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In the intense competitive marketplace of the global economy, policymakers and managers continue to struggle with ways to motivate and reward employees that promote competitiveness and worker well being. One approach championed by some blurs the traditional lines between capital and labour. It increases workers’ financial stakes in their companies through pay-for-performance and stock ownership plans and increases employee decision-making. This has been called “shared capitalism”.

It will likely only be successful in motivating and benefiting employees and their employers if employees know about and understand such plans. Previous research shows that employee ignorance of privately and publicly provided employee benefits is not a trivial concern. Research reveals that most employees are not ware of the family-friendly benefits offered by their employers.

It therefore appears reasonable to hypothesise that some employees are ignorant about shared capitalism programmes in their workplaces.

Recent analysis suggests for company-level profit-sharing plans, 23 per cent of employees incorrectly report that they are not covered by this type of financial participation plan. Across individual, group, and company-level performance-based pay plans, the ignorance rate is around 15 per cent. A similar level of imperfect awareness of employee stock ownership plans is also estimated.

Higher-paid workers, those that expect to work for their employer for a long time, and those with higher levels of education are less likely to be unaware that they are covered by shared capitalism programmes. The probability of being ignorant about the existence of a profit-sharing plan is 62 per cent for a single, 21 year-old, non-white, high school dropout father of two earning $25,000 (£14,000) per year with no expectation of working for a long time for his 200-employee company of one year in a union-represented, non-sales, hourly job in the United States. In contrast to this less-educated, low-paid, young worker profile, consider a better-educated, salaried, experienced worker profile: a married, 45 year-old, white, college-educated, childless woman earning $75,000 per year with expectations of working for a long time in her 200 person company of 15 years in a non-union, non-sales, salaried job in the United States only has a 4 per cent chance of failing to correctly realise that she is covered by a profit-sharing plan.

Another aspect of employee ignorance relevant to financial participation plans is a lack of information needed for on-the-job decision-making. Though these questions were only asked at one to three companies, they are revealing. Nearly 30 per cent of employees believe that their company only occasionally or never reaches out to them to provide them with information about company goals and workplace changes. Nearly 45 per cent report that they personally seek out such information on their own only occasionally or never. A quarter of employees failed to agree with the statement that they have the information needed to their job. Around 40 per cent failed to agree with the statements that they are kept abreast of important issues in the organisation and in their jobs.

Recent analysis strongly suggests that corporations with shared capitalism programmes need to improve their employee communications programmes. Shared capitalism programmes are not free – they involve cash and/or stock outlays to employees as well as administrative costs.

Public policymakers also need to realise that the envisioned benefits of various employee financial participation programmes might be limited by informational problems. Without effective communications programmes, the benefits of shared capitalism will likely be dampened by employee ignorance, and the expenses or governmental support of shared capitalism programmes might not be justified.

John W Budd is industrial relations land grant chair at the Carlson School of Management, University of Minnesota

This article first appeared on VoxEU.org