Aspen Institute releases issue brief that details policy and practice interventions
by Adria Scharf
“Even before the COVID-19 pandemic, in an allegedly strong economy, workers at the bottom of the opportunity scale were struggling to support themselves and their families. Not only have the incomes of the lowest-paid workers stagnated or fallen even as the cost of essentials, such as housing, health care, and transportation, have climbed, but — and relatedly — wealth inequality has soared. The divisions in wealth between men and women, and between white households and households of color, are particularly striking.”
A new issue brief released last week, “Race and Gender Wealth Equity and the Role of Employee Share Ownership,” takes the above quote as its starting point. It then makes a case for why policymakers, funders, and investors who care about racial and gender wealth equity should support employee share ownership. The paper summarizes recent research findings showing that employee ownership can “increase equity of opportunity to build wealth and address wealth divides” and lays out a long list of thoughtful policy and practice ideas that, if implemented, could greatly expand employee ownership—and racial and gender equity—in the U.S. economy.
The brief makes a case for why policymakers, funders, and investors who care about racial and gender wealth equity should support employee share ownership.
Roundtable of Experts Convened
In October 2020, the Aspen Institute Economic Opportunities Program hosted a roundtable discussion on “Expanding Employee Ownership with a Racial Equity Lens.” Maureen Conway notes, “our roundtable brought together experts from across fields of practice who share a commitment to expanding employee share ownership and advancing racial equity. Their engagement and openness to sharing insights and experiences helped to generate the creative policy and practice ideas captured in this paper.”
In breakout sessions and group discussion, participants identified barriers to growing employee share ownership and shared their ideas about how to expand employee ownership to advance racial equity. Some of the ideas they explored built on longstanding work by practitioners and scholars of color seeking ways to use a variety of forms of employee ownership to benefit workers and business owners of color.
Proposals to Expand Employee Share Ownership
When it came to policy and practice ideas, roundtable experts named a variety of strategies to expand employee share ownership and reach business owners and workers of color, including ideas related to:
- Increasing awareness and education efforts and broadening messaging to reach a wider audience.
- Increasing access to equity and risk capital.
- Implementing policies inclusive of the spectrum of employee share ownership forms, across all levels of government, to expand access to employee share ownership with an equity lens.
Among the many specific ideas enumerated were these:
Raise Awareness: Noting that although employee share ownership is not well understood by policymakers and the public, it supports outcomes that matter deeply to many–for example, bolstering local economies, helping business owners retire in ways that preserve jobs, addressing racial inequity and economic inequality–the brief recommends a “targeted education campaign” to explicitly connect employee ownership to these important issues. To connect directly to racial justice campaigns, it also calls for “organizing a summit of civil rights leaders to build awareness of the role employee share ownership can play in addressing racial wealth gaps.”
Although employee share ownership is not well understood by policymakers and the public, it supports outcomes that matter deeply to many–for example, bolstering local economies, helping business owners retire in ways that preserve jobs, addressing racial inequity and economic inequality.
Improve Financing: The need for capital to finance employee ownership transactions with a racial equity lens could be addressed, roundtable experts suggested, by providing capital directly to lenders or investors that have an explicit racial equity focus; through crowdfunding; or through philanthropic investments in employee ownership funds or technical assistance support.
Implement Supportive Public Policies: The brief details a veritable menu of government policy proposals, suggesting for example enabling workforce development dollars to help workers become owners; developing a strong Local Economies Financing Initiative to support small business retention; and designing investment vehicles that facilitate the transition of equity ownership from founding Opportunity Zone entrepreneurs to their employees. Other ideas include a public procurement preference for employee-owned businesses; ensuring that when businesses run by women and people of color convert to employee ownership they retain their minority- or women-owned business certification; and making broad-based equity sharing a condition of corporate tax breaks.
Foundations, impact investors, business leaders, and policymakers would do well to consider these policy and practice ideas, among others, and to act.
Research Demonstrates Employee Share Ownership Reduces Wealth Disparities
The issue brief adds to the growing body of research suggesting that employee share ownership can effectively build wealth for low-income and low-wealth workers, workers of color, and women. It follows the 2019 release of Building the Assets of Low and Moderate Income Workers and their Families: The Role of Employee Ownership published by the Rutgers Institute for the Study of Employee Ownership and Profit Sharing, and Project Equity’s The Case for Employee Ownership. The Rutgers study found that low- and moderate-income workers had ESOP account values ranging from $5 million to $15 million, with median account values of $165,000, compared to the median American household’s $17,000 in savings.
Jenny Weissbourd, Maureen Conway, Joyce Klein, and Yoorie Chang of The Aspen Institute Economic Opportunities Program; Joseph Blasi and Douglas Kruse of the Institute for the Study of Employee Ownership and Profit Sharing at Rutgers School of Management and Labor Relations; and Melissa Hoover, Todd Leverette, Julian McKinley, and Zen Trenholm of Democracy at Work Institute co-authored the final report. It’s available for download here.
Adria Scharf, PhD, is a Beyster Fellow and Director of the Curriculum Library for Employee Ownership at the Institute for the Study of Employee Ownership and Profit Sharing at Rutgers University’s School of Management and Labor Relations. Over the course of 2021, she will be contributing regular columns covering new research in the employee ownership field to Employee Ownership News.