Winimac, Indiana – population 2,500, more than 60 miles from the nearest airport—is a pretty unlikely place to find hope for the future of our economy. It’s home to the headquarters of Galfab, a manufacturer of waste-hauling equipment, which is the kind of company that used to be, and in some parts of the country still is, the bedrock of the American economy. It’s the kind of company that employs Americans to make things and has no intention of sending those jobs overseas. Today, this commitment is stronger than ever for Galfab, which recently opted to transition to employee ownership. “Taking care of all the employees was foremost in our mind,” said CEO Jerry Samson, in announcing the recent transition. “The desire to create an ownership opportunity in Galfab for our over 150 employees was always the top priority for us. Our employees are the heart and soul of Galfab.”

If it’s heartening to hear such a sentiment from the CEO of a manufacturing company – nowhere near in the business of Birkenstocks or granola – it’s equally heartening to know about the financing partner Samson found for the transition: a private equity firm. Yes, progressives might be surprised to know that private equity – not usually the guys in “white hats”– was the catalyst in delivering this company into the hands of its workers. In fact, this private equity firm, Mosaic Capital Partners, is in the business of creating employee-owned companies. With a dedicated fund of $165 million, it’s one of only few private equity funds in the nation focusing on employee ownership.

We at The Democracy Collaborative, a nonprofit working for a more just and sustainable economy, are seeing these days that capital could have a big role to play in taking employee ownership to scale. With income inequality at record levels, employee ownership is increasingly seen as an unexpected but promising solution. As recent research by the National Center for Employee Ownership found, employee owners aged 28 to 34 enjoy 92 percent higher household net worth than non-employee owners, and earn 33 percent higher wages. Plus, they’re about one-fourth as likely to be laid off.

A key issue for the growing employee ownership movement is: who are the agents who can move this idea ahead? Most employees cannot afford to buy their own companies. Could friendly capital be the agent that helps to take employee ownership to scale?

There are only a handful of investment funds that focus today on employee ownership. Mosaic’s story is telling. This is a firm that leverages investment capital and public incentives to finance the sale of private, often family-owned companies to employees, using a vehicle known as an Employee Stock Ownership Plan (ESOP). “When we first came to market with our ESOP strategy, no one had done it,” says Keith Butcher, managing partner of Mosaic Capital Partners, based in Charlotte, North Carolina. Now, they have completed at least eight ESOP transactions. The firm’s first fund is on track to return competitive private equity returns of 20-25 percent to investors. But beyond generating investment returns, Mosaic’s fund is having a substantial social impact – particularly in communities that have long felt forgotten in today’s economy.

If this is a combination – happy investors plus happy employees – that could be replicated, the outcome could be a more equal economy. That’s particularly the case today, given the fact that more than 2 million retiring baby boom entrepreneurs will transition company ownership in the next decade. Only one in seven plans to pass the company to family. What if a substantial portion of these companies could be captured for employee ownership – rather than being sold to multinationals, or closed? This could bend the curve of history. It could light the path to a more equal economy. That potential makes Mosaic’s story of larger significance.

“We’ve possibly impacted nearly 2,000 people, many of them low-income employees, primarily with rural ties,” Butcher told us. “As ESOP participants, they may end up with three times their annual salary in wealth.” Jobs are protected, and families enjoy increased economic stability, through employee ownership. Communities also benefit when wealth stays local.

An interesting thing about Mosaic is that positive social impact was not an initial goal. Their interest was primarily in finding a unique niche and making money. Mosaic, you might say, is the private equity fund that backed its way into social impact. They’ve found it’s a natural byproduct of the work they do. But the by-product is becoming the headliner. The effect of this triple-bottom line ethos has the potential to address structural inequality.

Recently, Mosaic has been working on three ESOP transactions – the Galfab deal plus two others, and interestingly, all three are in rural areas. Why rural? “It’s not our target. But manufacturing tends to be outside major cities,” Butcher said. “We look for the best businesses, and manufacturers are a good fit.” These companies have the kind of blue collar workforce that has largely lost out in the American economy in recent decades; it’s a workforce that stands to gain substantially from employee ownership

Rural areas make good candidates for ESOPs for more intangible reasons, as well. Company owners in small towns are “often one of the biggest employers in town, and they want to keep people employed,” Butcher said. “They want those employees to be local.” He spoke of one company where the founder was age 70 and everyone working there had grown up in the company. “That’s in a community of 3,000 people. The whole company is family.”

Butcher says Mosaic has decided it’s time to get serious about quantifying its social impact and letting potential investors know about it. He and his colleagues recently attended an event hosted by Big Path Capital, where they met large institutional investors seriously interested in socially responsible investing. And these types of investors are serious about measuring impact. Butcher said Mosaic is confident that its work is delivering that impact, but the company has never quantified it, nor set deliberate targets at the outset. “We’re neophytes at our ability to talk about and measure our social impact,” he said. But they intend to learn. They’re now exploring how to do so for a planned second fund, twice the size of the first, which they hope will interest a substantial field of players in impact investing.

This expansion will not only mean big wins for Mosaic’s investors and the thousands of workers they benefit – it also has the potential to breathe innovation into the impact investing space, which has long suffered from an undersupply of investable opportunities, relative to demand. The potential to receive private equity-level returns is particularly relevant to philanthropic mission-related investments, because competitive returns mean investing in employee ownership could come from the body of assets. (Program-related investments, by contrast, often bring below market returns and come from the 5 percent grant payout stream.) The approach is taking off. In May, private equity firm KKR facilitated the public offering of Gardner Denver Holdings, a manufacturer of gas compressors and vacuum systems. The firm awarded $100 million in shares to 6,000 employees who were not previously included in the company’s equity plan, a sum equal to about 40 percent of their annual salaries.

Private equity as a catalyst for addressing the rampant income inequality throughout the United States is a truly unorthodox path to change. But imagine the political and social effects that could result from this type of at-scale economic stabilization in the heartland. If more players were to follow Mosaic’s and KKR’s lead – and mission-related investors supported those moves – it’s not hard to imagine an exponential increase in rural employee ownership over the next decade. Communities would see millions more families once again enjoy stable jobs and a higher quality of life.

Jerry Samson at Galfab emphasized that taking care of employees was good for his business too. “Galfab is well known as an industry innovator,” he said, and the new employee ownership structure “will position Galfab as a leading-edge manufacturing employer.” Employee ownership, it turns out, is good business in more ways than one.

Marjorie Kelly is executive vice-president of the Democracy Collaborative. Jessica Rose is director of employee ownership Programs at The Democracy Collaborative. They are cofounders of Fifty by Fifty, an initiative aimed at creating 50 million worker owners by 2050.