Employee Stock-Owned Companies Had Fewer Layoffs

January 16, 2013 (PLANSPONSOR.com) – An analysis suggests employee stock-owned companies laid off fewer workers during the recession.

Using data from the 2010 General Social Survey (GSS), the National Center for Employee Ownership (NCEO), in partnership with the Employee Ownership Foundation, found that during the recession of 2010, employees of these companies were laid off at a rate more than four times less than employees of conventionally-owned companies. The 2010 GSS shows that employee stock-owned companies laid off employees at a rate of 2.6% in 2010, whereas the rate for conventionally-owned companies was 12.1%.  

The Employee Ownership Foundation says this indicates these companies saved the federal government more than $37 billion in 2010. “When a person has a job, she or he pays federal income taxes, Social Security taxes, Medicare taxes, and does not collect unemployment compensation,” said Employee Ownership Foundation President, J. Michael Keeling. “So, the fact that employee owners were more than likely to pay taxesand not collect unemployment compensationmeans Uncle Sam’s fiscal house would be so much better off if there was more employee ownership,” he contended. 

The NCEO analysis calculates that 18 million Americans worked for employee stock-owned companies in 2010, with 11 million working in companies with employee stock ownership plans (ESOPs). Savings from the low layoff rate of ESOP participants was $14.5 billion in 2010, or seven times more than the estimated $2 billion-per-year tax expenditure attributed to the special laws promoting ESOP creation and operation.  

A link to the full analysis can be found at www.esopassociation.org under “news.”