🎧 MOVIES VS. CAPITALISM: Judas and the Black Messiah (w/ Ryan Christian)

Who Cleans The Billionaire Factory

Mar 12, 2023 Andrew Perez
America’s most vulnerable workers are doing hazardous work to help make private equity execs richer.
Who Cleans The Billionaire Factory
(AP Photo/Mark Lennihan)

We often make the point at The Lever that private equity has been a bad deal for public pension funds managing the retirement savings for unionized teachers, firefighters, police officers, and other government workers. State and local retirement systems have plowed fortunes into private equity, chasing higher returns that haven’t materialized, with high-fee investments that could soon blow up.

At the end of the day, the fees have primarily served to help make a small number of Wall Street executives exorbitantly rich — leading French economist Ludovic Phalippou to name the private equity industry “the Billionaire Factory.”

But then there’s the issue of what public pension officials are actually investing in when they hand government workers’ retirement savings over to private equity firms. What companies are private equity funds buying with workers’ money? Whose work supports the Billionaire Factory?

The answers to these questions are disturbing.

Last week, The Lever dove headfirst into this topic, which is at the heart of two of the darker stories in recent news.

In recent weeks, the Labor Department announced it fined a sanitation contract company, Packers Sanitation Services Inc., for employing more than a hundred children, some as young as 13, to clean slaughterhouses for giant meatpacking conglomerates.

The kids, reportedly mostly undocumented migrants, were using hazardous chemicals to sanitize dangerous machinery and blood-soaked floors — for a company that a 2017 Businessweek profile identified as potentially the most dangerous employer in America.

That Businessweek profile came out less than a year before the Blackstone Group, the world’s largest private equity firm, bought Packers. Blackstone’s CEO, conservative mega-donor Stephen Schwarzman, took home $1.3 billion last year.

The Labor Department is also reportedly investigating a contract baking manufacturer, Hearthside Food Solutions, for hiring migrant children in one of its factories, which manufacture and package snacks and cereal for some of the biggest brand-names in America like General Mills and Quaker Oats, following a New York Times exposé.

Both companies, Packers and Hearthside, have gone through a series of private equity acquisitions over the past two decades. Our report traced how government workers’ retirement dollars have helped fund many of those acquisitions along the way.

The Blackstone fund that bought Packers, for instance, received investments from state retirement systems in California, New York, and North Carolina.

This is how public pension officials have chosen to deploy retirees’ savings — investing in private equity funds that are motivated to seek profits anywhere possible, no matter the social consequences — and that includes buying companies premised on outsourcing factory labor.

Investors in private equity funds can’t tell the future, and don’t know exactly how private equity funds will use their money. But public pension officials in Pennsylvania knew from the start that Packers’ first private equity buyer was eager to target the “industrial outsourcing” sector. They invested $100 million worth of workers’ savings in the fund, anyway.

Outsourcing invariably means paying workers lower wages; outsourcing factory work inevitably means underpaying workers to perform hazardous jobs.

It should come as no surprise that Packers has reportedly relied heavily on undocumented workers to clean meatpacking plants, since the overnight sanitation workers get paid substantially less than workers on day shifts. Perhaps it should be equally unsurprising both Packers and Hearthside were eventually accused of illegally employing migrant children.

We already knew public employees were helping fund the Billionaire Factory. Now, we’ve learned who cleans it: the most vulnerable workers in America, including children, who are risking life and limb to make some of the wealthiest people in the world even richer.

Only paid subscribers can comment. Please subscribe or sign in to join the conversation.