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Labor to Private Equity: We Are Part of Solution

Frank Polich | Bloomberg via Getty Images

For the first time in recent years, policymakers don't have a major financial crisi s to grapple with at this year's World Economic Forum (WEF), which gets under way on Wednesday.

Instead, political and business leaders are set to focus on how to inject confidence and stability into the global economy. They will be aiming to reconcile creating employment and reducing income inequality with achieving growth.

Deep divisions remain over how best to achieve this: freeing businesses to do what they do best or increasing government intervention to boost the labor market.

The former would encourage the process of creative destruction, allowing capital to flow to sectors that are the most productive through mergers and acquisitions and private equity.

The latter would allow greater job protection for workers, while asking them to make compromises, along the lines of Germany's model — which helped shield it from major job losses during the financial crisis.

"It's time to recognize the voice of labor and work with labor, we know how to get this job done," Philip Jennings, General Secretary of labor union UNI Global told CNBC. "We can fix this, give us a seat at the table, we can fix this, we are part of the solution."

Jennings said the general employment picture was "very bleak." The International Labor Organization (ILO) said in its annual report on Tuesday that global unemployment would hit a record high in 2013 and could continue rising until 2017. The ILO forecasts unemployment numbers will rise by 5.1 million in 2013 to reach 202 million and will rise to 205 million in 2014.

(Read More: Global Unemployment Set to Hit Record High in 2013: ILO)

"It's time to put the money sitting in those cash mountains to work, people are desperate to work. They are looking for quality jobs and a decent wage … the world needs a pay rise," Jennings said.

John Studzinski, senior managing director at private equity firm Blackstone agreed that there was a need for corporates to pay attention to job creation.

"It's an essential issue because otherwise you're going to have a lost generation of unemployed. CEOs have got to focus on it, it has to be a tier one issue and it still isn't," he said.

Both Jennings and Studzinski agreed the German model of labor contracts worked very well.

"They train people young, they re-train them, they keep them in the workforce. The Chinese and Brazilians are looking very carefully at [the model]" Studzinski said.

(Read More: Private Equity in China: Which Way Out?)

Jennings added that Germany had "weathered the storm" because they had kept up apprenticeship programs and protected workers. But he also hit out at private equity, an industry that has been accused of slashing jobs to improve efficiencies in companies it invests in.

"We ain't going to fix this with a private equity business model, I'm afraid," Jennings said. "I want to see a call to action at Davos this year on sharing the wealth and investment."

But Studzinski refuted the claims against private equity investors.

"Private equity is about growth and investment and return but you don't get return unless you invest, and people are one of the major investments," he said.

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