Entrepreneurship 2.0: From Workers to Owners

Income inequality

Expand existing project, program, or initiative (expanding and continuing ongoing, successful work)

The combination of low and stagnant wages, limited opportunities for advancement, and a rapidly rising cost of living have made it nearly impossible for the hundreds of thousands of low-to-moderate income (LMI) workers in Los Angeles County (LAC)—who are disproportionately Black and Latino—to benefit from the success their labor creates and build generational wealth. A recent Zillow report showed that Angelenos need to make nearly $117,000 to comfortably afford a typical rental, putting many workers and their families at risk of housing instability. At the same time, there is a small business closure crisis unfolding. The majority of baby boomer business owners in LAC—who employ 1 in 5 private sector workers and account for $237 billion in revenue—are retiring without succession plans. Without intervention, this Silver Tsunami will lead to widespread small business closures, massive job losses, and disruption of local economies.

Employee ownership is a turnkey strategy that aligns the interests of business owners, workers, and communities. EO keeps businesses intact and is a powerful tool for building wealth, income, and job quality, particularly for workers of color. E.g.: a 2017 study found that millennial employee-owners of color had 30% higher median wages and 79% higher median household net worth than those at companies without EO. Employee-owners are also significantly more likely to have access to flexible schedules, paid parental leave, and increased job security.
This year, Project Equity will finalize execution on a multi-year contract with the LAC Department of Economic Opportunity and a related grant from the Elbaz Family Foundation through last year’s LA2050 process. We have explored ways to build community wealth and retain local businesses through EO, conducted market research into the needs of LAC legacy businesses, raised awareness of EO amongst business owners and advisors, and hosted our national EO Equity Summit in LA.
With LA2050’s support, we can capitalize on this momentum in the next year to identify and engage industry associations in LAC representative of industries that employ high numbers and concentrations of LMI workers and workers of color on the importance of EO as a workforce retention and resiliency strategy. This will include providing communication tools and messaging on EO, and collaborating on events and webinars for their member organizations.

In addition to better job quality and higher incomes, EO offers a meaningful opportunity to build wealth. As it currently stands, the richest 10% of Americans own 90% of the business wealth. Meanwhile, according to the CA Budget and Policy Center, 19% of Black households and 13% of Latinx households in LAC hold no wealth whatsoever. But the good news is that by making just one change—expanding who gets to benefit from business ownership—we can provide pathways to prosperity for thousands of LMI workers and workers of color in LAC.
If our work is successful, LAC will have an abundance of employee-owned businesses. These businesses will create transformative opportunities for workers. E.g. Proof Bakery, which transitioned to a worker cooperative in 2021, has shared more than $440,000 in patronage, an average of $12,000-$15,000 per worker-owner. These distributions have been life-changing for workers and allowed them to afford housing in an area with a rapidly rising cost of living.

By strengthening communication about the potential of EO from industry associations, we can create economic opportunities for LMI workers and workers of color. As a data-driven organization, we track long-term success based on an array of metrics, such as the number of:
Business owners / advisors reached through educational events
Individuals reached through marketing, social media, etc.
1:1 consultations conducted with business owners
Feasibility studies started / completed for businesses exploring transitions and workers employed by these firms
Business transitions started / completed and workers impacted
Companies assisted through our post-transition THRIVE program and workers impacted
Ecosystem stakeholders engaged
In order to more fully capture the impact of EO—the way it changes lives, improves job quality and affects the experience of coming to work each day—we also collect stories and metrics from the selling owners and workers at our client companies.