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The Luxury of Risk: Helping People Afford to Pursue Their Dreams Again


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An opportunity for workers in an old law (photo: Michael Appleton/Mayor's Office)


As several cities begin to shutdown again with the hope of slowing the spread of COVID-19, we’re reminded of the timeless words “certain unalienable rights, that among these are life, liberty and the pursuit of happiness.” I’m interested in the unique opportunity to evaluate how that third unalienable right — the pursuit of happiness — matches with the reality of today’s world and steps we can take to improve opportunities for people to pursue and achieve their definition of happiness.

For Americans, it has become increasingly difficult to feel content, optimistic, and fulfilled during this period of uncertainty and tragedy. While happiness is of course subjective, research shows that only 49% of Americans are very satisfied with their job while an even more shocking 14% of Americans report being generally “very happy.” There is a clear culprit that makes this pursuit of happiness difficult for many: lack of financial security.

There is plenty of evidence to suggest that money cannot buy everlasting happiness, but there are also strong correlations between rising incomes and a certain level of happiness. Not having enough income to cover basic needs can contribute to unhappiness and general dissatisfaction (not to mention the negative correlation with overall health).

For many, being able to pursue a better life is dependent on the ability to take on certain risks. One’s ability to start a new job, go back to school, launch a business, or even spend more time on a new hobby does not happen in a vacuum. Those who are struggling to pay their basic bills every month do not have the financial freedom to take these kinds of risks. Yet there is hope.

New York City has just announced an ambitious initiative, Employee Ownership NYC, that will help more employees of small businesses in the city to become owners — and also help infuse struggling businesses with capital and resources to be able to sustain themselves through the duration of this pandemic.

At the same time, as more and more Americans work for large companies, there is a tremendous opportunity to help even more people realize financial security, especially women and people of color.

Written into law in 1964, the Employee Stock Purchase Plan (ESPP) was created as part of President Lyndon Johnson’s War on Poverty. Effectively, it was America’s first financial wellness benefit and today it still holds incredible promise to help Americans build sustainable wealth and secure their financial futures.  

Under the original law, employees could contribute up to $25,000 per year to purchase company stock at a discount. Although the $25,000 limit has never been updated to reflect inflation over more than 50 years, the value of these programs for hardworking Americans is incredibly powerful.

Around half of America’s publicly-traded companies offer ESPPs, which means millions of Americans have direct access to the wealth-building power of the stock market—at a discount—through their employers. Well-run, financially-inclusive ESPPs can help employees generate what can be equated to an 11% annual raise.

Despite this, participation in ESPPs remains incredibly low because the reality of affording access to this benefit can be out of grasp for many. Companies need to harness the power of technology and innovation to make these plans accessible to all of their employees, not just the ones that can afford to reduce their take-home pay in order to participate. It is a solution to income inequality that is directly within our grasp.

It’s impossible to talk about income inequality, however, without taking a close look at who’s participating in the stock market today. Recent reporting by the Associated Press found that 61% of white households own stock while in Black households that number is only 33%. The same report noted that the S&P 500 grew approximately 260% over the last decade—meaning for those Americans that are in the market—the last ten years have been quite successful financially.

One of the most impactful ways to get more Americans into the stock market and sustainably close the wealth gap is through employee stock purchase programs coupled with the right financial inclusion tools and education.

By building equity in the companies where they work, American workers can begin to align their interest with the goals and priorities of the decision-makers at the very top of their firms. Research shows that employees who have ownership in the companies where they work are more satisfied and more motivated in their jobs. This also means that employees have access to capital on a rainy day and have the opportunity to make their money work for them.

While stock programs will never take away the need for employees to earn a good living and have access to other crucial benefits like healthcare, ESPPs are one of the few benefits that immediately help employers and employees alike and that don’t require action from Washington or costly changes by companies.

Through ESPPs companies can take book value of their shares—which look good on a balance sheet but do little else—and convert those to cash which can be used to cover any number of business-related expenses. Pair that with a more motivated and committed workforce and the benefit looks even better from an employer perspective.

Through these stock programs we have a proven solution that squarely aligns with the goals and values of both political parties and presents an opportunity to make a huge difference in the lives of working Americans—offering a pathway to more financial freedom, happiness and greater economic opportunity for millions.

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Aaron Shapiro is the Founder and CEO of New York-based Carver Edison. On Twitter @CarverEdisonHQ.

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