America: Land of Opportunity
Our nation’s capital is full of people discussing the middle class, and with good reason. Last week a Washington Post article opened, “Children growing up in America today are just as likely — no more, no less — to climb the economic ladder as children born more than a half-century ago.” The president in the State of the Union emphasized the same, saying, “Inequality has deepened. Upward mobility has stalled.” Continuing, he said, “Our job is to reverse these trends.”
I agree. America is, after all, supposed to be the land of opportunity. One way to address economic inequities is to help workers have long-term security through retirement. Half of working Americans have no retirement plan at all. That’s why I am so pleased to see the president focusing on helping Americans whose employers do not provide retirement plans by creating starter retirement savings. This is a great step, but there are other ways we can share capital, create upward mobility and give our workers a secure retirement.
More than 2,000 privately held “Subchapter S” corporations in the U.S. are owned mostly — or entirely — by their workers through broad-based employee stock ownership plans (S ESOPs). Congress created these structures to eliminate traditional lines between management and owners and give workers “skin in the game.” Nearly a million employees who are part of S ESOPs can boast retirement account balances on average three to five times higher than the average U.S. 401(k), and the funds invested come from the company’s profits, not from the worker’s personal funds.
What’s more, these companies perform better because of the sense of common ownership: Last year a study by American Enterprise Institute economist Alex Brill found that S ESOPs were more resilient in the recent down economy, growing their jobs when U.S. employment as a whole was flat. That makes inherent sense when you consider the impact that giving employees an ownership stake in the success of the company has on their willingness to reach down for that extra effort when challenging economic times arrive.
In an effort to strengthen upward mobility and retirement savings for workers, Sen. Ben Cardin (D-Md.) and Sen. Pat Roberts (R-Kan.), together with 16 bipartisan cosponsors, are touting their Promotion and Expansion of Private Employee Ownership Act, which would make the structure available to more companies and thus benefit more U.S. employees. I hope all the talk in Washington translates to passing this legislation.
S ESOPs are creating the good, paying jobs we need to sustain economic growth and give more workers opportunities for upward mobility while doing as Congress had envisioned back in 1997 by broadening ownership, sharing capital and giving workers a secure retirement. This model can help grow our economy and help our workers and middle-class families. That should be our clear and continuing goal: to again be the land of opportunity for not just a few but for all Americans.
Former Congressman Earl Pomeroy is senior counsel at Alston & Bird LLP. He served nine terms as a member of Congress and was a senior member of the House Ways and Means Committee. Pomeroy’s practice areas include financial services regulation, health care policy, pensions, tax policy, energy and agriculture. Pomeroy works with employee-owned companies through the Employee-Owned S Corporations of America.