The Future of Employee Compensation

A recent Article on the future of work focused on an important piece of  the story: a future employee compensation model. Author Dwight Chestnut proposes a new model that he calls the Empowered Employee Compensation Model (EECM). This new workplace compensation model was the result of a new economic research initiative. The model replaces hourly wages, salaries and benefits with ten new income resources and benefits and is projected to drive a three-fold increase in the aggregate standard of living.

The author describes the period during the industrial revolution where our wealth building capacity increased significantly as workers migrated from farms and small shops to earning a wage in factories. He correctly points out that it was a historic transition. The question he poses hits at the heart of a struggle that dates back to the third phase of the industrial revolution. Why aren’t we experiencing a similar historic transition on the strength of significant advances during the third and now fourth revolution? A decreasing middle class and rising inequality would seem counter-intuitive. Should this next Tipping Point be at least as significant and historic as the last tip –  where income and living standards increased two to three times? The model proposed by this research is designed to usher in this three-fold increase in standard of living.

This visual gets to the crux of a perplexing issue that has existed since the 1970s. Wages have not kept pace with productivity growth and Remain Flat around the world. Productivity versus WagesThe left side of the visual reflects the latter stages of what economists have labeled a Special Century. This period was driven by technology that augmented labor. The period prior to this special century looked a lot like the left side of the visual; productivity growth exploded, but the working class suffered. This phenomenon has been called a Technology Trap and explored in depth in a book with the same title by Carl Benedikt Frey. That early period was marked by labor replacing technology.

A premise pursued by the author is that worker income must be tied to workplace productivity in order to adequately address the above productivity gap. A statement right from the Article:

Given that most people make their living in the workplace, what better way to improve the income and wealth building ability of the masses for the long term than to create a workplace where people effectively run their own business under the roof of their employer with the support of their employer?

To realize this, employees must give up hourly wage/salaries in lieu of productivity and ownership based compensation. The vision driving this research is to eliminate paycheck to paycheck dependence on a large scale and shift employee thinking and focus away from just earning a paycheck to running their own business under the roof of employers with the support of employers. The new compensation model has the following components:

  • Productivity Based Compensation
  • Ownership Equity
  • Residual Income Equity Benefit
  • Virtual Wages
  • Virtual Dividends
  • Virtual Bonds
  • Virtual Stocks
  • Private Retirement Plans
  • Group Medical

The article describes each of these components and articulates the benefits to employees, employers, and society. Take a look at the article and supporting research to dig deeper into a possible solution to a problem that  has been 50 years in the making.

2 thoughts on “The Future of Employee Compensation

  1. While I support employee ownership in general and a move toward more of an employee coop model like Mondragon in Spain. We need to be careful that startups don’t become traps where employees wages are a solely based on a share of profits which are zero, and a ceo can milk the cash from angle investors in other ways.

    Liked by 1 person

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