Observations on Employee Ownership
The Impact of Employee Ownership and ESOPs on Layoffs and the Costs of Unemployment to the Federal Government
July 16, 2015Employee-owners—people who own stock in the companies where they work—are far less likely to lose their jobs than non-employee-owners. An analysis by the National Center for Employee Ownership of data from the 2015 General Social Survey (GSS) shows that in 2014, 9.5% of all working adults in the private sector not in employee ownership plans report having been laid off in the last year, compared to just 1.3% of those respondents who say they own stock in their company through some kind of company-sponsored employee ownership plan.
Unemployment is expensive for the federal government, particularly in terms of federal expenses for unemployment benefits and forgone taxes. This paper estimates the cost to the federal government per unemployed worker. Based on that estimate, we believe that the lower job losses among employee-owners saved the federal government approximately $17 billion in 2014. Looking just at employee stock ownership plans (ESOPs), we estimate the federal government's savings at approximately $8 billion. For 2010, a recession year, the numbers were $37 billion for all plans and $15 billion for ESOPs alone. In the non-recessionary period of 2002 and 2006, the average annual savings were $16 billion for all plans and $6 billion per year for ESOPs alone for the 2002-2010 period.
These numbers are necessarily estimates based on numerous assumptions. We do not claim that they are anything other than broad estimates, although we believe they are very reasonable estimates. We also have been conservative in our approach and have not counted federal costs for unemployment related programs such as retraining. Even if our numbers were as much as one-third too high, which is unlikely, they still would show that the saved costs and tax revenues to the federal government are a multiple of the annual tax costs of ESOPs.
Download the full analysis in PDF format here
About the Author
Corey Rosen is the founder of the National Center for Employee Ownership. He received his PhD from Cornell University in political science and worked on Capitol Hill before founding the NCEO in 1981.
Author biography and other columns in this series