When Elon Musk pledged to give a share of SpaceX to each child in the US, the proclamation was met with a certain amount of skepticism. Regardless of Musk’s motivation or whether his promise comes to fruition, he has — inadvertently or not — hit on a worthwhile idea: Giving both future and current workers a stake in American business is a good way to lift their fortunes, reduce inequality and bolster support for free-market capitalism.
US business leaders have a problem. On the one hand, their companies are hugely valuable and profitable, making them and many of their investors immensely rich. At the same time, a sizable portion of the workforce doesn’t earn enough to get by. The divide is making corporate chieftains and their companies unpopular, and the backlash is shaking the social and political stability their companies rely on.
Corporate executives see the danger and have paid lip service to it for years without taking any meaningful action. In 2019, the Business Roundtable issued a letter signed by 181 chief executive officers of leading US companies vowing to “modernize” the role of corporations. It included a commitment to invest in employees, starting with “compensating them fairly.” Last week, United Airlines Holdings Inc. CEO Scott Kirby went further, endorsing a national wealth tax as a “more fair” way to narrow inequality and lower taxes for ordinary workers. But low-wage workers already pay little tax, so it’s not clear how a wealth tax would help them.
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Fair is in the eye of the beholder, but surely, at a minimum, it means paying workers a living wage to the extent companies can do so profitably. Since the Business Roundtable issued its statement, however, profit margins for US public companies as a group are up 35% and rising. Meanwhile, there’s no indication that a greater share of workers earn a living wage. More than 4 in 10 US households are still unable to afford necessities, including housing, childcare, food, transportation, healthcare and basic technology, according to United for ALICE, a research and advocacy group led by United Way of Northern New Jersey.
One way to raise workers’ pay is to give them a slice of corporate profits. CEOs have long received part of their compensation in company stock, as have other corporate executives, tech and finance professionals and employees at some large public companies. But together they account for only about 1 in 4 US private-sector workers. Extending stock-based pay to all employees of public companies, and profit-sharing arrangements to workers in private businesses, would give everyone a boost.
Stock grants would also help reduce inequality if they came from founders and executives directly. That’s because the richest Americans’ wealth is tied up in ownership stakes in their companies, including Musk, Amazon.com Inc. founder Jeff Bezos, Alphabet Inc.’s Larry Page and Sergey Brin, Meta Platforms Inc.’s Mark Zuckerberg and Nvidia Corp.’s Jensen Huang. Musk’s pledge is effectively a wealth transfer, albeit a small one. SpaceX President Gwynne Shotwell has already gifted the company’s stock to Trump accounts for more than 2 million children.
Workers would have more financial stability owning a broader range of American businesses rather than a single or handful of stocks, which would be accomplished if more billionaires followed Musk. The same can be achieved by giving workers money to invest in the broad stock market. Billionaires Michael and Susan Dell and Bridgewater Associates founder Ray Dalio have pledged funds to Trump accounts, which invest the money in index funds. Only children are eligible for these accounts, but the White House has talked about expanding the program to adults. They would be a good repository for stock grants and wealth transfers, although ordinary brokerage accounts would work just as well.
Wherever they reside, universal investment accounts would have numerous benefits. They would supplement the income of workers who fall short of a living wage, build wealth for workers who don’t earn enough to save and provide a bridge for workers temporarily displaced by new technology. They could give workers some protection against shortfalls in Social Security. They would make the economy more inclusive, providing a counterweight to socialist policies popular with younger Americans by demonstrating that the benefits of free-market capitalism can be shared widely. Stock grants and profit-sharing would also allow low-margin or cyclical businesses to pay workers more without raising base wages.
It might also build support for direct-to-people programs. Pandemic stimulus payments would have reached more individuals, with less fraud, if they had gone directly to sidelined workers rather than through employers and other intermediaries. Anthropic PBC risks repeating that mistake if it follows through on its plan to give 5% of its shares to a charitable fund for “the public good.” Those shares should go directly to people.
Musk and other billionaires are clearly trying to buy goodwill for themselves and corporate America. If that means making substantial wealth transfers from their companies or personal accounts or both to help lift workers and lower inequality, all the better.
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