The most fundamental tragedy of the coronavirus crisis is human. It is lives being lost. Somewhere close behind is the feeling of desperation shared by working people. In an economy where it is estimated that 50 percent of the labor force survives from paycheck to paycheck, we are facing an economic crisis of unprecedented proportions that exposes a fundamental flaw in our widely accepted idea of the relationship between working people and their places of work.
That fundamental flaw is a long-standing acceptance across the ideological spectrum of a division between wage earners and the owners of capital assets. While owners of businesses are able to fall back on accumulated wealth and assets in a crisis, it has become abundantly clear that a majority of workers are prisoners of wage income. As long as that divide persists, the threat of economic breakdown will loom both in the coming months and into the next crisis. That divide is the heart of economic inequality. Near-term measures that maintain or increase wage income should be implemented. But it is time to think more deeply about the causes of inequality, and it is time to introduce remedies that serve as conditions for the provision of federal government assistance.
As Mark Cuban, owner of the NBA’s Dallas Mavericks, has wisely counseled, no governmental interventions now being considered should be entered into without consideration of how that intervention will address inequality.
A prominent test case—the airline industry—can help lead the way. Any federal funds loaned to the airlines should be repaid in two steps. The first dollar repaid should be directed to newly established Employee Stock Ownership Plans, or ESOPs, at each company whose beneficiaries are the more than 500,000 airline workers, from luggage handlers and flight attendants to mechanics and pilots. The second dollar repaid should return directly to the federal government. Using that formula, over a short period of time, employees will accrue a substantial stake in these companies. They or their selected professional representatives should serve prominently on company boards of directors to give voice to the employees that make the business work.
As Columbia law professor Tim Wu points out, the American public also deserves corporate governance representation to help steer the airlines back to responsible stewardship. Narrowly focused stock buybacks in public companies that have enriched a small set of the corporation’s stakeholders, senior management, and quick-flipping, short-term shareholders should end. If management balks, they should be educated on how this arrangement is a superior corporate model for workers, shareholders, and the public. There is abundant empirical evidence that it is. It simply requires more of management.
A second mechanism to use with the airlines and with any other private-sector company receiving governmental support can also speed up the process toward greater wealth participation by ordinary working people. Business taxes should be rethought. They should be paid in full if they perpetuate status quo arrangements that keep workers on the outside of ownership. A necessary reform would simplify existing rules by crediting a company’s tax payments dollar for dollar against its federal tax obligations. Payments that would ordinarily be directed to the federal government should instead be directed to purchase company stock that would be held by trusts for company employees. Over time, working people would become substantial owners of the companies they work for and enjoy a voice and a share in the wealth they have helped create.