PISCATAWAY, N.J. – Establishing the first conclusive link between broad-based employee stock ownership and increased employment stability, a study co-authored by Rutgers School of Management and Labor Relations Distinguished Professor Douglas Kruse finds that companies with employee stock ownership had only half as many layoffs as other companies during the last two recessions. The findings appear in the new book, How Did Employee Ownership Firms Weather the Last Two Recessions?, published in the academic press.
“If good-paying, stable jobs are the economy’s goal, then encouraging employee stock ownership in companies makes a lot of sense,” said Douglas Kruse, Distinguished Professor and J. Robert Beyster Faculty Fellow at the Rutgers School of Management and Labor Relations. “As part of corporate tax reform, there’s a good case for providing some of these tax incentives to companies that adopt employee stock ownership.”
Higher productivity is the most likely explanation for fewer layoffs. Prior studies have shown that employees who own shares in their companies tend to work harder and take greater pride in what they do. This higher productivity, Kruse argues, makes their companies more likely to succeed and less likely to cut jobs – even during the recessions that stuck the U.S. from 2001-03 and 2009-11.
“Employee ownership is often seen primarily as a way to improve employee relations and increase productivity, but these results show there is an important add-on effect on job stability,” Kruse said. “Lower unemployment and greater stability are good for the whole economy. These results suggest important benefits if employee ownership were expanded beyond the 20 percent of private sector workers who now hold employer stock.”
Kruse, a former Senior Economist with the President’s Council of Economic Advisers, co-authored the research and the book with University of Massachusetts Amherst Associate Professor Fidan Ana Kurtulus. They analyzed data from more 8,000 companies with publicly traded stock as part of their groundbreaking, three-year study supported by a grant from the publisher, the W.E. Upjohn Institute for Employment Research.
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