Employee ownership

The Problem

The future of millions of small and mid-size businesses and their employees is unclear due to retiring Baby Boomers and lack of succession planning. Because business owners are unaware or misinformed about the option to sell their company to employees, they either shut down—leaving communities with fewer jobs—or sell to a larger company, further concentrating ownership and wealth.

Why This Matters

Employee-owned companies typically provide: more of a voice at work, increased job security, higher wages, and additional opportunities to build wealth. Increasingly, federal, state, and local government agencies focused on advancing job quality, equity, and economic resiliency are building employee ownership incentive programs to increase the number of companies owned by its employees.

The Solution

Employee ownership is an attractive alternative to closure or consolidation and an evidence-based tool for improving job quality, making it a valuable service offering for local and state workforce and economic development agencies. Increasing the number of employee-owned companies promotes:

  • Higher wages: On average employee-owners making less than $30,000 have 17% higher median household net worth and 22% higher median income from wages than non-owner peers.

  • Greater assets: More than one-third of all US workers nearing retirement have no retirement savings nor a defined benefit pension. Yet, one survey of US employee-owned firms found that workers nearing retirement had on average $147,522 in retirement savings solely from their ownership stakes. 

  • Lower turnover: Employee-owners are less likely to leave their jobs.

Different models of broad employee ownership include Employee Stock Ownership Plans (ESOPs), Worker Cooperatives, or Employee Ownership Trusts (EOTs).

This job quality intervention offers a variety of ways in which workforce and economic development agencies can advance job quality through employee ownership. They include a combination of education, funding for feasibility studies and referrals to technical assistance, as well as increased access to affordable capital to support internal operations, funding and advocacy efforts.

Recommended actions can help workforce and economic development agencies advance strategies to finance their job quality strategy for the long term.