For many years now, conventional solutions to income and wealth inequality—minimum wage, unions, progressive taxation, or guaranteed income—have failed to gain enough momentum to reverse the trend of greater and greater accumulation among the already well-off. What if we added a new approach, focusing on a primary source of wealth, business ownership, and how to transfer that wealth directly to the workers struggling today? A promising vanguard of institutional investors are doing just that, using their resources to support business transitions to employee ownership. If this nascent movement were to grow, it has the potential to significantly reduce the wealth gap overall as well as the racial equity gap.

The COVID-19 pandemic further revealed the vulnerability of millions of workers in the US, who have seen wages stagnate for decades as work has become increasingly precarious. An already stark divide between the wealth of the top 10 percent and the bottom 90 percent became a chasm. The top 10 percent, who now own 89 percent of all US stocks, saw wealth grow significantly during the pandemic, while many low-wage workers lost jobs or risked exposure to a potentially fatal illness. The top 1 percent today own nearly a third (32 percent) of the country’s wealth.

As nonprofit, political, and business leaders concerned for the future search for new solutions, broadening access to wealth through employee ownership is gaining attention. It is a rare approach supported across the political spectrum, for it increases financial security for workers as it also increases the productivity and stability of businesses.

Employee ownership also has a role to play in preserving local economies. After two years of economic crisis, an unprecedented number of businesses are looking for new owners. A “silver tsunami” of business sales or closures loomed even before the pandemic, as baby boomer business owners approached retirement. The pandemic accelerated this trend. Employee ownership transitions for these businesses could be transformational, shoring up local economies while contributing to greater stability, civic engagement, and financial security for low- and middle-income workers who have been stretched to the breaking point.

Read the full article about employee ownership by Marjorie Kelly and Karen Kahn at Stanford Social Innovation Review.