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Shared Capitalism Essay

1084 words - 5 pages

With the rising popularity of shared capitalism in the United States, it is worthwhile to analyze the effects this trend and the workplace theories that correspond to it. The purpose of the paper is to show not only how forms of shared capitalism in the workplace can increase overall employee compensation, but how several labor theories relate and support the outcomes of shared capitalism. More specifically, three theories will be extrapolated and the outcomes of shared capitalism will follow each theory. First, expectancy theory will be explained and followed by its correlation to motivation and increased compensation. Second, equity theory will be explained and followed by the results ...view middle of the document...

According to the GSS and NBER data, the increased forms of shared capitalism pay results in higher compensation (p. 272). While fixed pay may be near market level, in some instances, employee compensation remains higher than the market level. Employees under some form of shared capitalism tend to report feeling paid what they deserve (p. 272). More specifically, gain sharers experience a higher total compensation in relation to the market. This holds true for individuals with larger profit-sharing bonuses and owners through Employee Stock Purchase Plans and 401(k) plans (p. 273). The effects of shared capitalism on employee motivation are clear through the following statistics: 78% of workers would be motivated by receiving a cash incentive, 77% of workers would be motived by stock options, and 69% of workers would be motivated of workers would be motivated by receiving ESOP stock (p. 157). These sort of statistics make it clear that offering forms of shared capitalism in the workplace will definitely affect performance.
Equity theory puts forward the idea that people judge the fairness of their pay based on what another person is paid. The theory presumes that pay basis decisions, merit increases or bonuses, have a larger probability to induce equity judgments (p. 135). One way employers can influence the perception of the employees and make them feel the pay basis decisions are more equitable is to implement employee stock ownership plans (ESOPs). ESOPs have been advocated for increasing both worker motivation and productivity.
Many critics of ESOPs have claimed that employee ownership only changes the composition of wealth rather than adding to it. The evidence suggests otherwise. First, there does not seem to be a decrease in alternate forms of wealth with increasing employee ownership because NBER data suggests 94.2 cents of higher wealth per each added dollar of employer stock (p. 366). Second, NBER ESOPs data show that for one dollar that employee ownership increases there is a corresponding wealth increase of 80 cents (p. 366). This data seems to suggest that the wealth of employees involved in ESOPs is raised by nearly a dollar for every dollar increase in employee stock ownership. Therefore, there is little to no evidence suggesting that employee ownership merely changes the composition of wealth. Instead, since the data suggests a wealth increase for employees then there may be a reduction in...

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