Show Me the Money: Does Shared Capitalism Share the Wealth?

Abstract

This paper examines the effect of a variety of employee stock ownership programs – including ESOPs and broad based stock options – on employees’ holdings of their employers’ stock, their earnings and their total wealth. Two major datasets are employed: the NBER Shared Capitalism Research Project employee survey dataset and the 2002 national General Social Survey (GSS). Focusing on permanent, full-time employees with at least one year on the job, we find that 87% of employees in the NBER ‘shared capitalist’ firms, and 36% of employees in the national survey, own their employers’ stock. The NBER employees (including those who hold no company stock) hold an average of $50,000 of employer stock, compared with$13,200 for employees nationally. We find no evidence – either between datasets or between employees within datasets – of substitution of pay for stock ownership. Employee-owners earn more on average than non-owners, controlling for confounding factors, and report that it would be somewhat more difficult than GSS employees do to find another job that would replace their current pay and benefits. Finally, we find a rough similarity between the distribution of employer stock among the NBER employees (with the top 10% holding two-thirds) and the distribution of all stock among U.S. households (with the top 10% holding three-quarters). Wealth trickles down a little faster in the shared capitalist firms, perhaps, but it’s still just trickling.