Do Employees Profit from Profit Sharing? a Longitudinal Analysis of Canadian Establishments Theoretical and Empirical Background

Using panel data from a large sample of Canadian establishments, this paper examines whether there is any link between adoption of an employee profit sharing plan and subsequent employee earnings. Overall, growth in employee earnings during the three-year period subsequent to adoption of profit sharing did not differ significantly between establishments that had or had not adopted profit sharing. However, growth in employee earnings was significantly higher among profit sharing adopters that paid above-market wages prior to adoption of profit sharing. This suggests that profit sharing may be financially beneficial to employees in establishments making high investments in human capital.