Just last week, I read sad findings about the status of too many hard-working American workers.
According to the Transamerica Center for Retirement Studies, 63 percent of laid off workers have had to rely on their retirement savings to cover expenses, rather than a steady paycheck. Once again, more surveys report that for a vast number of Americans, thoughts about retirement security tend to be more worrisome than assured. Once again, opportunities for good careers are falling short and causing responsible Americans to have to dip into their hard-earned savings.
As employee-owned American S corporations, we’ve been proud to tell a different story, and one we hope more people can enjoy as our economy looks to rebound.
Operating as private corporations with employee stock ownership plans (ESOPs), we can provide every worker with retirement savings through company contributions of employer’s stock, at no cost to the worker. Congress authorized the S corporation ESOP structure to encourage and expand retirement savings by giving millions of American workers in all 50 states the opportunity to have equity in the companies where they work.
In a new study, An Analysis of the Benefits S ESOPs Provide the U.S. Economy and Workforce by Alex Brill, advisor to the Simpson-Bowles deficit reduction commission, S ESOPs have been shown to be powerful job creators and job savers. In this study, which included a review of S ESOPs over the last 10 years, Brill observed that “employee commitment leads to increased profitability, which in turn allows companies to grow at a faster rate because they can invest more, hire more workers and increase output.” And despite the lackluster labor growth in America overall, S ESOPs have shown to be resilient in difficult economic times. In fact, from 2001 to 2009, S ESOP firms increased their net employment by over 60 percent, while total private, nonfarm employment fell.
This study, and others before it, all continue to show that companies that are S corporation ESOPs are proven job-creators, even during tough times. A 2008 University of Pennsylvania study found that S corporation ESOPs contribute $14 billion in new savings for their workers each year beyond the income they would otherwise have earned, and that S corporation ESOPs offer workers greater job stability and increased job satisfaction. The study also found that S corporation ESOPs’ higher productivity, profitability, job stability and job growth generate a collective $19 billion in economic value.
In this new economic reality, S ESOPs offer workers good, stable jobs. When it comes to retirement security, S ESOPs offer what is increasingly a rare opportunity for a good company-funded retirement. As Congress considers deficit reduction and tax reform, members must be careful not to jeopardize what has been an eminently successful structure.