**TL;DR: Employment stock ownership plans (ESOPs) represent a win-win economic policy for both workers and companies. The government should promote this policy.** Even in Joe Biden’s 100 days in office, he appears unable to sell a $15 minimum wage to Congress. [1] Since the option has failed to qualify for budget reconciliation, the federal government should look elsewhere to promote worker compensation. ESOPs may serve as an attractive alternative. The policy allows employees to become company shareholders. They can then potentially earn an extra benefit from these stocks. Currently, workers in the U.S. take a historically low share of the national economic growth. Disparities between a company’s earnings and its workers’ wages have grown significantly. Therefore, allowing long-term workers to become shareholders can ensure a correlation between the variables. In conclusion, ESOPs can increase workers’ disposable income and promote a more fair distribution of corporate profit. [2] The unique advantage of ESOPs lies in their corporate and political practicality. Unlike plans such as a $15 minimum wage, ESOPs may enjoy a warmer reception from businesses and conservative politicians. ESOPs have benefited corporations in various ways. For one thing, it promotes employee morale and loyalty. A study has shown that companies with ESOPs fare better in retaining their employees during an economic downturn. [3] The benefit seems to continue in the long term. An empirical study ties ESOPs with better long-term fortunes of businesses. Companies with ESOPs are less likely to file for bankruptcy or face acquisition. [4] In general, ESOPs seem to lead to corporate efficiency and longevity. The U.S. labor force of 2021 requires immediate political action. Therefore, Congress and the Biden Administration should look at policies with bipartisan support. As a win-win strategy, promoting ESOPs may become a viable and effective option. For this reason, employee stock ownership plans are a good economic strategy. [1]. Cochrane, Emily. 2021. "Top Senate Official Disqualifies Minimum Wage From Stimulus Plan". The New York Times, , 2021. https://www.nytimes.com/2021/02/25/us/politics/federal-minimum-wage.html. [2]. Stangler, Dane. 2021. "Enable More Workers To Become Owners Through Employee Stock Ownership". New Ideas For A Do-Something Congress. Progressive Policy Institute. https://www.progressivepolicy.org/publication/esops/. [3]. Kurtulus, Fidan Ana, and Douglas Kruse. 2017. "An Empirical Analysis Of The Relationship Between Employee Ownership And Employment Stability In The US: 1999-2011". British Journal Of Industrial Relations 56 (2): 245-291. doi:10.1111/bjir.12254. [4]. Blasi, Joseph, Douglas Kruse, and Dan Weltmann. 2013. "Firm Survival And Performance In Privately Held ESOP Companies". Advances In The Economic Analysis Of Participatory And Labor-Managed Firms 14: 109-124. doi:10.1108/S0885-3339(2013)0000014006.

**Like most things that claim to be the economy's financial savior, there are pros and cons to ESOP's.** An [employment stock ownership plan](https://www.esopinfo.org/how-esops-work/) is considered an employee benefit, as it allows employees to own shares of the company they work for. Over time, employees have the ability to accumulate shares that are then secured into a trust so that when they either leave the company or retire, they can then cash those in. Basically, it’s a [401(k) plan funded solely by the company](https://www.investopedia.com/terms/e/esop.asp). In this type of compensation package, there is an incentive tied to it that ensures an alignment of motivation for both the employee and employer. However, with the pros come the cons, and they include: → If a startup company offers ESOP’s to its employees and the company goes under, [shareholders stand to lose everything](https://www.fiftybyfifty.org/2020/05/itstime-to-reconsider-bankruptcy-protections-for-esop-participants/#:~:text=In%20the%20event%20of%20a,have%20a%20claim%20as%20creditors.). → When an employee leaves a company, they are only eligible to receive the vested portion of their ESOP and the remainder is [forfeited to the company](https://smallbusiness.chron.com/distribution-esop-due-termination-employment-14662.html). So while the potential is definitely there to be an advantageous economic strategy, a few laws need to be put into place first, the main being protection to the employees that have lost their job and are therefore subject to lose their retirement investment.

**ESOPs are a good way to improve employee motivation. However, they also have the effect of diluting shares.** An [Employment Stock Ownership Plan](https://www.investopedia.com/terms/e/esop.asp) (otherwise known as ESOP) gives workers ownership interests in the company at no upfront cost to the employee. The employee’s shares are held in a [trust unit](https://corporatefinanceinstitute.com/resources/careers/compensation/employee-stock-ownership-plan-esop/) for safety and growth until the employee leaves the company or retires. At this point, the shares are returned to the company and distributed to other employees. Some [benefits](https://corporatefinanceinstitute.com/resources/careers/compensation/employee-stock-ownership-plan-esop/) of ESOPs include: • Motivates employees to ensure that the company performs well since they are owners as well as workers; • Tax benefits for employees; • Research has shown that companies adopting ESOPs perform better than those that don’t. Some [drawbacks](https://corporatefinanceinstitute.com/resources/careers/compensation/employee-stock-ownership-plan-esop/) include: • Newer employees may not be able to accumulate as much in savings as older employees; • With every new share that is allocated, the percentage of ownership that each share holds is reduced. Thus, ESOPs create a dilutive effect on voting power.