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
02.27 TRUMPCARE VS. OBAMACARE
02.27 Only China Can Save the Planet [Republicans cede renewable energy dominance to China, as if only fossil energy has worth. Could they be more stupid?]
02.27 With Obamacare in jeopardy, California considers going it alone with 'single-payer' system [with population larger than Canada, California could achieve better single-payer efficiencies than Canada's, with even greater efficiency when more states join in a common insurance market]
02.26 Scott Pruitt vows to slash climate and water pollution regulations at CPAC [another immoral idiot speaks]
02.25 Revealed: thousands of children at London schools breathe toxic air [you can't see the most dangerous pollution, the particles are too small which makes them dangerous]
02.23 Climate scientists face harassment, threats and fears of 'McCarthyist attacks' [sociopathic behavior...]
News Media Matters
02.26 Revealed: how US billionaire helped to back Brexit [and Trump] [at what point is the label "traitor" apropriate?]
US Politics, Policy & 'Culture'
02.26 'Incredibly Disappointing': Democrats Choose Tom Perez to Head Party [not changing is not the answer; can a party taking large campaign donations from healthcare companies ever support price-controlled single-payer?]
02.26 Trump national security adviser wants to avoid term 'radical Islamic terrorism', sources say [McMaster seems an unusually sane member of Trump's administration]
02.25 Steve Bannon: Trump is 'maniacally focused' on executing promises [videos; will increasingly unregulated and immoral capitalism save us?]
02.26 Hate Crime Is Feared as 2 Indian Engineers Are Shot in Kansas [two foreigners walk into a red state bar...]
Economics, Crony Capitalism
02.27 How Russia Is Using Oil Deals To Secure Its Influence In The Middle East [countries should get off of fossil fuels so the world can breathe]
02.27 Twilight of the Technocrats? [caring for people and morals have to become prime factors!]
02.27 THE LONG HISTORY OF DEPORTATION SCARE TACTICS AT THE U.S.-MEXICO BORDER [why can't we have altruistic policy to help people avoid becoming refugees? perhaps it is bad governments that should be helped...or punished. is U.S. drug policy the root problem?]
02.26 HOW PETER THIEL’S PALANTIR HELPED THE NSA SPY ON THE WHOLE WORLD [technology East Germany's STASI would have loved!]