Employee Ownership Can Broaden Wealth for the Young Middle Class

As the nation is in the midst of a rapid rethink of the fortunes of the middle class that is affecting both political parties, a new study suggest what kinds of companies might improve their wages and wealth. The study, Employee Ownership and Economic Well-being, shows that employee stock ownership is linked with better wages, wealth, and benefits for young workers as they move through their first two decades in the workforce. Have no doubt about it, these workers are at the frontline of capitalism where the failure of our economic system to build wealth for the middle class has to be sorted out or where even more severe disappointment will have to be admitted very soon with bad consequences for our society and economy at large.

Dr. Nancy Wiefek of the National Center for Employee Ownership (ownershipeconomy.org) ingeniously used information from the National Longitudinal Surveys of the U.S. Department of Labor’s Bureau of Labor Statistics to get into the weeds about what happened to a nationally representative group of 9,000 young people as they began their journey through the workforce from 1997, when they were close to 17 years old, to 2013, when they were close to 34 years old. In a standout finding, by 2013, the young people who worked for companies with Employee Stock Ownership Plans, namely ESOPs and similar plans, were in a much better situation than young people working in companies without ESOPs. The ESOP workers had 33% higher median wage income, 92% higher median household wealth, and greater access to nine other employee benefits such as flexible work schedules, parental leave, and tuition reimbursement, plus greater job stability. The two groups of young people started out in 1997 with about the same wages and wealth, similar education, marital status, and parents’ education. They came from similar parts of the country.

How was working in a company with an Employee Stock Ownership Plan or ESOP linked to these better outcomes? The young people in ESOP companies had higher median wages and household wealth whether their income was above or below $50,000, whether they were male or female, whether they were people of color or not, whether they were married or single, college-educated or without college, with or without children. This seems to cross over some of the usual fault lines of wealth in American society. One key difference is that workers in the typical ESOP company had a way to build up capital ownership in addition to wage income.