Every year, millions of Americans benefit from employee ownership and broad-based profit-sharing plans that ensure workers receive a share of the wealth that they help create. These programs—which reward workers based on a company’s collective performance rather than workers’ individual performance—help raise wages and boost wealth among American workers. Moreover, research shows that broad-based sharing programs support the long-term stability and profitability of local businesses and even do a better job boosting firm-level productivity than does performance pay for individual workers.
As a result of these benefits, city and state policymakers across ideological divides—including the conservative strongholds of Iowa and Nebraska and the progressive bastions of Berkeley, California, and Newark, New Jersey—are increasingly adopting policies to support and expand the use of employee ownership and broad-based profit-sharing.1 Yet, too few jurisdictions are taking advantage of such programs. Cities and states could do much more to advance the use of all types of profit-sharing plans, which help ensure that workers are able to prosper in the 21st century.
Despite working in an expanding economy with low levels of unemployment, Americans’ wages are only slowly inching up.2 According to a 2018 report from the Economic Policy Institute, labor income for the bottom 90 percent of Americans as a share of all market-based income shrunk by 11 percentage points between 1979 and 2015.3
Moreover, the wealth of everyday Americans is shrinking while racial wealth disparities are increasing. The average wealth level for the bottom half of American households was approximately $20,500 in early 2019—about half of what working-class families were able to save 20 years earlier.4 In addition, the wealth gap between white households and African American and Latino households has only increased since the Great Recession.5
At the same time, large corporations are too often focused on short-term profits rather than long-term investments and increasingly share profits only with corporate executives and top talent. Moreover, an ongoing wave of retirements among Baby Boomer business owners could lead to the sale or shuttering of local businesses that employ millions of American workers.6
Employee ownership and broad-based profit-sharing—granting workers ownership stakes in the company or a share of its profits based on workers’ collective performance—promise to help alleviate a number of these problems. These plans include everything from profit-sharing and stock options that are sufficiently broad based to employee stock ownership plans, employee ownership trusts, and worker cooperatives.
Studies that compare workers enrolled in broad-based sharing programs with workers in similar companies without sharing programs find that participating employees—including those who are African American, Latino, or working class—experience higher wages and wealth.7 Businesses that offer such programs are more likely to have other types of retirement plans as well.8 Research also shows that firms and investors receive tangible benefits from sharing with their workers, and, by selling to their workers, retiring business owners can preserve local jobs and the legacies of their companies.9
Yet, today, far too few workers receive significant benefits from employee ownership and broad-based profit-sharing. While the federal government has adopted a number of policies to support sharing programs—such as tax advantages for companies and owners interested in selling to their employees—policymakers at all levels of government can take further action to ensure that more workers are able participate in these sorts of programs.