have pre-existing health problems. These health issues tend to reduce productivity, but they also mean that affected employees are better protected by social security schemes. As a result, private equity firms may find it easier, and less reputationally costly, to let these workers go. At the same time, employees with access to generous social security benefits may be more inclined to leave voluntarily. 

For those who remain employed after a buyout, health outcomes do not worsen. Despite often restructuring firms decisively, private equity owners do not appear to create more stressful or unhealthy working environments overall.  

The picture is different for employees who leave and fail to find new work: their health tends to deteriorate. By contrast, employees who move on to a new job typically experience a slight improvement in health. 

Conclusion  

Private equity buyouts reshape firms without necessarily harming employee health, but they do expose workers, especially less healthy ones, to serious income risks. Healthier employees are more likely to remain employed and recover economically, while those in poorer health face a double blow: lower earnings and higher chances of leaving the workforce.