San Diego businesses and their employees could enjoy opportunities for growth by switching to an employee-ownership model, according to a San Diego Workforce Partnership report released Tuesday.

The report — “Employee Ownership: A Good-For-Business Tool That Creates Equity and Opportunity for Workers” — finds that employee-owned businesses such as El Cajon’s Taylor Guitars are both more profitable and resilient than many privately-owned companies.

The workforce partnership outlines how San Diego’s economy could see improvements through businesses adopting an employee-owned model.

“As we look towards recovery, San Diego faces an incredible opportunity to build a bigger and brighter future,” said Rachel Merfalen, director of business services at the San Diego Workforce Partnership. “Employee-owned business structures could offer our local economy a viable and powerful path forward.”

The number of small businesses open in San Diego decreased by 37.9% in 2021 from the previous year due to the compounded economic and opportunity crises associated with the pandemic. Additionally, as millions of baby boomer business owners retire every year, nearly 1 in 6 American employees could face job loss, according to the report, which found that employee ownership is a powerful tool to retain businesses and jobs in a small business-based economy.

Employee ownership also helps close the race and gender wage gap, according to the findings. Employee owners of color have a 30% higher income and women employee owners have a 17% higher income than their non-employee owner counterparts, a number that jumps to 24% for single women, according to the study.

Other benefits cited in the report: 72% of workers profiled prefer working at employee-owned companies and 40% of customers are more likely to patronize them.

The San Diego Workforce Partnership offered several recommendations for interested businesses:

— 100% employee-owned S corporations pay no income taxes and set-up costs and the sale of the business to its employee owners are tax deductible; and

— for those business owners contemplating retirement, consider transitioning to employee ownership. The workforce partnership has partnered with Project Equity — a California-based nonprofit — to provide hands-on consulting to business owners interested in transitioning to employee ownership.

The San Diego Workforce Partnership will host “Keep San Diego Businesses Thriving: An Employee Ownership Workshop” on Thursday, in partnership with Project Equity.

–City News Service

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