By Miranda Duncan
We champion democracy as the ideal system of governance, where freedom can flourish. All voices are equal and have a right to be heard. When it comes to the workplace, though, we’re reluctant to embrace democracy. In the business sector, we expect there will be one person at the top making all the decisions for others to follow. Why do we demand democratic rule for our country and reject it in the workplace?
Nowhere is rejection more obvious than from the U.S. Small Business Administration. May 1st heralds International Workers Day, and during the first week of May, the SBA will acknowledge small businesses across the county for their resilience, ingenuity and creativity. No cooperatives, however, will be featured during Small Business Week.
Let’s give credit where credit is due. Small businesses strengthen our economy by employing 60.6 million people, accounting for 47.1 percent of the workforce. Small businesses have added 10.5 million net new jobs over the past 20 years, and in 2014, a study showed small business contributed $5.9 trillion to the GDP (U. S. Small Business Administration, October 2020).
Not included in those numbers, though, are the 465 worker cooperatives in the United States today, employing approximately 7,000 people, and generating over $550 million in annual revenues (Democracy at Work Institute, U.S. Federation of Worker Co-ops, January 2020). “Why,” you might again ask?
According to the Democracy at Work Institute, a worker cooperative is a business that is owned and controlled by its workers, who constitute the members of the cooperative. The two central characteristics of worker cooperatives are:
- Workers own the business and they participate in its financial success on the basis of their labor contribution to the cooperative.
- Workers have representation on and vote for the board of directors, adhering to the principle of one worker, one vote (Worker Cooperative FAQ | Democracy at Work Institute).
The SBA was established to “aid, counsel, assist and shield the interests of little businesses” and fulfills its mission by offering loans, loan guarantees, government contracts, financial counseling and other forms of assistance. The common practice of holding one person accountable for debt explains why worker cooperatives don’t fit the small business criteria. A worker cooperative has no primary owner who can apply for a loan and take on the responsibility of repayment.
So, while small businesses earn the accolade “backbone of our economy,” worker co-ops, with their contributions to building wealth in local communities, stand apart as unsung heroes. “Co-ops can boost career mobility and seed homegrown job opportunities, while communities benefit from an ownership structure that keeps capital reinvested locally, not exploited or outsourced to faceless corporate chains (“Worker Cooperatives Are More Productive than Normal Companies,” The Nation, March 2016).
Another study, “What Do We Really Know about Worker Cooperatives?” compared traditional top-down businesses with cooperatives, and concluded, “Worker cooperatives are more productive than conventional businesses, with staff working better and smarter and production organized more efficiently” (Virginie Perotin, Leeds University Business School, January 2015). She also found that worker co-operatives survive at least as long as other businesses and have more stable employment.
Worker co-ops are positioned to steal even more of the small business thunder in the future. As small business owners reach retirement age, transferring their business to employees is an enticing way to preserve a legacy. Succession plans for retiring baby boomers could direct some of the estimated $10 trillion in business assets poised to change hands over the next 20 years to worker cooperatives (Beneficial Foundation State Perspectives, Melissa Hoover, 2018). With more attention focused on worker cooperatives, studies show benefits in higher wages, with the average starting hourly pay at $19.67, and instead of a 300:1 cap on highest to lowest paid worker, the ratio is more like 3:1.
Perhaps our renewed appreciation for democracy will transfer to the workplace after all, giving people control over the conditions of their daily work life.
To learn more about Worker Co-ops, attend the California Co-op Conference April 29-30, 2022 at the Sacramento Scottish Rite Center: https://cccd.coop/events/2022-california-co-op-conference
Miranda Duncan is the Communication Associate for Co-op Home Care, California Center for Cooperative Development (CCCD).