By Anthony Mathews
At the Beyster Institute at the University of California-San Diego, which is dedicated to studying and promoting employee ownership, I was part of an initiative about ten years ago to try to organize a work group with the humble goal of curing poverty in the U. S. We started from the assumption that we, all of us, knew what it took to get someone from poverty to security — education, a good job, a safe and comfortable home and all the skills necessary to support all those things. Our group comprised 46 representatives from non-profits around the country, among whom were dedicated experts in each of these areas and more.
Our job was to work together to create real solutions for the intractable problem of poverty in the most opulent country in history. We felt that among us, we clearly had all the parts of the answer covered (once we got through the “jockeying for position as the most critical element to attack first” phase of our work.) Unfortunately, the crash of the late 2000s intervened and funding for the project, provided by a well-known non-profit foundation, was cut abruptly pending the rebuilding of endowments and has not resumed.
Most stunning is the fact that, in every element of financial health that was studied, employee owners are materially better off than non-employee owners who are otherwise identical.
I’ve been very disappointed for years that the effort was aborted before it got much traction. I still think our assumptions were true — that if all the people working on eradicating poverty would do so together, we would be a lot closer to reaching that goal. Widespread ownership of productive capital would be a key factor. Distributing and building on capital in areas where it will not develop on its own has the power to fill the voids that create a lack of resources for individuals in poverty. Employee ownership of earned capital will be a key element of the cure for poverty because it has the best chance of creating real wealth opportunities for America’s working class.
Poverty is a community issue.
Poverty is a community issue. It eats away at the core of a community until the system of that community becomes the engine that creates more and deeper poverty (financial as well as psychological). If we want to fix poverty, we need to fix what’s wrong with our communities. I have always believed (and preached) that creating economic engines within communities that produce wealth and leave it there, in the community in which it is generated, is the key to making that happen. I can’t think of a better way to describe the economic impact of an ESOP than that — an economic engine designed to create wealth in a community and leave it there, distributed among members of that community.
On this very complex subject, though, our group’s intuitive sense ten years ago of how employee ownership must play a key role in the anti-poverty movement, was, after all, intuition. But our friends at the National Center for Employee Ownership released a report a few months ago, “Employee Ownership & Economic Well-Being: Household Wealth, Job Stability, and Employment Quality among Employee-Owners Ages 28 to 34,” that makes the quantitative case for employee ownership in very strong terms.
The study showed that employees who are fortunate enough to work for an ESOP company, compared to their otherwise identical non-ESOP employees fare much better. For example, employees who participate in employer stock plans report job tenure that is 53 percent longer, median household net worth that is nearly twice as large and income that is on average 33% larger than those reported by non-owner comparison groups. These results are stunning and consistent. They are even more dramatic when the data is broken down by race, wealth position, and other related factors. Most stunning is the fact that, in every element of financial health that was studied, employee owners are materially better off than non-employee owners who are otherwise identical.
This study is perhaps the most important work we have ever had in the ESOP community, because it validates what we have been shouting for the last 35 years to anyone who would listen: broadened employee ownership of our productive capacity is “the cure for what ails our communities,” as well as our country.
Anthony Mathews is a consultant with the Beyster Institute at the Rady School of Management at the University of California at San Diego.