Video “Men and Jobs” by The Economist
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
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Selected Article: A Shrinking Slice – Labour’s Share of National Income Has Fallen
“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.”