It’s a commonly held social democratic principle that Canadian workers deserve a share of the wealth that they create. While a social democratic model offers considerable promise for prosperity among ordinary Canadians, based on high levels of public ownership with full employment, a generous social safety net, and an active trade union movement, questions of workers’ collective ownership have historically fallen off the policy agenda. Workers’ ownership has been a central concern of left-wing ideas for building a good society, and it is time we brought this question back to the forefront.
Capitalism is, at its core, defined by private ownership. This has taken a sharp turn in the neoliberal era, as states have mobilized public policy away from the classical liberal ideal of open, competitive markets, and instead towards facilitating upward redistribution and shielding major economic actors from democratic decision-making.
The details of the great transformative handover are now familiar since these processes began at the start of neoliberal era in the late-twentieth century: the privatization of public assets; the concentration of unaccountable forms of corporate power; the growing financialization of our economies and commodification of social life; the rapid growth in income and, more importantly, wealth inequality. The top 20 percent of households in Canada account for 67.8 percent of net worth, compared to just 2.7 percent for the bottom 40 percent. The top one percent alone hold almost a quarter of all wealth in Canada. As returns on capital tend to exceed economic growth, progressive policy action is needed to ensure that this economic inefficiency does not become entrenched as a function of Canadian capitalism.
The problems caused by inequality are becoming increasingly acute. While the pandemic turbocharged the long-term growth in corporate profits, Canadians are being squeezed by rising prices, and over a quarter are struggling to makes ends meet. Low labour productivity growth gives little reason to think that relief in the form of higher wages might be on the way. Living standards are instead buttressed by the highest household debt levels in the G7. As prospects for the broadly shared prosperity that Canadians rightly expect are fading in a system in which too many of the gains go to the top, thinking about how worker ownership can play a vital role in creating a more equal, democratic economy has become an important task.
There are, broadly, three primary public policy approaches to expanding workers’ ownership, or ‘employee ownership’ as described for some policy approaches. The first approach to consider involves a direct transfer of shares to workers, an idea proposed by the United Kingdom’s Labour Party under Jeremy Corbyn, which, in its 2019 manifesto, promised to require large companies to establish Inclusive Ownership Funds (IOFs) giving employees control of up to 10% of firms. This approach was also echoed by Bernie Sanders during his previous bids for the United States Democratic Party candidacy, who pledged to require certain companies to transfer at least 2% of shares a year, up to at least 20% in total, to workers through Democratic Employee Ownership Funds. Both plans maintained obvious roots within the ideas proposed in several European countries for wage-earner funds during the postwar height of social democratic politics. This scheme found a major proponent among Swedish Social Democrats, who introduced a version of this approach in the 1980s where shares were purchased and put into employee hands using taxes on corporate profits.
The design and implementation of IOFs raises several important questions towards their actual implementation as an ownership model. As noted above, The UK Labour and US Bernie Sanders proposals both call for transfers of company shares, but differ around the extent and rate of these transfers. The New Economics Foundation (NEF), which was instrumental in popularizing IOFs in the UK, suggests in its 2018 report that transfers could, as a whole or in-part, be facilitated through tax incentives—an approach that would ultimately have much in common with the Swedish share purchase model. The US model looks to require companies to issue new shares to build employee ownership, instead of using tax incentive mechanisms. Major differences also exist around the division of benefits between workers and the state, but if building and spreading wealth is, rightly, being prioritized, setting a cap on dividends and collecting outstanding funds for targeted spending, as UK Labour planned to do, may seem misguided.
The second option for promoting worker ownership is to facilitate the sale of a business to its employees. This has become the subject of significant policy attention, with Canada’s Liberal government introducing plans to support Employee Ownership Trusts (EOTs) in the 2023 Federal Budget following earlier commitments in 2021 and 2022. While the Canadian Employee Ownership Coalition (CEOC) announced its support for the proposals in 2023, reversing its criticisms of the plan presented in the budget following the announcement of a capital gains exemption in the Fall Economic Statement of that same year, there is an opportunity for social democrats to advocate for more meaningful reforms.
Broadening the scope of EOTs, incentives should also be offered for Employee Stock Ownership Plans (ESOPs) and co-operatives, allowing workers to choose from a range of ownership structures that offer different benefits. EOTs could themselves be strengthened by providing trusts with tax exemptions and by allowing for the individual allocation of shares. Regardless of the structure they seek to adopt, employees should be given a right of first refusal when a company is being sold—another idea with support across the political spectrum in the United States. Such a policy was again proposed by UK Labour under Corbyn and by Sanders, whose proposal also covered manufacturers that were closing facilities or moving them abroad, and offered financing support towards workers’ ownership via a $500 million US Employee Ownership Bank.
Lastly, governments can approach workers’ ownership through the creation and growth of worker co-operative ownership. NEF in the UK has outlined potential forms of financial support, including a national investment bank, non-member investment, tax incentives, and enterprise grants. Growing co-operatives also be done through community wealth building initiatives that take advantage of the significant spending powers of public bodies and other anchor institutions. Scotland, which has a dedicated co-operative development body as a part of its national economic development agency, has committed to an extensive community wealth building program that prioritizes inclusive ownership models as part of its ambitious wellbeing economy objectives. Where successful initiatives exist elsewhere, Canadians must not hesitate to learn from them.
Working Canadians deserve an alternative to a system that is leaving them behind. They need to know that social democratic principles inform that alterative, and that a better future is not just possible but necessary. The ‘Good Society,’ echoing Ed Broadbent and John Stuart Mill, will be built on shared principles of justice, democracy, and empowerment. We need an alternative economic model that works for all of us, and it is up to social democratic administrations to expedite this great re-transformation against neoliberal capitalism.