S corporations with private employee stock ownership plans added jobs over the last decade more quickly than the overall private sector, says this study.
The study, released today by Alex Brill, former advisor to the Simpson-Bowles bipartisan deficit reduction commission and a fellow at the American Enterprise Institute, indicates that among "S-ESOP" companies surveyed, jobs grew by 60 percent over the past decade, while jobs in the private economy as a whole remained relatively flat. "The unique strengths of employee ownership drove company gains and jobs in the past decade, while helping insulate S-ESOP businesses from the adverse effects of the recent recession," Brill said.
ESOPs are tax-exempt retirement plans that consist of company stock held on behalf of the company's employees. They are company-funded retirement plans that do not require any contribution from workers. Congress first changed U.S. tax rules to allow S corporation businesses to be ESOP-owned in 1998; today, there are thousands of S-ESOP companies in America employing millions of Americans -- who are owners of their business -- in every U.S. state.
The study assessed the ten-year performance of S-ESOP companies through a survey of 56 S-ESOP businesses and through analysis of Labor Department data from 2002-2009.
Key findings include:
S-ESOP companies showed substantially more employment growth in the pre-2008 recession period than private businesses.
S-ESOP companies regained momentum faster than other private firms after the recession.
S-ESOP companies in the manufacturing sector particularly benefited from the S-ESOP business structure, which buffered manufacturers through especially challenging recent economic times.
Brill suggests that such positive business outcomes may be linked to the beneficial effects of employee ownership of private businesses, where workers are substantially more invested in the success of their workplaces because they know it will affect their own economic well-being. An earlier University of Pennsylvania study found that the success of S-ESOP companies generates roughly $14 billion in retirement savings for the workers of those businesses that would not have existed in the absence of the S-ESOP business ownership tax structure.