A Cure for What Ails Us

By Anthony Mathews

About 10 years ago, we were given a small grant by the Annie E. Casey Foundation to try to organize a work group with the humble goal of trying to cure poverty in the U.S. We started from the assumption that we, all of us, know what it takes to get someone from poverty to security – education, a good job, a safe and comfortable home and all the skills necessary to support all those things. Our group comprised 46 representatives from non-profits around the country, among whom were dedicated experts in every one of those areas and several more. Our job was to represent alternative employment formats and to try to get the members to work together to create real solutions for the intractable and growing problem of poverty in the most opulent country in history. We felt that among us, we clearly had all the parts of the answer covered, and once we got through the “jockeying for position as the most critical element to attack first” phase of our work we began to make progress with some ambitious possible plans. Unfortunately, the crash of the late “0s” intervened; funding was cut abruptly (endowments plunged by breathtaking numbers) and has not been reactivated as everyone involved found other goals before the recovery rebuilt the reserves.

I’ve been disappointed for years that the effort was aborted before it got much traction. I still think all our assumptions were true, and I still believe that we have it within our power to fill the voids and cure the insecurity that lack of resources creates for so many of our citizens. And, most especially, I still believe that employee ownership of earned capital will be a key element of that cure as it seems to have the best chance of creating real wealth opportunities for America’s working class.

Simply put, poverty and hopelessness are not just personal issues, they are community issues. Those twin demons eat away at the core of a community until the system of that community becomes the engine that creates more and deeper poverty (financial as well as psychological). The only way to effectively fix poverty, is to fix what’s wrong with our communities. I have always thought (and preached to anyone who would listen) that creating economic engines within communities that produce wealth and leave it there, in the community in which it is generated, would establish the launch ramp from which a real assault on poverty can be mounted. And, I can’t think of a better way to describe the economic impact of an ESOP than that – an economic engine designed to create wealth in a community and leave it there - distributed among a wide array of members of that community.

On this very complex subject, though, our speculations, no matter how compelling we might have made them, were just that, speculations. Until now.

On May 15, 2017, our friends at the National Center for Employee Ownership once again shined a bright light on the possible road ahead and produced the most intriguing research into this hypothesis to date. Their research is summarized in a report titled Employee Ownership & Economic Well-Being: Household Wealth, Job Stability, and Employment Quality among Employee-Owners Age 28 to 34. https://www.ownershipeconomy.org/wp-content/uploads/2017/05/employee_ownership_and_economic_wellbeing_2017.pdf

That mouthful title opens the door to some remarkably “on point” findings that we strongly recommend to anyone interested in employee ownership, whether through ESOPs or some other mechanism.

The study is very comprehensive and will speak for itself, but a few key findings that got my heart pumping indicated that employees who are fortunate enough to work for an ESOP company when compared to otherwise identical non-ESOP employees at the median have 92 percent higher household net worth. They also have median income that is 33 percent higher, job tenure that is 53 percent longer, and benefits that include education support more than 2 ½ times as often. These median results are stunning and that is even enhanced when the data are broken down by race, wealth position and other similar factors. Those sub-sets of the data enjoy similar advantages within their groups on all the measures. Most stunning of all is the fact that in every element of financial health that was studied, employee owners are materially better off than non-employee owners who are otherwise statistically matched. More research will be necessary, of course, to explore the phenomenon for other age groups and other industries etc., but this is an excellent platform upon which to build this argument into a fact.

This study is perhaps the most important work we have ever had in the ESOP community because it validates what we have been shouting for the last 40 years to anyone who would listen. Broadened employee ownership of our productive capital is a major part of "the cure for what ails our citizens, our communities and our country."

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