We're taking a break from AI this week to talk about ownership, which remains out of reach for many Americans. What role does ownership play in pathways to economic mobility? And has our focus on getting people jobs prevented us from asking what else they could build?
Let’s dive in.
Jared Giles
Founder, SquareOne
[email protected]
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A Pathway to Ownership
Last week I attended a conference for restaurant franchisees. Most of it was what you’d expect, vendor booths and sessions where executives laid out the future of the company. Then on the last day, during the awards ceremony, something clicked for me: so many of the franchisees had been able to build successful businesses, growing one store to 5 then 10 then 20 or more, and provided economic security for their children and grandchildren. So with the right support, what on-ramps can we create to replicate that success and security?
Economic mobility and workforce development conversations often prioritize a “good job” as the end goal for anyone going through a program or education system. A job is important, and secure jobs have traditionally provided pathways to home ownership, wealth creation, and a reliable retirement for generations, but so has entrepreneurship.
Data from the Federal Reserve revealed that in 2022 “business-owning families were wealthier than families without a business:”
$570,000: mean net worth of families without a business
$1.1 million: mean net worth (excluding the value of businesses) of families that owned a non-employer business. That grows to $1.6 million and $4.1 million for families that had 2-5 and more than 5 employees, respectively.
$105,500: mean income among families without a business
$173,200: mean income for families that owned non-employer businesses. Increased to $617,100 for families that owned businesses with more than five employees.
This doesn’t discount the difficulty, insecurity, and inconsistent income that come with running a business. But it does put the two options in perspective. As we’ve seen these last few years, a company can lay off as many people as it decides to, whenever it decides to. The company holds power over its employees and can make decisions without regard for what’s best for those employees. So both paths carry risk, but we should make sure people always have a stake in something nobody can take from them.
While a business may not be inherited, the knowledge to run one almost always is.
I think we’ve misdiagnosed this as a money problem. Money is part of it, but more than half of all businesses in this country start with less than $25,000, and about one in nine start with no capital at all. A cleaning company, a home care agency, a gym, a restaurant chain, and a corner store are all businesses with cash flow and varying entry points. But we fail to build pathways to these opportunities into our economic mobility strategy for young people.
We have built an extraordinary apparatus for moving people into jobs: training programs, career-connected learning, community college pathways, apprenticeship, the summer youth employment program, and many others. Billions of dollars are committed every year to moving individuals from un- or underemployment to a full time job that pays a living wage. But in 12+ years of public school, we will teach a young person how to work as an HVAC technician, but not how to own the HVAC company.
If the families I watched last week can learn that difference at home, a young person in our school system should learn it in the classroom. If exposure is what predicts whether someone makes it, then this belongs in schools. I’m not arguing everyone should start a business. Plenty of people shouldn’t, and a job with a good employer is a solid path to economic security. But if we continue to focus our efforts and financial resources on pathways into jobs, wealth creation through entrepreneurship will remain a door that is only open to those with access.
National Spotlight: Colorado’s Employee Ownership Office
How does a state encourage and support business ownership? Let’s look at what Colorado has been doing since 2019.
The Problem: Most people who could own a business never find out it’s possible, and most owners who want to sell their businesses have no idea they could sell to their own employees. So profitable businesses close when their owners retire, or they get absorbed by a buyer from out of state, and the employees who built them end up with nothing.
The Intervention: Colorado created an Employee Ownership Office inside its economic development agency, and gave it two tools.
1) Education: free courses, a consultant network, and referrals through the state’s small business development centers.
2) Money: a tax credit covering up to 75% of the cost of converting a business to employee ownership, capped at $150,000 for an ESOP, $40,000 for a worker cooperative or employee ownership trust, and $25,000 for other structures.
The Takeaway: More than 63 companies have transitioned using state programs since 2021, and Colorado now counts over 200 employee-owned businesses. The entire program costs Colorado $3 million a year in foregone tax revenue, which is roughly a rounding error against what any state spends preparing people for jobs.
ICYMI
[READ] Project Equity: Press release detailing how many business owners are aging out, and how many employees are at risk of losing their jobs because of it.
[REPORT] Who Becomes an Inventor in America: Research paper outlining that children of the top 1% families are ten times likelier to become inventors than children from below median income families.
[LISTEN] Owners at Work, Ohio Employee Ownership Center: A podcast about people selling their businesses to their employees.
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