At the center of the ongoing debate about the causes and cures of inequality in America today is the vast difference in wealth between owners and workers. As many have noted, that gap was not nearly as large in the middle of the twentieth century as it has become in the first two decades of the 21st century, where owners and other executives make many multiples of what workers make – largely through grants of stock in lieu of salary.
There is, however, an alternative – one that goes all the way back to the founding of this nation: Employees should share in the ownership equation. In their new paper, Joseph R. Blasi, Douglas L. Kruse and Richard B. Freeman show that this concept has a long and robust tradition in American history. Their argument is straightforward. They begin with the fact that “Capital income is the most unequal part of the income distribution.” They go on to argue that we should adopt “policies that encourage firms and workers to broaden capital ownership and access to capital income, consistent within the long American tradition of encouraging broad-based private property ownership, should be part of any effort to address today’s economic inequality.”
As Blasi et.al. take us through this history, it becomes clear that although the U.S. Federal government supported the notion of employee ownership throughout most of its history, recent decades have seen a gradual but undeniable roll back in federal policies supporting these forms of corporations. This has happened “even as concern was rising about the plight of the middle class and the growing economic inequality in America.”
They argue that the time has come to encourage Employee Stock Ownership Plans. Not only are these corporate forms a powerful tool in the fight against inequality, but there is evidence that they provide the incentives for greater effort, more cooperation, more innovation and more sharing – all of which contribute to improvements in workplace performance and company productivity. ESOPs can also increase both firm survival and employment stability and create more harmonious workplaces.
Blasi et.al. argue for a broad package of reforms that would restore forms of corporate employee ownership to the place they used to hold in American policy. Their argument is not just economic. In advocating a policy agenda they remind us that ”… broader citizen capital ownership and capital income contribute to a stronger democracy.”