Employee capital sharing - an international comparison

Since the beginning of the 1990s, the European Commission has promoted employee capital sharing in the member states of the European Union. The reaction to these strong recommendations in the individual member states and the intensity of implementation have varied. These different reactions can be explained by institutional differences in the member states as well as by different political approaches in implementing the recommendations of the Commission. The support for employee capital sharing is backed by the assumption that it has a positive effect on productivity and employment, but clear empirical proof of this has not yet been provided. In spite of this, government support is to be strengthened, since capital sharing of the employees can be seen as an instrument for the preservation of jobs. With increasing globalisation and expanded international mobility of goods and production factors, employee remuneration in high wage countries - in particular for employees with low qualifications - is coming under increasing pressure. In particular capital sharing can help ameliorate the subsequent distribution effects. The forms of capital sharing bear risks for employees, however, if appreciable earnings components depend on company profits, over which the individual has little influence, or if employees lose not only their jobs but also their invested capital in cases of insolvency. From the viewpoint of an optimal risk diversification, a system of capital formation is perhaps preferable in which the employee's capital sharing is not limited to his own firm.