June 30, 2020

New Research Highlights Potential Benefits of ESOPs for the Formerly Incarcerated

Timely research published by the American Economic Review conducted by Professor Robynn Cox at USC adds additional evidence of the potential for ESOPs to address income and wealth inequality. Her paper “The Role of Broad-Based Employee Ownership Opportunities in Prisoner Reentry” uses data from the National Longitudinal Survey that has followed a cohort of almost 9,000 individuals since 1997 through 17 waves of surveys. These data have previously been used by the NCEO to document the positive impact of ESOPs on lower wage workers and workers of color. (See our own research stemming from the same cohort at www.ownershipeconomy.org.)

Cox’s sample is 437 people age 18 and older who reported having been incarcerated. The sample is split between those who work or worked at an ESOP company (128) and those who work for a non-ESOP company (209). She found that “ESOP employment is significantly associated with a roughly 25.4 percent increase in annual earnings [and] a roughly 8.8 percent increase in weekly hours worked.” Her statistical analysis also finds a significant relationship between ESOP employment and a decrease in the likelihood of criminal activity.

To be sure, issues of inequality, criminal justice, and incarceration, particularly for communities of color, are complex and require a comprehensive array of solutions; we see a strong case to be made that broad-based employee ownership must be part of that serious conversation.