Wage Economy vs. Employee Ownership Economy - New York News

Wage Economy vs. Employee Ownership Economy

Updated:

By: John Hoffmire, Deseret News

Two weeks ago, a meeting of global business leaders took place in London, England. Titled the Conference on Inclusive Capitalism, the event focused on addressing a critical flaw in the current application of capitalism: rising inequality in a wage economy.

In the end, the meeting itself did little more than promote discussion; however, it still provided some interesting insights, especially considering the aggregate wealth of those who attended. Summing up available wealth, participants from this meeting help control a staggering $30 trillion, or one-third of global liquid assets. To earn that much money at the current minimum wage, it would take the entire population of the United States six years, working eight hours a day, every day, each year.

Herein lies one of the major challenges in a wage economy: wages do not often create material wealth. For most, wages simply cover day-to-day expenses and, with careful planning, provide enough to put aside a portion for a rainy day. Some place money in 401(k) plans and other basic investments, but these are often entirely dependent on employee contributions and require long term consistency, something many people lack in a rapidly changing economy.

Real, long-term wealth comes from owning a portion of a company. These holdings can pay out dividends as long as they are held and can be sold at a profit as businesses mature. They also enjoy tax benefits as profits that come as a result of capital gains are taxed at a lower rate. However, given the high entry cost of purchasing stock in larger private companies, where big money is often made, this type of acquisition is out of reach for the majority of families worldwide.

One solution to this problem that is gaining traction is called employee ownership. Just like it sounds, employee ownership is a fundamental change in how a company is owned: rather than having most of the shares of a company concentrated in the hands of a few, the employees themselves buy shares through a trust, and, in aggregate, become significant stock holders in the company.

The mechanics of a transition to employee ownership sound quite simple. The company, after deciding to make the change, sets up an employee benefit plan that includes a contribution of stock towards ownership. A trust is set up to house the shares, which are then allocated to individual employee accounts based, usually, on the same allocation of wages within a firm. In other words, someone who gets paid twice as much gets twice as many shares. After the transition is made, employees often also take on more responsibilities for the business.

Research over the last couple of decades has shown a great deal of benefit directly related to employee ownership. One major benefit is more dedication from employees. Those who own a portion of the company they work for tend to exhibit higher motivation and increased job satisfaction. Also, the interests of shareholders and employees are correlated since they are one and the same.

Of course, there wouldn't be success attached to employee ownership if there wasn't a way for employees to sell their shares. After an employee leaves the company, the firm repurchases the shares at market value. The employee can roll the proceeds into a retirement account or take cash distribution.

Employee ownership has the potential to create enormous long-term benefits across the entire economy. Superior to the wage economy model, an employee ownership economy enables businesses to provide material returns for everyone involved. There are also significant tax advantages available to those who sell to qualified employee ownership plans.


Original Post

Copyright 2013 Deseret Digital Media, Inc.

  • Local NewsLocal NewsMore>>

  • Runners of 3,100-mile race in Queens seek spiritual experience

    Runners of 3,100-mile race in Queens seek spiritual experience

    Thursday, July 31 2014 7:26 PM EDT2014-07-31 23:26:44 GMT
    Since mid-June, 14 runners have been on a mission that is spiritual at its core. They are running the Self-Transcendence 3,100 Mile Race in Jamaica, Queens. Spiritual leader and former Queens resident Sri Chimnoy, who died in 2007, created the race, which lasts 52 days.
    Since mid-June, 14 runners have been on a mission that is spiritual at its core. They are running the Self-Transcendence 3,100 Mile Race in Jamaica, Queens. Spiritual leader and former Queens resident Sri Chimnoy, who died in 2007, created the race, which lasts 52 days.
  • New York's smallest piece of private land

    New York's smallest piece of private land

    Thursday, July 31 2014 7:13 PM EDT2014-07-31 23:13:43 GMT
    The Hess triangle is a tiny piece of private property in Greenwich Village. Manhattan historian Joyce Gold explained the origins of the property: After World War I, New York City seized a beautiful residence and tore it down so it could extend Seventh Avenue and the west side subway below it. The city left the building's owner only a tiny scrap of property so small it requested he donate the triangle to make way for a sidewalk. The man refused, took the city to court and won.
    The Hess triangle is a tiny piece of private property in Greenwich Village. Manhattan historian Joyce Gold explained the origins of the property: After World War I, New York City seized a beautiful residence and tore it down so it could extend Seventh Avenue and the west side subway below it. The city left the building's owner only a tiny scrap of property so small it requested he donate the triangle to make way for a sidewalk. The man refused, took the city to court and won.
  • Road-trip vacations that don't break the bank

    Road-trip vacations that don't break the bank

    Thursday, July 31 2014 5:37 PM EDT2014-07-31 21:37:29 GMT
    Last-minute vacations don't need to be a headache or ridiculously expensive, especially if you make it a road trip. Even if you don't have a car, renting one can be an affordable option.Lauren Lyons Cole, a personal finance contributor to TheStreet.com, has some suggestions.
    Last-minute vacations don't need to be a headache or ridiculously expensive, especially if you make it a road trip. Even if you don't have a car, renting one can be an affordable option.Lauren Lyons Cole, a personal finance contributor to TheStreet.com, has some suggestions.
Powered by WorldNow
Didn't find what you were looking for?
All content © Copyright 2000 - 2014 Fox Television Stations, Inc. and Worldnow. All Rights Reserved.
Privacy Policy | Terms of Service | Ad Choices