Employee Ownership and the Costs of Unemployment
February 1, 2013
Employee Ownership and the Costs of Unemployment In a joint project with the Employee Ownership Foundation, the NCEO found that employee ownership averts a substantial amount of unemployment and saved the federal government over $23 billion in 2010. Data from the General Social Survey shows that in 2010, for instance, 12.1% of all working adults in the private sector reported having been laid off during the prior 12 months from being asked, compared to just 2.6% of those respondents who said they own stock in their company through some kind of company-sponsored employee ownership plan. This dramatic difference remains even after adjusting for different conditions faced by employee-owners and non-employee-owners.
Unemployment causes the federal government to pay unemployment benefits and forgo payroll tax revenue. The GSS data indicate that if employee ownership did not exist, almost 1,800,000 more workers could have lost their jobs in 2010. This would have increased the number of layoffs economy-wide by 15% and cost the federal government over $23 billion in unemployment insurance and in forgone taxes. The annual cost in non-recession years is somewhat lower. The estimated annual cost to the federal government for the period from 2002 to 2010 is $13.7 billion. The implied savings for ESOPs and stock bonus plans alone is $13.7 billion for 2010 and $8.1 billion per year for the 2002-2010 period.