ESOPs narrow America’s wealth gap, Rutgers study finds

A groundbreaking study by the Rutgers Institute for the Study of Employee Ownership and Profit Sharing found that employee stock ownership plans can help narrow gender and racial wealth gaps, Rutgers University announced this week.

The national look at low- and moderate-income workers at employee-owned companies found that ESOPs can help these families significantly increase their assets, reducing — but not eliminating — wealth inequality.

“The Top 10% of American households own more wealth than the bottom 90% combined,” Joseph Blasi, Beyster Distinguished Professor and director of the institute, said in a prepared statement. “This study demonstrates that employee share ownership can chip away at inequality by putting significant wealth in the hands of the working middle class.”

The study found that low- and moderate-income workers have a median ESOP account value of $165,000 — in a range of $15,000 to $6 million — compared with the average American household’s $17,000 in savings. Those closest to retirement, ages 60-64, have 10 times more wealth than the average American their age.

“Past research showed that employee-owned firms perform better on average, but we didn’t know much about what employee ownership means to regular employees,” Douglas Kruse, distinguished professor and associate director of the institute, said in a statement. “This study provides rich data from the perspective of workers about the many ways in which employee ownership transforms the workplace.”

The three-year study was supported by a grant from the W.K. Kellogg Foundation, with a Rutgers-led team of researchers interviewing nearly 200 workers at 21 companies with an ESOP retirement account.

The institute, opened in 2018, is the first academic institute dedicated to researching broad-based capital shares and their impact on the economy, according to Rutgers.

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