Study: Employee Ownership Narrows Gender and Racial Wealth Gaps

Rutgers Institute for the Study of Employee Ownership and Profit
Sharing Completes Three-Year Research Project Supported by the W.K.
Kellogg Foundation

PISCATAWAY, N.J.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/hashtag/ESOP?src=hash” target=”_blank”gt;#ESOPlt;/agt;–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.

• 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.”

“This was a proof of concept study and we found the proof,” said study
co-author Janet Boguslaw, a Kellogg Fellow in the Rutgers Institute for
the Study of Employee Ownership and Profit Sharing and a Senior
Scientist at Brandeis University. “Low and mid-income employees who
have the opportunity to share in the capital built through their labor
have greater wealth than their non-employee owner peers. Period.”

“Employee ownership can have particular benefits for low-income women
and people of color, who are often marginalized at the bottom of
workplace organizations,” said study co-author Lisa Schur, a Kellogg
Fellow in the Rutgers Institute for the Study of Employee Ownership and
Profit Sharing and Professor at Rutgers University. “Not only can
employee ownership lead to economic rewards, but it can also help these
workers attain increased voice and skills in the workplace.”

“The gender wealth gap is fundamental to inequality, and this study
shows the potential of employee ownership to begin to address it,” said Glenda
Gracia-Rivera, a Kellogg Fellow in the Rutgers Center for Women and Work.
Rivera served as project manager for the study, coordinating a team of
15 researchers from nine colleges and universities nationwide.

“There simply was not evidence in the field that employee ownership and
profit sharing actually worked for everyday people,” said Jeanne
Wardford, Program Officer at the W.K. Kellogg Foundation. “This
research is pathbreaking, and will guide our investments to support poor
families with small children, and – hopefully – stimulate more interest
in the philanthropic world in developing new strategies for wealth
creation.”

About ESOPs

An ESOP is a retirement account that does not require employee
contributions. The ESOP takes out a loan to buy shares of the company’s
stock. As the company repays the loan, its employees receive the
shares—making them owners. The employees typically do not pay for the
stock or provide collateral on the loan. ESOP account values are not
taxed while the employee is earning, and they do not count as assets
when determining eligibility for SNAP, Section 8, and other public
assistance. There are approximately 7,000 ESOPs in the U.S., covering
about 11 million participants.

About the Rutgers School of Management and Labor Relations

The
Rutgers School of Management and Labor Relations (SMLR) is the
world’s leading source of expertise on managing and representing
workers, designing effective organizations, and building strong
employment relationships. The
Rutgers Institute for the Study of Employee Ownership and Profit Sharing
at SMLR is the first academic institute dedicated to researching
broad-based capital shares and their impact on the economy.

About the W.K. Kellogg Foundation

The
W.K. Kellogg Foundation (WKKF), founded in 1930 as an independent,
private foundation by breakfast entrepreneur and innovator, Will Keith
Kellogg, is among the largest philanthropic foundations in the United
States. Guided by the belief that all children should have equal
opportunities to thrive, WKKF works to create conditions in
underresourced communities for children can realize their full potential
in school, work and life. The Kellogg Foundation is based in Battle
Creek, Michigan, and works throughout the U.S. and internationally, as
well as with sovereign tribes. Special emphasis is made on priority
places where there are high concentrations of poverty, and where
children face significant barriers to success. WKKF priority places in
the U.S. are in Michigan, Mississippi, New Mexico and New Orleans; and
internationally, are in Mexico and Haiti.

Contacts

Press Contact / Interview Requests
Steve Flamisch, Rutgers
School of Management and Labor Relations
848.252.9011 (cell), [email protected]