In the first-ever national study of low-income and moderate-income workers at employee-owned companies, researchers discovered employee stock ownership plans (ESOPs) enable families to significantly increase their assets, shrinking—though not eliminating—gender and racial wealth gaps. The research by the Rutgers Institute for the Study of Employee Ownership and Profit Sharing suggests employee ownership can reduce wealth inequality in the U.S.
“The top 10 percent of American households own more wealth than the bottom 90 percent combined,” said Beyster Distinguished Professor Joseph Blasi, Director of the Rutgers Institute for the Study of Employee Ownership and Profit Sharing. “This study demonstrates that employee share ownership can chip away at inequality by putting significant wealth in the hands of the working middle class.”
Supported by a grant from the W.K. Kellogg Foundation, a Rutgers-led team of researchers interviewed close to 200 employees at 21 companies that offer an ESOP retirement account. About half of the workers surveyed are defined as low-income or moderate-income based on earnings. The ESOP account gives them significant wealth, above and beyond their wages and other income. The three-year study finds:
- The low/moderate-income workers have ESOP account values ranging from $15,000 to $6 million, with a median value of $165,000. By contrast, the typical American household has just $17,000 in savings.
- Of the low/moderate-income workers surveyed, those closest to retirement (ages 60 to 64) have 10 times more wealth than the typical American in that age group.
- ESOPs do not eliminate gender and racial wealth inequality, but they significantly narrow the gaps.
by Gender and Race
of Single Workers in the U.S.
Median ESOP Account Value of
- Several workers in the survey borrowed against their ESOP account to pay for medical expenses, make the down payment on a home, or send their children to college. The ESOP kept them out of debt.
- Many low/moderate-income workers—especially single women—told researchers the ESOP gives them a sense of economic security and enables them to think about retirement for the first time.
- In ESOP firms with participatory management, workers improved their communication skills and learned open book management, which also enabled them to make better financial decisions at home.
“Past research showed that employee-owned firms perform better on average, but we didn’t know much about what employee ownership means to regular employees,” said Distinguished Professor Douglas Kruse, Associate Director of the Rutgers Institute for the Study of Employee Ownership and Profit Sharing. “This study provides rich data from the perspective of workers about the many ways in which employee ownership transforms the workplace.”