The vast majority of the estimated 2.34 million boomer-owned businesses don’t have succession plans. U.S. cities are now facing potentially dramatic shifts in their small-business landscapes. But Berkeley has a plan. The city’s Office of Economic Development has partnered with local organizations to set up a city-funded program, believed to be one of the first of its kind in the U.S., which aims to retain and support small businesses that are at risk of closure ― or, in some cases, of being gobbled up by asset-stripping private equity firms. It will do this by converting them to employee-owned businesses, otherwise known as worker cooperatives.
Berkeley, along with larger cities like Austin, Texas, and New York, is part of a broader municipal movement that views employee ownership as not just a strategy to retain at-risk businesses, but also a way to address rising income and wealth inequality. California has the fourth highest level of income inequality in the U.S., and the Bay Area specifically is experiencing a housing affordability crisis that makes it increasingly difficult for low- to medium-wage earners to live in the cities where they work. The business cooperative model helps tackle some of the root causes of these crises by giving workers a say in decisions that affect their lives, said Peter Gowan, a policy associate at the Next System Project, who has just authored a report on worker ownership. A worker co-op “says that … we’re not going to have someone who makes money just by owning things, that the people who work at this business are also going to get the wealth generated through profits,” said Gowan. Because these co-ops are managed democratically, the worker-owners can vote on strategic decisions such as whether to provide themselves with a living wage, for example. A 2017 report released by the National Center for Employee Ownership found that worker-owners make on average 33% more than their employee counterparts in the same industry. And 2016 research that studied international data found that worker co-ops tend to match or outperform traditional business structures: They survive at least as long, they are often more productive, they may weather recessions better, and they provide workers with profit-sharing opportunities unavailable at traditional companies.
Capitalism Has Failed Immigrants. Can Worker Cooperatives Do Better?
Long presumed to be dead, the once foundational ethos known as the “American Dream” is exhibiting new signs of life — except this time around it looks a little bit different. Less about the individual bootstrapping entrepreneur and more about cooperation and community, the reemerging American Dream looks remarkably anti-capitalist — and it’s springing to life in unexpected places.
When Yuri Reyes first immigrated to the United States from El Salvador in 2009, he barely spoke a word of English. Like many newly arrived immigrants without a college education, he found himself in a cycle of precarious, low-paid work — from working in scrap metal yards to cleaning office buildings. Reyes was much more accustomed to working outdoors in more natural environments back in El Salvador, and so when a family member suggested he come work at a landscaping company in Waltham, Massachusetts, he decided to try it out. The company was called A Yard & A Half, and Reyes’s experience working there would radically transform his life in ways that he couldn’t have imagined.
The Cooperative Landscape
At the time, A Yard & A Half was not exactly your typical landscaping company; it provided a retirement plan for the employees, medical and education benefits, bonuses based on productivity, and the owner, Eileen Michaels, openly shared the finances of the business with her employees. But it wasn’t until 2014, when Michaels began planning for retirement, that things really began to take a radical shift. Instead of liquidating the business or selling it off to the highest bidder like many retiring business owners do, Michaels took a completely different route: She sold A Yard & A Half to the workers.
There are a number of different forms that employee ownership can take — from more simple employee stock ownership plans, which provide employees with ownership interests through stocks, to full-on worker cooperatives, which are not only worker-owned but also worker-managed. Worker cooperatives are an especially radical departure from traditional business structures, because they completely dismantle the employer-employee relationship — a dynamic which is ultimately predicated upon the exploitation of the workers by the boss. In allowing workers to share in the profits that they themselves generate, as well as giving them a say in the decisions that shape their work life, worker cooperatives bring democracy into a realm of life where it is normally absent.
Moreover, according to a recent paper by economist Virginie Pérotin, worker cooperatives actually tend to be more productive, longer lasting and more efficient than traditional capitalist firms.
Converting into a worker cooperative — or starting one from scratch, for that matter — is not an easy process, as cooperative laws are not always clear and banks are less likely to provide loans to co-ops. However, there are a number of organizations throughout the country that have begun breaking through this barrier by providing services that facilitate the creation of worker cooperatives. One of these organizations is the Cooperative Fund of New England (CFNE) — a community development loan fund that specializes in facilitating investments in worker-owned businesses.
Michaels reached out to CFNE for help, and in 2014, with technical assistance and a large loan from the organization, Reyes and seven other workers purchased A Yard & A Half and successfully completed the company’s conversion into a worker cooperative.
“At first I was a bit nervous, a bit afraid, because I didn’t speak English very well and talking about finances and money wasn’t something I knew anything about,” Reyes admitted. “I was kind of lost at the beginning, but after a while, I started getting a better sense of what was going on and I began to learn a lot.”
Five years later, Reyes is now A Yard & A Half’s board president. He still works on the field team doing landscaping and hardscaping work, but he now has a much broader range of responsibilities, which include facilitating meetings, developing agendas, and meeting with the executive committee once a month.
A Yard & A Half currently employs 32 workers, 19 of whom are members. New hires do not automatically become members — there is an 18-month waiting period during which workers must attend a workshop series that explains the responsibilities and benefits of being a part of the co-op. These workshops help to educate workers on a wide variety of topics, from cooperative history to business growth strategies and more. Once a worker is brought on as a full member, they can vote in board elections and on a number of issues, like approving new debt and amending the bylaws of the cooperative. They are also required to join one of four committees — finance, education, human resources or the executive committee.
“Before this, I just knew how to follow instructions — I’d come to work at 7 am, do whatever they asked me to do, and at 5 pm, I’d be done,” Reyes told Truthout. “Now it’s a different story. I’ve learned a lot about the business side of things, and it’s been a huge improvement in terms of personal development.”
Co-ops Create Power Pathways for the Historically Marginalized
Although the history is only beginning to resurface, worker cooperatives have a long and rich tradition among historically marginalized or oppressed communities in the United States. Scholar Jessica Gordon Nembhard has documented how African American communities — from the era of slavery, to Jim Crow segregation and through to the modern day prison-industrial complex — have utilized the worker cooperative model to emancipate themselves from the shackles of a racist, capitalist economic system set out to exploit and ultimately discard them.
And to this day, far from being limited to a handful of hipster coffee shops or pizza parlors, worker cooperatives are popping up more and more within communities that have been traditionally locked out of the formal economy. From Rich City Rides, a bicycle repair shop within the city limits of poverty-stricken Richmond, California, to Chicago’s Blue Tin Production Co-Op run by refugee and immigrant women, to the Tightshift laboring cooperative in Washington, D.C., founded by formerly incarcerated people, co-ops are providing pathways into a formal economy not otherwise available to many marginalized communities.
It is in this rich ecosystem that A Yard & A Half was founded to help break through the seemingly insurmountable systems of oppression within the capitalist economy and to create power pathways for immigrants and Latinx communities. About 95 percent of the workers at A Yard & A Half are immigrants from Central America, many of whom do not speak English and some of whom cannot read or write even in Spanish. Not only are these individuals rarely given access to the resources necessary for personal and professional development, but they often occupy one of the most precarious and exploitative positions within the capitalist economic system. Poor working conditions, wage theft and sexual harassment and assault are all issues that both documented and undocumented immigrants often face with no hope for justice. These conditions are baked into a system that relies on the cheap labor of a subjugated class whose basic needs remain unmet.
“The co-op is really a response to the community’s needs — we’re bringing in people with very low income and education levels and I don’t think that any other model of business will give them the power they have here,” Eulalio Guevara, a worker-member on A Yard & A Half’s management team, told Truthout. Guevara came to the United States from El Salvador in 1999 and joined the co-op after the conversion and has been working closely with worker-owners over the last few years. “These minority communities are really being given extraordinary benefits from this type of business model.”
According to the Democracy at Work Institute (DAWI), a national “think-and-do-tank” dedicated to building the field of worker cooperative development, immigrant worker-owners are actually the largest and fastest-growing segment of worker-owners in the United States. DAWI’s mission is to strengthen and expand the worker cooperative movement in the U.S. by focusing specifically on the communities most afflicted by our current economic system — people of color, recent immigrants and low-wage workforces.
DAWI has been working with A Yard & A Half since its conversion about five years ago, mostly providing educational resources — particularly in Spanish. But the collaboration goes both ways; because A Yard & A Half has been such a successful example of a co-op conversion, DAWI has recruited Guevara to advise on its training series and leadership development cohorts provided to a number of different co-ops.
“Eulalio was part of a group that we convened to advise on what support immigrant-led co-ops — particularly Spanish-speaking immigrant led co-ops — needed from us in the field,” Melissa Hoover, the executive director of DAWI, told Truthout. “What the co-op ecosystem is lacking in Massachusetts is technical assistance for co-op development that is particularly targeted toward Latinx, African American and low-income communities,” Hoover explained. “So, what we’re trying to provide for them has developed alongside and out of necessity for businesses like A Yard & A Half, who are really the leading edge of a wave of Latinx immigrant businesses who are using the cooperative ownership form to create income and wealth for themselves.”
Co-ops like A Yard & A Half aren’t only providing personal development opportunities for their members, they’re also providing a form of financial security that often remains out of reach to marginalized communities. As owners, workers at A Yard & A Half share in the profits they help to generate — there’s no boss at the top taking the lion’s share of income. They also receive one of the highest-paid hourly rates for the industry in Massachusetts, starting at $15 per hour, as well as a benefits package which includes health insurance, vacation hours, holiday pay, a retirement program and dental insurance. These benefits are extraordinary for a sector which is not exactly known for the best work conditions or labor practices.
“The landscaping industry is mostly immigrants,” Reyes explained to Truthout. “You see these people who don’t speak English or who don’t have documentation who tell you stories about not getting paid for weeks, or who are making below minimum wage. We’re always trying to talk to these people to tell them about co-ops and how this model actually works much better, because part of our mission at A Yard & A Half is to change the industry.”
But it’s more than just one specific industry — worker cooperatives exist within a very broad range of industries, from retail to manufacturing to construction and more — and the movement as a whole has its sights set on transforming the entire economic landscape. In partnership with co-op development organizations like the Cooperative Fund of New England, the Sustainable Economies Law Center in Oakland, California, The Working World in New York City, Project Equity in Berkeley, California, and many more, cities all over the country are beginning to explore policies and strategies to grow and strengthen the cooperative sector. According to DAWI’s State of the Sector 2017 report, there are 450 known co-ops in the United States employing a total of 6,734 workers and grossing over $400 million in revenue. These numbers are not particularly high when put in the context of the entire economy, but what’s significant is that the number of co-ops is growing.
Within an economic system that is failing so many, and during an era where the most vulnerable communities are being targeted in some of the most brutal and oppressive ways imaginable, the movement that A Yard & A Half is part of provides an alternative to a ruthless and exploitative capitalist model — a real example of what a better world might look like.
“The best part of all this is that it’s not all about money — it’s about people,” Reyes told Truthout. “It really makes a big difference for so many people, and I’m proud to be a part of this model.”