Video “Men and Jobs” by The Economist

admin — Sun, 01 Dec 2013 09:00:02 +0000

We found this interesting video on the contribution of capital and labor to work. Ryan Avent describes here that the share of capital is increasing while the share of labor is simultaneously decreasing. This decreasing share of labour was already observed by Louis O. Kelso, he claimed that employee ownership is a great tool that lets labour participate in the outcomes of productive capital via ownership. Ryan Avent from The Economist (Video below) seems to have the same thoughts as he says that employee ownership might function as one of the solutions by having ownership in the productive capital.

The best way to make this capital ownership available to all employees is by means of a leveraged ESOP model. The leveraged ESOP model allows the company to take on a bank loan in order to provide employees with shares of the company, by using the trust as the vehicle of holding shares. The leveraged effect originates from the loan repayment by future earnings.

[youtube=http://www.youtube.com/watch?v=BLqN8mj17hU&w=560&h=315]

Also see our previous blog posts:

The Economist: A shirnking slice – Labours’ share of national income has fallen

197 Words intro on leveraged ESOPs

Follow us on twitter @ProEFP or connect via Facebook.com/intercentar

Selected Article: A Shrinking Slice – Labour’s Share of National Income Has Fallen

admin — Fri, 29 Nov 2013 09:03:53 +0000

“Imagine the proceeds of economic output as a pie, crudely divided between the wages earned by workers and the returns accrued to the owners of capital.” With this picture in mind, The Economist proves with numbers that “the workers’ take from the pie has shrunk across the globe” over the past 30 years. Especially “when growth is sluggish, as it is now, most workers are getting a smaller morsel of a smaller slice of a slow-growing pie“.

So what can be done? The Economist states that the goal should be to strengthen workers without hamstringing firms. In fact, “a good antidote to labour’s falling share of national income would be to boost ordinary workers’ share of capital.”

The Economist is right when underlining “ugly consequences” of this development. Since the rich own most of the capital – i.e. in 2008 the richest 20% of the population in Germany owned 80% of all capital assets – the increase of the share going to capital worsens inequality even more.

This effect is reinforced by the technological progress due to which the labour input in production decreases in comparison to the capital input and, as a result, the owners of productive assets receive a growing share of the income whereas the owners of human labour receive a proportionally ever-smaller share.

So the question is how productive property can be financed for the many. This is what the Employee Stock Ownership Plan, the ESOP, invented more than 50 years ago by American lawyer and investment banker Louis O. Kelso does. It uses the borrowing power of a company to acquire shares of that very company for its employees.

Intercentar » Labour

Video “Men and Jobs” by The Economist

Selected Article: A Shrinking Slice – Labour’s Share of National Income Has Fallen