Footsie, yeah! Share prices and worker wellbeing

Abstract

Purpose

A small literature has shown that individual wellbeing varies with the price of company stock, but it is unclear whether this is due to wealth effects amongst those holding stock, or more general effects on sentiment, with individuals taking rising stock prices as an indicator of improvements in the economy. The authors contribute to this literature by using two data sets to establish the relationship between share prices on the one hand and worker wellbeing on the other.

Design/methodology/approach

First, the authors use over 20 years of British panel data to show that employee happiness and job satisfaction moves with share prices among those whose pay is partly determined by company fortunes. The authors then examine share price movements and employee stock holding in a single corporation and provide suggestive evidence that an increase in the firm’s stock price increases the well-being of those who belong to its employee share purchase plan (ESPP). These effects are greatest among those making the largest monthly contributions to the program who have the most to gain (or lose) from stock price fluctuations. There is also tentative evidence that the well-being effects of a higher share price are larger for those who hold more shares. Taken together these results suggest that, although stock price movements have little effect on well-being in the population at large, the well-being of those holding stock in their own company rises when the price of that stock is higher, suggesting the effects of share prices work at least partly via changes in wealth.

Findings

Taken together these results suggest that the wellbeing effects of share prices work at least partly via changes in wealth.

Research limitations/implications

The authors cannot be certain that the job satisfaction movements they see are causally linked to share plan participation and bonus receipt. Future research might fruitfully examine the mechanisms at play, and whether the effects identified here are linked to differences in employee motivation and effort over the business cycle.

Practical implications

Firms may wish to consider the appropriateness of linking their workers’ pay to firm performance through share plans or profit shares to establish whether this improves worker wellbeing.

Social implications

The utility of workers may increase where firms offer some compensation via a share plan or profit share.

Originality/value

The literature suggests a link between share price movements and worker wellbeing, but the reasons for the link are contested. Using two very different data sources, the authors are able to show that share price increases induce higher worker wellbeing, at least in part, through wealth effects.

Citation

Bryson, A., Clark, A. and Green, C. (2021), "Footsie, yeah! Share prices and worker wellbeing", Journal of Participation and Employee Ownership, Vol. 4 No. 3, pp. 197-211. https://doi.org/10.1108/JPEO-09-2021-0010