Labor Unions and Co-ops, part 4

The New* Worker Co-operatives

Worker owned businesses have always existed in the in the United States. They may be as small as a single proprietorship or as large as Google. Depending on the definition of worker ownership, organizations such as Google and Microsoft (Blasi, Freeman, & Kruse, 2013), which offer significant stock options along with traditional ESOPs such as WinCo Foods and their “millionaire cashiers” (Josephs, 2014). The workers in these organizations tend to do better than workers in competing organizations; however, the workers do not have any control over the workplace. The ownership is purely transactional. A different type of worker ownership, the co-operative, has also engaged workers in the United States for centuries. As stated earlier, worker owned factories were the primary vehicles for the Knights of Labor. Other laborers (both industrial and agricultural) turned to the co-operative model to meet their economic and social needs. The American Grange championed co-operatives throughout the United States and many of the top Agriculture firms today are producer or “shared-service” co-operatives in which the members of the co-operatives may be a single farmer (and his or her family) or an incorporated farm and use the co-operative to engage in bulk purchasing of supplies and marketing the product of each farm (Welch’s, Sunkist, Land o’ Lakes, Cenex, etc.). Worker co-operatives, in the laborers of a business own the business, however, largely disappeared during the second Industrial Revolution with the exception of a few fishing and logging co-operatives in the Pacific Northwest.

The social upheaval caused by the Civil Rights Movement and the Anti-Vietnam War movement sparked renewed interest in worker owned co-operatives, but outside of a few enclaves such as San Francisco, Minneapolis, Madison and Boston, the worker co-operative model was often ignored in favor of consumer, agricultural, housing and financial co-operatives. This began to change in the new century. The collapse of the Argentina economy in the early 00’s sparked a new movement of workers who took over their closed factories, claiming the building and equipment in exchange for back-pay (Lewis, 2004) sparking a similar take over in Chicago at the Republic Windows Company in 2007. This movement sparked similar ideas of worker ownership in the United States. By 2004, momentum among the existing 300 or so worker co-operatives built to create the US Federation of Worker Co-operatives and they held their first meeting in Minneapolis. On the international level, the International Organization of Industrial and Service Co-operatives published a Declaration on Worker Co-operatives that defines a worker co-operative as meeting these key elements (CICOPA, 2005):

  1. They have the objective of creating and maintaining jobs that provide a living wage or better and contribute to the quality of life, dignity of human work, and provide for democratic self-management while promoting community and local development.
  2. Free and voluntary membership/
  3. A majority of the workers are members and a majority of the members are workers.
  4. The worker-members relation with their co-operative should be different than waged-based labor and more akin to autonomous individual work.
  5. Internal governance is democratic.
  6. They have autonomy and independence from the government and third parties.

The CICOPA definition along with the simpler concept provide by Bowles and Gintis (1996) in which they define a democratic firm as one in which labor chooses the administration and administrative structure through a democratic process. The worker co-operatives in the United States run a gamut of industries from retail such as bicycle shops, bakeries, and book stores, to service industries such as cleaning, home care, and taxi operations, to industry with coffee roasters, industrial bakeries, and machine engineering. Governance models range from the true collective (generally in smaller co-operatives) to traditional hierarchical top-down management command-and-control. However, at the base of all of these organizations is either a board of directors or the general meeting in which the workers collectively decide the key aspects of the organization. Worker co-operatives have a lot to offer the labor movement and their development at this critical juncture in the US labor movement offers new potentialities for workers to reengage with the American Dream.

While traditional industrial relations theory tend to disregard, if not distrust, the ability of workers to self-manage in an effective means (Perlman, 1970) more recent research has shown that worker co-operatives can out-perform their competitors even while spending capital on improved working conditions and wages. In general, worker co-operatives operate at a higher level of productivity than conventional firms (CF) (Bowles & Gintis, 1996; Craig & Pencavel, 1995) although the causes of increased productivity may not always be completely understood and may even be a result of work practices that might not be permitted in conventional firms with or without labor union representation due to the “entrepreneurial nature” of the worker and a higher degree of risk-acceptance (Craig & Pencavel, 1995). In any event, traditional comparisons need to be adjusted with the nature of the workplaces. Co-operatives exist to benefit their members just as CFs exist to benefit their shareholders. In an employee owned firm, then, many of the benefits (higher wages, better insurance, safer and more humane working conditions) translate economically into the expense side of a traditional profit-and-loss statement. For example, Union Cab of Madison Co-operative  provides health insurance to its members by paying up to 70% of the premium in an industry that never provides health insurance to its drivers. In 2009, this benefit cost the co-operative approximately $360,000 for the co-operative’s contribution or approximately 5% of annual sales (Siegfried, 2009).

Wages compose the primary driver for labor unions and worker co-operatives alike, so it should come as no surprise that worker owned business tend to have higher wages as the wages become the primary source of return to the worker-owner (Craig & Pencavel, 1992). However, the more interesting dynamic arises from mechanisms to adjust to changes in the market place where co-operative engage a positive wage-employment relationship (they adjust to the market more slowly and tend to protect employment) (Burdín & Dean, 2009). In addition, pay differential within the co-operatives tend to be exceptionally small (Craig & Pencavel, 1992; Levine, 1990) as work tends to be considered equitable in order to meet the needs of the organization. The ability to control wages and benefits and using a compressed wage scale creates an elasticity within the labor system that helps lengthen the life span of the co-operative and allows them to weather economic downturns better than CFs (Ben-ner, 1984).  However, the life cycle of worker-owned firms does not follow similar patterns of CFs, which may be for a multitude of reasons that can vary by nationality. Some of these reasons include risk-aversion among the ownership required to address changes in the marketplace, the conversion of a CF already near the end of its life cycle, and increased competition during economic upswings (Ben-Ner, 1988).

While data on the actual number of worker co-operatives is severely limited, the incidence of the creation of worker co-operatives has been increasing since 2010. Many of the new co-operatives are being started by new immigrants and younger people who do not see the pathway to a career that their parents had even twenty years ago. In addition, the model has received a significant amount of attention recently through films such as Shift Change (Dworkin & Young, 2013) and new organizations such as the Democracy Collaborative. Significant barriers exists to the creation of worker co-operatives, not the least of which includes access to capital (Lawrence, 2002) and connection to larger networks. Labor unions provide one such network. Traditional relationships between the two models of the labor movement in the United States tend to run from indifference to distrust that workers can adequately manage disputes without union leadership (Lanze, 1992).  The Industrial Workers of the World has historically mistrusted worker co-operatives as a form of “self-exploitation” worrying that they will push wages down to compete with unionized firms (X344543, 2010).

* By “new” I mean the new era of worker ownership that began in the 1970’s and continued building through the neoliberal attack on labor unions (post-PATCO) and the social safety net. Some of these co-ops have celebrated their 40th anniversary, but they are new in the sense that they marked a return to worker ownership that had largely been ignored for much of the 20th Century.

 

References:

Ben-ner, A. (1984). On the Stability of the Cooperative type of Organization. Journal of Comparative Economics, 8, 13.

Ben-Ner, A. (1988). The Life Cycle of Worker-Owned Firms in Market Economies. Journal of Economic Behavior and Organization, 10, 26.

Blasi, J. R., Freeman, R. B., & Kruse, D. L. (2013). The Citizen’s Share: Putting Ownership Back Into Democracy. New Haven & London: Yale University Press.

Bowles, S., & Gintis, H. (1996). The Distribution of Wealth and the Assignment of Control Rights in the Firm. Amherst, MA.

Burdín, G., & Dean, A. (2009). New Evidence on Wages and Employment in Worker Cooperatives Compared with Capitalist Firms. Journal of Comparative Economics, 37, 16. doi:10.1016/j.jce.2009.08.001

CICOPA. (2005). World Declaration on Worker Co-operatives. Retrieved from http://www.cicopa.coop/World-Declaration-on-Worker.html

Craig, B., & Pencavel, J. (1992). The Behavior of Worker Cooperatives: The Plywood Companies of the Pacific Northwest. The American Economic Review, 82(5), 1083-1105.

Craig, B., & Pencavel, J. (1995). Participation and Productivity: A Comparison of Worker Cooperatives and Conventional Firms in the Plywood Industry. Retrieved from Washington, DC:

Dworkin, M., & Young, M. (Writers). (2013). Shift Change. In M. Young (Producer). Seatle, WA: Bullfrog Films.

Josephs, M. (2014, November 5, 2014). Millionaire Grocery Clerks: The Amazing WinCo Foods Story. Forbes.

Lanze, L. B. (1992). Attitudes of Labor Union Leaders Toward Worker Cooperatives: A survey of the United States, the United Kingdom and Italy. Annals of Public and Coopertive Economics, 63(1), 77-102.

Lawrence, J. W. (2002). Democratic Worker Cooperativs: An Organizational Strategy Reconsidered for the 21st Century. New Politics, Summer, 116-122.

Levine, D. I. (1990). Participation, Productivity, and the Firm’s Envrionment. California Management Review, 32(4), 86-100.

Lewis, A. (Writer). (2004). The Take. In B.-A. Productions, K. L. Productions, N. F. B. o. Canada, & C. B. Corporation (Producer). Toronto: Celluloid Dreams.

Perlman, S. (1970). A Theory of the Labor Movement. New York: Augustus M. Kelley.

Siegfried, D. (2009). [Board Meeting Packet].

X344543, M. (2010). Collectives, Workers’ Cooperatives and the IWW. Retrieved from http://www.iww.org/en/join/collectives.shtml

 

About John McNamara

John spent 26 years with Union Cab of Madison Cooperative and currently helps develop co-op in the Pacific Northwest. He holds a Masters in Management: Co-operatives and Credit Unions from Saint Mary's University and hopes to finish his Ph.D. in Business Administration soon. He has served on the board of the US Federation of Worker Cooperatives and the Board of Governors for the Democracy at Work Network. He currently sits on the Co-op Circle and Mission Circle for Sociocracy for All. He teaches on worker co-operatives and democratic management in the summer at The Evergreen State College.
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