Given the increasing risk of job security and layoffs, as well as difficulties younger generations are having saving for retirements, employee-owned companies offer a needed mechanism for fostering economic growth in the United States.
Employee owned businesses experience layoffs much less frequently than their counterparts, in addition to the median ESOP account balance being more than double the median 401(k) balance (meaning significantly higher retirement savings for employees).
These are only two of many economic benefits that ESOPs have for our economy.
And the more we are able to do to help employee owned companies grow and prosper, the more money is put back into our workforce and thus the economy since the companies are owned by the employees.
State-Level Support for Employee Ownership
In order to realize and accelerate these benefits, it is critical for states to support both the creation and growth of employee owned businesses, similar to the countless precedents set around supporting other types of small businesses and startups for the purpose of economic development.
Several states have already started to lead the charge with initiatives that encourage and support employee owned businesses. Two standout examples are California’s Employee Ownership Hub and North Carolina’s Disadvantaged Business Contracting Program.
- California’s Employee Ownership Hub: The state of California has launched an Employee Ownership Hub, which provides resources, education, and financial support for businesses considering transitioning to employee ownership. They originally had included grant funding for feasibility studies, helping businesses assess the viability of converting to an ESOP or worker cooperative, although that was ultimately removed with hopes of adding it in the future.
- North Carolina’s Disadvantaged Business Contracting Credits: North Carolina has taken an innovative approach by offering contracting credits to employee-owned businesses under its disadvantaged business program. This initiative gives employee-owned firms a competitive edge in securing government contracts, encouraging more businesses to adopt employee ownership structures while also promoting economic equity.
While some states have taken significant steps to support employee ownership, more needs to be done on a national scale. Expanding government contracting incentives especially for public RFPs, increasing funding for technical assistance programs, and raising public awareness about the benefits of ESOPs can help build a more resilient economy for our workforce and ensure a higher percentage of our economic growth is flowing back into the workforce.
