Worker Cooperatives

Take a second to think of how a business is structured right now. There’s workers on the bottom of the ORG Chart, then maybe some managers above them, and as you go higher and higher up, you get executives, then the CEO of the company. This is how most businesses in the modern world are structured. But there’s a different, much better way that barely gets talked about in our modern world of politics; worker cooperatives.

Alyce Santoro, under a Creative Commons license

What’s a worker cooperative?

Democracy at work defines a worker cooperative, or worker coop, as “value-driven businesses that put worker and community benefit at the core of their purpose. In contrast to traditional companies, workers at worker cooperatives participate in the profits, oversight, and often management of the organization using democratic practices. Workers own the majority of the equity in the business, and control the voting shares.”

There are seven main characteristics that also define a worker coop.

1. Open and voluntary membership (membership is available to all who can use it’s services)

2. Democratic member control (workers make decisions about the company democratically, rather than just a few board members at the top)

3. Members’ economic participation (members control the capital of the firm)

4. Autonomy and independence (firm acts independently of the government or other companies)

5. Education, Training, and Information (education and training for all members, information provided for those unfamiliar with worker coops)

6. Cooperation among cooperatives (coops work with local, national, regional, and international structures)

7. Concern for the community (coops work for sustainable development of their communities with their policies)

Some of these require more explanation than others, but if you would like to learn more about each of these, I recommend looking at the cited sources or listening to this Richard Wolff lecture. He’s, unsurprisingly, a lot more educated on economics than I. But enough about what a worker coop is, how effective are they?

© 2020 U.S. Federation of Worker Cooperatives

How effective are worker cooperatives?

The natural response to learning about worker coops for many is to scoff, after all, don’t these people need a leader? How can this business ever survive when it’s uninformed workers making top level financial decisions? Although even proponents of coops, such as Grassroots Economics Organizing, won’t deny these potential problems with cooperatives, the benefits shown of already existing coops far outweigh the costs.

The Democracy at Work institute furthers that coops “have proven to be an effective tool for creating and maintaining sustainable, dignified jobs; generating wealth; improving the quality of life of workers; and promoting community and local economic development, particularly for people who lack access to business ownership or even sustainable work options.” This isn’t surprising either. When the employees who are in touch with the community get to make decisions in the business, the community tends to benefit.

Furthermore, worker coops are significantly more likely to succeed in the long term compared to their non coop counterparts. A study performed over more than 10 years found that coops are 29% less likely to dissolve due to their greater employee stability. However, this does come with consequences. Due to the fact that coops are more likely to cut employees' pay rather than lay those workers off during a recession or other economic struggles, pay was 14-16% lower than in non coop firms.

One thing you can look into to learn more is the Mondragon Corporation, located in the Basque region of Spain, is the world's largest collection of worker cooperatives. In the U.S., the pay ratio between the top and bottom earners in the top 350 U.S. companies is around 1:312. In the Mondragon Corporation, this ratio is only 1:9. This is a ratio that the employees democratically set, not by executives or the board of directors, but by the workers who make the company function in the first place.

How to help

The first thing you should do is tell your friends about cooperatives. This topic is rarely discussed in modern politics, so get your circle involved. If you’re employed at a small business especially, do some research on how to turn your business into a cooperative, and work with your boss. If that doesn’t work, however, look at unionizing. Although it’s no replacement for a full on worker coop, having a union allows you to fight for your rights for a living wage, good benefits, etc. Remember, worker cooperatives are all about helping the community, so start there.

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Sources cited:

• “The Benefits of Worker Cooperatives.” Democracy at Work Institute, institute.coop/benefits-worker-cooperatives.

• “Understanding the Seven Cooperative Principles​.” America's Electric Cooperatives, NRECA, 19 Aug. 2020, www.electric.coop/seven-cooperative-principles%E2%80%8B/.

• Lindenfeld, Frank, and Pamela Wynn. “Why Some Worker Co-Ops Succeed While Others Fail.” Grassroots Economic Organizing, 2012, geo.coop/story/why-some-worker-co-ops-succeed-while-others-fail.

• Burdín, Gabriel. “Are Worker-Managed Firms More Likely to Fail Than Conventional Enterprises? Evidence from Uruguay - Gabriel Burdín, 2014.” SAGE Journals, 2014, journals.sagepub.com/doi/10.1177/001979391406700108.

• Pistaferri, Luigi, and John Pencavel. “Wages, Employment, and Capital in Capitalist and Worker-Owned Firms - John Pencavel, Luigi Pistaferri, Fabiano Schivardi, 2006.” SAGE Journals, 2006, journals.sagepub.com/doi/10.1177/001979390606000102.

• Rushe, Dominic. “US Bosses Now Earn 312 Times the Average Worker's Wage, Figures Show.” The Guardian, Guardian News and Media, 16 Aug. 2018, www.theguardian.com/business/2018/aug/16/ceo-versus-worker-wage-american-companies-pay-gap-study-2018.

• “New Report Highlights Lessons from Mondragon - the World's Largest Worker Co-Op: Co-Operatives UK Newsroom.” Co, 10 Nov. 1970, www.uk.coop/newsroom/new-report-highlights-lessons-worlds-largest-worker-co-op.