Workers as Owners: An American Dream
The founders’ path to shared prosperity, less inequality
Expanding employee stock ownership plans (ESOPs) could go a long way toward easing income inequality.
George W. Bush talked the talk of an “ownership society,” but the laws he passed shifted income upward into the hands of the few. Three professors would rather see income flowing into the hands of the many, and they’ve written a book to point the way. The authors are Joseph R. Blasi and Douglas L. Kruse, both of Rutgers, and Richard B. Freeman of Harvard. The book is The Citizen’s Share: Putting Ownership Back into Democracy.
The nation’s founders wanted workers to have a piece of the pie, wanted widespread sharing of America’s bounty. The challenge of restoring the cod industry, laid low by the Revolutionary War, gave them the chance to set the national tone. George Washington, Thomas Jefferson and Alexander Hamilton played key roles in shaping legislation that split tax credits between ship owners (a three-eighths share) and crews (a five-eighths share). Further, owners could collect only if they had “a written, profit-sharing contract with all the sailors...covering the entire catch.” The law helped turn the industry around and remained in effect for nearly 20 years.
That was on the sea. On land, the government parceled out pieces of America itself to tens of thousands of early settlers. Starting with the Northwest Ordinance in 1787 (covering an area that became the states of Ohio, Indiana, Michigan, Illinois, Wisconsin, and part of Minnesota), Congress followed Jefferson’s lead: “distributing public lands to landless citizens, to give them a direct capital stake in society.” The land commonly went for bargain-basement prices with easy credit terms. The capstone was the Homestead Act of 1862, which turned over 160-acre plots west of the Mississippi. In Alaska, a law similar to the Homestead Act was on the books until 1986.
Today, of course, capital has replaced land as the primary source of wealth. For the authors, the nation’s beginning holds a lesson going forward: just as America itself was once divided up and shared, so capital (and the income it generates) should also be shared.
A template already exists in the form of employee stock ownership plans (ESOPs), pioneered by the financier Louis Kelso. ESOPs were included in the omnibus retirement bill passed by Congress in 1974. It offered tax incentives to companies to establish ESOPs, and to banks to lend set-up funds. Both incentives were later stricken. Today, with income inequality “the defining issue of our time” (President Obama’s words), there’s powerful reason to restore them. Corporations are awash in record profits; Congress should again encourage a cut for workers.
It’s surprising to discover how many already get one: “[T]here are an estimated 10,300 corporations with ESOPs and similar plans, with about 10 million workers and almost a trillion dollars in total market value....about 3,000 closely held companies are majority or 100% owned by their employees, about 3,000 are 30% to 51% owned, and the rest have ownership ranging from about 5% to 30%.”
Employee equity is part of the culture at companies of all sizes, including roughly a tenth of the Fortune 500. Equity stakes and start-ups were made for each other. Annually, nobody shares equity better than Google: “Each year a stock pie is cut up...Less than one percent goes to the top executives. The other 99 percent goes to the broad group of workers.”
Equity takes various forms: stock ownership, profit-sharing, gain-sharing (e.g., setting goals and reaping rewards for meeting them), stock grants, and stock options. The key is that all boats rise, not just the yachts.
“The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.” Keynes wrote those words about England in 1936. To deal with the same faults, America needs more “citizen’s shares” in 2014.
©2014 Gerald E. Scorse. Gerald E. Scorse helped pass the bill requiring basis reporting for capital gains. He writes articles on tax policy.
Copyright © 2014 The Baltimore News Network. All rights reserved.
Republication or redistribution of Baltimore Chronicle content is expressly prohibited without their prior written consent.
Baltimore News Network, Inc., sponsor of this web site, is a nonprofit organization and does not make political endorsements. The opinions expressed in stories posted on this web site are the authors' own.
This story was published on February 6, 2014.
Local Gov’t Stories, Events
Ref. : Civic Events
Ref. : Arts & Education Events
Ref. : Public Service Notices
Books, Films, Arts & Education
Ref. : Letters to the editor
Health Care & Environment
10.13 Climate Change Is Making It Harder to Grow Rice [might there be a “perennial rice” with much deeper roots to survive droughts?]
10.13 'If the land isn't worked, it decays': Tunisia's battle to keep the desert at bay [beautiful business plan for LIFE]
10.13 Trump scraps Obamacare subsidies in surprise late-night announcement [videos; his Infantilism should cause his impeachment]
News Media Matters
10.15 The Establishment Still Doesn't Recognize The Political Revolution That's Happening [the question is, CAN MAINSTREAM NEWS MEDIA – desperate for corporate advertising as revenue falls – ALLOW CHANGE TO HAPPEN?]
US Politics, Policy & 'Culture'
10.16 TRUMP’S WOULD-BE WEATHER CZAR TRIED TO SHUT DOWN FREE FORECASTS [The looting and corrupton is refreshingly open]
10.16 The Texas town where all the energy is green [Alert! Ignoring party leadership, exceptional Republicans use reason to do good!]
10.15 “It’s going to hurt everybody”: Nevada’s GOP governor rips Trump over ACA sabotage [Alert! Republicans aren't all bad!]
10.15 To Kill a Mockingbird by Harper Lee taken off Mississippi school reading list [teaching real history makes future citizens better and avoids racist hatred repeating—that's why Germans have taught real history since WWII]
10.15 ‘Hitler’s American Model: The United States and the Making of Nazi Race Law’ [America is still a model country for racism and hate]
10.17 Trump could remake judiciary for ‘40 years’ — with controversial picks [America will become more like Malta; facilitating corporate/mafia criminality to the maximum]
Economics, Crony Capitalism
10.17 Trump Revives Notorious GOP Dog Whistle in Call for 'Welfare Reform' [less money "wasted on welfare" would allow larger tax cuts for "the more deserving rich"]
10.17 For Abandoning Climate Accord, Pope Swipes Trump on World Food Day [Trump is attuned to serve billionaire friends and himself]
10.12 Fossil fuels win billions in public money after Paris climate deal, angry campaigners claim [fossil fuel companies will declare bankruptcy when (not if) fossil fuels become worthless, so it will then be the public's money that is lost, without recourse]
International & Futurism
10.17 For Abandoning Climate Accord, Pope Swipes Trump on World Food Day [Trump is attuned to serve billionaire cronies and himself]
10.17 The Movement of #MeToo
10.15 Tony Blair: ‘We were wrong to boycott Hamas after its election win’ [guiding principle #1: do not cause harm to civilian populations]