Worker-Owned Cooperatives Can Succeed

At face value, the City of Santa Barbara appears to be very progressive. Over 3,000 people attended the Women’s March last year, holding signs with phrases like “Love Trumps Hate,” “Black Trans Lives Matter,” and “Nevertheless, She Persisted.” An estimated 40,000 attended the Earth Day Festival at Alameda Park to celebrate and fight for the survival of the earth itself. Today, it’s popularly understood we have the most progressive city council in our historical memory.

And yet, for some reason our values don’t necessarily carry into our places of employment.

Earlier this year, I attended a workshop on workplace diversity, inclusivity, and equity, expecting to hear about workplace governance models giving marginalized workers more voice. The workshop was more an invitation for business leaders to examine how privilege and oppression dynamics play out at work so they could make adjustments to hiring practices and build a culture of inclusivity.

The CEO of a nonprofit expressed how conflicted she was about being a white woman running a business with mostly Latina/o workers. Her conflict was rooted in a sense of social justice that was pulling her in two directions. On the one hand, she had been told all her life that, as a woman, she is less valuable than men. So being a female CEO is, in itself, a kind of achievement. On the other hand, she recognized that she is a white woman who’s essentially the boss of a bunch of Latina/o workers who she doesn’t pay that much. She hoped to find a way to address this issue.

After the workshop, I asked her if she would consider sharing decision-making power with her workers so they could vote on things such as compensation. She said no because, “They’d definitely vote for me to get paid less, but I get paid what I’m worth.”

I don’t think her opinion is controversial or uncommon. But workplace democracy, in theory and practice, is both controversial and uncommon — even in a supposedly progressive community such as ours.

The phenomenon of worker-owned cooperatives is a simple concept. Workers weigh in on the conditions that affect them most: They vote to elect their board of directors and/or managers and/or to set wages and rules around profit redistribution. They can design the business so they have no managers or serve as the board themselves. Worker coops can use any number of decision-making processes ranging from simple majority to total consensus. The governance structure typically depends on the size of the business, but all of this is evidenced to be manageable and scalable.

The largest worker-owned coop in the United States is Community Home Care Associates, which employs over 2,200 worker-owners in the Bronx. The majority of workers are Latina or African American women, and the annual employee turnover rate is 15%, three or four times less when compared with the industry norm of 40 to 60%. Also based out of New York is a project called the Mirror Trans Beauty Co-op, a trans Latina-run cosmetology cooperatively-owned business now in its initial startup fundraising stages.

Other worker coops include Alvarado Street Bakery, which opened in 1981 and employs roughly 100 worker-owners in Sonoma County. Weaver Street Market is a multi-stakeholder grocery store coop with three locations in North Carolina and nearly 200 worker-owners. Austin, Texas, has a pub and brewery blending consumer and worker coop with roughly 3,000 consumer members and 30 worker-owners. In Isla Vista, we have a Food Cooperative, which is owned by its consumer-members, but this is different than a worker-owned cooperative.

In the US, we have very few worker coops, especially compared to other countries. We have just about 600. But travel to countries much smaller than ours, and you’ll find that, for example, Italy has roughly 25,000; there are 18,000 in Spain; 13,000 in Argentina; and 2,500 in France.

Skeptics assume that such business enterprises likely can’t survive in a traditional capitalist economy or cultivate a culture of workplace productivity. But the research suggests otherwise.

Economics professor Erik Olsen examined the survival of worker coops versus conventionally-owned businesses, relying on studies from the U.K., Canada, France, Uruguay, and Israel. He compared the rate of failure between the two types of businesses within their first five years of business and found that worker coops had equivalent or higher rates of survival.

Research by economist Virginie Pérotin and others from 30 to 40 years of study conclude that worker ownership also leads to higher worker productivity. Reasons for this appear to be a combination of monetary motivation (higher wages, end-of-fiscal-year redistribution of profit surplus); a greater sense of self-worthiness and empowerment, leading to increased intrinsic motivation (the “one worker, one vote” principle makes people want to work hard and honestly); and the application of group intelligence to solving problems (like crowdsourcing ideas on how to work efficiently and optimizing as you go).

There are examples of U.S. businesses that converted into worker-ownership structures, which include Namaste Solar in Colorado; Select Machine, Inc. in Ohio; and South Mountain Company in Massachusetts.

Santa Barbara businesses could be added to the list of worker-owned cooperative conversion. Our city council could develop municipal incentives to help local residents convert into or start worker cooperatives. The Berkeley City Council recently passed a Worker Cooperative Ordinance, with incentives including the waiving of application fees and first-year business taxes, expediting application requests, and offering technical assistance. A law in Italy incentivizes worker cooperative conversion for retiring business owners who sell the business to their workers instead of to an outsider.

Our large nonprofit community could also begin transitioning toward a culture of workplace democracy. Nonprofits are known for high burnout and turnover due to underpay and overwork, and so a more democratic governance structure could improve morale and even advance the work of the nonprofit mission.

A more equitable nonprofit model being practiced is called a “worker self-directed nonprofit.” Worker-directors from the nonprofit Sustainable Economies Law Center (SELC) share how to convert to this model on their website (theselc.org). SELC blends elements of the self-management system holacracy and dynamic governance system sociocracy, resulting in a highly engaged, empowered, and participatory workplace culture. Controversially, they have set a 1:1 pay ratio determined by the living wage calculator, and a 30-hour work week.

All of the above just scratches the surface of workplace democracy. If readers want to learn more, check out Democracy At Work Institute and the U.S. Federation of Worker Owned Cooperatives. Their websites have just about all the information I’ve provided here, as well as practical templates on how to convert into or start worker-owned enterprises.

Max Golding is another white dude with a beard and an opinion who works to pay for rent, bills, student loan payments, and embarrassingly frequent GrubHub delivery charges. He can be contacted at maxgolding1@gmail.com.