What if Workers Owned Their Workplaces? The cooperative movement is showing that worker-owned businesses can not only survive, but thrive.

Can good values be good business, too? For generations, the cooperative movement has been answering with a resounding “Yes!”

After a surge of entrepreneurial fervor following the 2007 economic collapse, cooperative ventures are even getting a nod from our divided government: In August, Congress passed the Main Street Employee Ownership Act. The measure aims to help launch the next crop of worker-ownership ventures by directing the Small Business Administration to take proactive steps to increase technical and financial assistance for budding worker-owned cooperatives. Although the law does not provide major new funding, advocates hope it broadens avenues for securing seed financing, and for conducting community-outreach programs through local SBA offices.

Although the law offers just a small boost to the sector, according to Melissa Hoover, executive director of the Democracy at Work Institute, “It’s a start. It’s the very first time that anyone ever said worker coops matter in federal legislation.”

Often the main barrier to launching a coop is simply lack of knowledge—worker cooperatives aren’t just a fluffy hippie social experiment, they’re viable businesses with a track record of promoting civic-minded sustainable enterprises. What worker-owned cooperatives offer is simply this: a stake for each worker in the future. Based on a structure centered on shared equity and worker autonomy, the business model, which hews to a principle of “one-member-one-vote” workplace governance, intrinsically guarantees that each worker profits in tandem with their labor. The key difference from the conventional corporate model is that workers share in the equity and direct how funds are reinvested, be it in pay raises and pensions, new hires, or investing in tech upgrades and staff training.

According to surveys of the roughly 300 to 400 cooperatives nationwide, more than a third were launched since 2000. Their trades range from craft breweries to cab companies. The median coop workforce has nine to 10 people (that’s basically the equivalent number of co-owners), and a total workforce of more than 6,800. Far from the penurious, tree-hugging stereotype, coops run on average a yearly profit margin of some 3 percent, yielding about $150,000 in profits. Compared to the precarious, low-wage jobs that are driving the fastest-growing industries, coop workers earn considerably more, about $15.80 per hour, and work just over 30 hours per week. Median tenure for employee-owners is also about 50 percent higher.

The foundation of the cooperative is an idea for a business that produces material and social good together, which in turn also does good for workers’ communities. This principle, reflecting an ethical framework known as the “solidarity economy,” is put to practice in ventures like the Queens-based eco-friendly cleaning company Pa’lante, which is cooperatively run by a group of housekeepers who merge environmental concern with labor empowerment. Or the driver-led Union Taxi coop of Denver, which also mobilizes against the expansion of exploitative ride-sharing apps.

Though worker-ownership doesn’t necessarily mesh with the traditional unionization model, the Oakland-based Design Action Collective has joined a unique cadre of unionized coops, represented by Pacific Media Guild, in order to fully embody the movement culture that the enterprise serves. On a larger scale, Cooperative Home Care Association has established a 2,000-strong presence in New York City’s home health-care sector, with a fully unionized staff of care workers, who also mobilize with labor-led campaigns for health-care funding.

The equity principle of worker-owned cooperatives could be especially crucial for communities of color, as a path toward expanding community investment and closing the abysmal racial wealth gap. A community-based cooperative can be a vital economic on-ramp for women, immigrants, and people of color historically excluded from entrepreneurship. So far, the cooperative sector is roughly 63 percent people of color, up from 59 percent in 2015.

While many coops are start-ups, conversion of conventional businesses to cooperatives can be a vital investment in marginalized communities, and also widen accessibility to credit, since start-up capital can be pooled collectively. Of the 15 new cooperatives that launched in 2016, 11 were conversions.

As struggling communities lose the mom-and-pop shops that have long been a bulwark of economic opportunity, Hoover says,“It’s really dangerous for our small-business ecosystem for [systematic sell-offs and closures, instead of conversion to coops] to happen.… What’s happening to those businesses as their owners are getting older is that they’re getting shut down or consolidated, it really changes that landscape.”

But conversions to more democratic ownership can preserve local assets, and in less-diverse economic landscapes, cooperatives can actively diversify historically white-male dominated sectors. “Who owns businesses in this country,” Hoover says, “are white men.… And who works in most businesses in this country are not white men.” When a retiring boss passes ownership onto workers, “you’re effectively making a racial wealth transfer from an aging white man to a much more diverse set of business owners.” Cleveland’s Evergreen Cooperatives, a coalition of worker-owned firms, has tried to expand its sector by launching a new Fund for Employee Ownership to finance fresh conversions of old local businesses.

When coops rescue a local family business, it could inject not just a capital infusion but an inspired redevelopment vision. Unlike your average big-box retailer, cooperatives tend to stick with their democratic ethos over the long run. Many coop enterprises actively partner with civic-minded financial institutions, like community credit unions. And while a single business won’t radically change the country’s dysfunctional social and economic policies, a network of cooperatives can foster progressive programs such as promoting workers’ health through providing comprehensive benefits, expanding access to affordable childcare, and cultivating more balanced schedule systems and labor-directed workplace-safety programs.

Now that the cooperative sector is entering a more complex economic horizon, it can push for more supportive public policies—like pro-cooperative labor laws that help worker-owners organize, city-based development programs like New York’s Worker Cooperative Business Development Initiative, and opening Workforce Development funding for coops.

“More and more, people who are developing coops to solve social problems are thinking at a bigger scale, and with more ambition,” Hoover says. “They’re thinking about…how do we leverage all the things that traditional businesses do, but for good?”

And since worker-owners practice and produce what they preach, the budding world of cooperatives is in a perfect position to make the change they want, and to pay it forward.

Image: Glut collective member Fiifi Andoh tends to a customer in 2015. Glut is a worker-owned cooperative store that serves the community in in Mount Rainier, Maryland. (USDA / Lance Cheung)

Originally published on The Nation, 8th March 2019: https://www.thenation.com/article/worker-cooperatives-economy-business/


Few businesses show the skewed dynamics between employer and employees as clearly as Amazon. Its CEO Jeff Bezos is the world’s richest person, with his wealth estimated at around $130 billion. He admits the near impossibility of spending these riches and commits $1 billion a year of his “Amazon winnings” to fund a personal project of space travel.

Back on Earth, Amazon’s 560,000 employees earn a median salary of $28,000, its warehouse workers face strict efficiency targets that lead some to relieve themselves in trash cans, and hundreds of Ohio, Arizona and Pennsylvania-based workers are on food stamps.

Amazon founder Jeff Bezos addresses the media at the Space Symposium in Colorado Springs, Colorado in April 2017. 

Amazon founder Jeff Bezos addresses the media at the Space Symposium in Colorado Springs, Colorado in April 2017. 

To understand why the relationship between employer and employee is so severely screwed, we have to look to capitalism.

Capitalist businesses are starkly undemocratic. Employers are economic dictators. They wield enormous power and control that is unaccountable to the social majority around them: their employees and the communities in which they live.

Employees’ labor produces profits, which belong 100 percent to the employers. Yet workers are excluded from decisions about how to use those profits. Instead, they depend on wages (set and controlled by the employer) as compensation for the work they produce.

Employers’ decisions shape major aspects of employees’ lives, both at work and away from it. The employer alone decides which commodities to produce, what production technology to use (with what side effects), where to locate the workplace, as well as what to do with the profits. Celebrations of employers’ risks, used to justify their profits, rarely even recognize that workers, too, take risks in their dependence on employers (but without getting profits for doing so).

The skills employees develop, the personal connections they make, the seniority they accumulate, the home they invest in, their personal connections (in neighborhoods, schools, churches, etc.) ― always risk being lost or diminished by decisions exclusively in employers’ hands. Above all is the decision to end a worker’s job.

While an employee deciding to leave a business will likely make little or no impact on an employer; employers’ decisions to, for example, relocate production overseas, or sell or close a business, carry huge risks for employees.

This undemocratic organization of production increasingly concentrates income and wealth, as well as economic power, in a tiny percentage of the population.

Those concentrations dominate politics as well. Fundraising for political campaigns and policies tends to rely on those with the most resources to offer. Wealth translates into political influence. The result is a system of decisions that protect and strengthen capitalism.

Activists hold a protests near the apartment of billionaire and Republican financier David Koch in June 2014. The Koch brothe

Activists hold a protests near the apartment of billionaire and Republican financier David Koch in June 2014. The Koch brothers – owners of the second-largest privately run business in America – are accused of skewing the political playing field with their financial contributions.

In the realm of culture, the ideas of the top 1 percent ― overwhelmingly capitalists ― usually become the ruling ideas of the culture’s arts, religions, media, and so on.

There is an answer ― a mechanism that can bring democracy into the workplace: worker cooperatives. Under the cooperative model, workers have decision-making power that corresponds to the risks and productivity of their employment. Each worker gets an equal vote on decisions, which are made on a majority basis.

All share democratically in the company’s gains and losses. If mistakes are made that threaten, weaken or even destroy the enterprise, those mistakes will flow from the affected workers’ democratic decisions.

Some capitalist economies have already made concessions to workers demanding more than undemocratic dependency. Halfway measures, such as the German concept of Mitbestimmung, or co-determination, for example, allow workers to participate in the management of a company.

Workers have also sometimes gained ownership of parts or even all of the enterprises where they work (for example, employee stock ownership plans in the U.S.). But worker ownership alone is fundamentally insufficient. In most capitalist economies, such measures still exclude workers from the actual direction and control of enterprises.

Worker co-ops put the workers in direct control. They democratize the direction of companies, rather than just giving employees a stake in some of the management decisions. Workers decide democratically who to hire and fire as managers, and direct their management activities. They become, in effect, their own board of directors.

In capitalism, benefits of improvements, for example in technology, flow mostly or only to one level: to directors, who are almost never workers as well. So, there is little incentive for workers to look for or make improvements in the efficiency of production. The same cannot be said of workers in co-ops, who have the dual roles of workers and directors.

Similarly, faced with opportunities for changes that increase profits but have negative environmental side effects, capitalist directors will more likely adopt them because they usually get the profits and can escape the side effects. Employees of those directors, who must bear the costs of the side effects for themselves, their families and neighbors, will give greater weight to the negative side effects versus the positive profits.

Worker co-ops also move away from huge pay disparity between those at the top and those at the bottom. All workers democratically decide on wages and bonuses, making it unlikely that they would give huge salary packages to only a very few.

Likewise, there are differences when it comes to the distribution of any profits or surpluses. Nothing plays a greater role in the dichotomy of 1 percent versus 99 percent than the undemocratic nature of capitalist decisions about how to distribute profits or surpluses.

Capitalist employers often distribute them as top executives’ salary and stock option packages, dividend payouts, buying back their company’s shares, and so on. Worker cooperatives take a democratic approach. They also typically decide how much goes to, for example, advertising, research and development, politicians, artists and civic contributions. Society is shaped in countless ways by corporate decisions about how profits are distributed.

However, in worker co-ops, the decision-making structure on distributing profits is an effective mechanism to reduce poverty, and income and wealth inequalities. They can, for example, devote surpluses to providing workers or area residents with social services, instead of paying dividends or advertising. Their goals in providing funds to politicians would differ, as would their contributions to cultural groups.

For people to ever get a real choice about capitalist businesses versus worker co-ops ― about what balance between them the economy should offer ― there would have to be a worker-co-op sector of the U.S economy within easy reach of all Americans.

However, the U.S. economy is skewed by a government that has provided a vast array of services, tax advantages, and subsidies to capitalist businesses, with nothing remotely comparable for worker co-op businesses.

Senator Kirsten Gillibrand has announced bipartisan legislation to support small businesses transition to cooperatives.

Senator Kirsten Gillibrand has announced bipartisan legislation to support small businesses transition to cooperatives.

Sen. Kirsten Gillibrand (D-N.Y.) recently introduced legislation that would begin to rectify some of the anti-worker and anti-co-op discrimination in U.S. government policy by offering to help small businesses convert to co-ops and gain access to capital. Similarly, the Labour Party in the U.K. is on record with a commitment to establish a major worker co-op sector of the U.K. economy if it is elected.

If such a worker co-op sector were established economy-wide, we all could vote ― with ballots and our wallets ― for whatever mix of alternative enterprises we prefer. Concrete knowledge, as well as ideological commitments, could inform democratic choices about what mix of capitalist and worker co-op enterprises best suit us. And if Republicans and Democrats are too dependent on capitalists’ contributions, perhaps we need an independent political movement or a party to advocate for building such a worker co-op segment of the economy.

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