Democratic Party leaders have made Wall Street “greed” and corporate financial engineering, such as stock buybacks, a priority of efforts to reduce wealth inequality. Policy recommendations to tax stock market gains and target private equity are popular, but one idea that many high-profile Democratic hopefuls have supported in the past has not received much attention on the campaign trail: Granting stock ownership to more Americans.
The latest monthly jobs report continued to show a solid job creation pace and low unemployment, but during the past decade of economic recovery, the top 10% of households have seen a disproportionate increase in wealth, as most of the gains went to the stock market.
In 2016, the richest 10 percent of the country owned 85% to 90% of financial assets, with the top 1% owning more than half, according to a paper by New York University economics Professor Edward Wolff. Meanwhile, a recent national survey by the Federal Reserve found that roughly 40% of Americans could not afford a $400 emergency expense — 27% would be forced to sell something or resorting to a loan; 12% would not even have those options available to fund the expense.
While workers at large publicly traded companies have access to employer stock plans — often at discounts to current market value — as well as compensation in the form of stock options, that is not the case for the majority of Americans employed by private companies.
He talks about the stock market. Well, that’s fine if you own stocks. So many families in America do not. — California Sen. Kamala Harris
California Sen. Kamala Harris highlighted household’s lack of access to capital during the first round of primary debates last month in Miami despite President’ Trump’s frequent celebrations of the stock market’s record highs.
“He talks about the stock market. Well, that’s fine if you own stocks. So many families in America do not,” Harris said.
The Harris economic platform is focused on many ways to increase the share of wealth held by working Americans, including what the campaign described as a a reversal of “President Trump’s trillion-dollar tax cut for corporations and the top 1%” and use of that money to give a tax credit of up to $6,000 to working families each year. She also supports a $15 minimum wage, greater union power, and rent relief.
Ohio Sen. Sherrod Brown, who is not currently running for president, recently introduced legislation to curb stock buybacks. Brown’s bill would require companies to offer employees $1 for every $1 million spent on stock repurchases.
“Wall Street’s obsession with accumulating wealth for the people who already have it is by their explicit design – and it comes at the direct expense of American workers,” the Ohio lawmaker said at a recent National Press Club appearance in Washington.
What these ideas lack is a direct method to generate gains the way the wealthy, like corporate shareholders, always have done so: through stock ownership.
Employee stock option plans, or ESOPs, are one of the only policies that can directly deal with the economic reality that gains in the economy have largely gone to Americans with access to stocks. ESOPs help solve that discrepancy by not only distributing profits of private companies more equally amongst workers, but also giving them more control of the company in turn.
”Creating more owners, by issuing equity to employees, is the fastest way to reduce income inequality, ” said Henry Ward, CEO of Carta, an equity management software platform. “It’s never been easier to issue employee equity. ESOPs are one more tool that can lift workers from payroll into the equity stack — where there’s potential for life-changing returns. The American working class deserves any vehicle that increases access to owning capital.”