Today’s post is going to digress from discussing the standard business model and introduce you to a different form of running a business: the worker cooperative. These organizations come in a variety of shapes and sizes. Below you’ll learn what a worker cooperative is, their existence in the US, how they are different than conventional businesses, and the benefits of this form of business.
What is a Worker Cooperative?
A worker cooperative is an organization that is owned and managed by its worker-owners. There are two important characteristics of worker cooperatives: the workers invest in and own the business, and the decision-making is democratic, generally adhering to the principle of “one worker-one vote” since all shares of the cooperative are held by the workers, each owning one voting share.
To become an owner, the workers usually invest with a buy-in amount of money when they begin working for the cooperative. At the end of each year, the worker-owners are paid their portion of money the business makes after expenses. In most businesses this is considered profit, in cooperatives it is called surplus. Generally the surplus is distributed according to hours worked, seniority, or other criteria.
Are There Worker Cooperatives in the US?
Historically, cooperatives have a stronger and, in many cases, more developed presence in foreign countries, specifically Italy and Spain. Researchers and practitioners at the United States Federation of Worker Cooperatives (USFWC) conservatively estimate that there are over 300 worker cooperatives (or democratic workplaces) in the US, employing over 3,500 workers and generating around $400 million in annual revenues.
The greatest concentration of worker-owned businesses is in the Northeast, the West Coast and the Upper Midwest. The vast majority of these worker cooperatives are small businesses, although there are some notable larger cooperatives. Cooperatives range across a variety of industries in the US, including retail and service sectors, and manufacturing and the skilled trades. Historically, there has been a strong existence of cooperatives in the natural foods industry. More recently, there has been an increase of worker cooperatives in the technology sector and home health care.
At this point, the USFWC is the only organization in the US that represents worker cooperatives on a national scale. In addition to the USFWC protecting cooperative interests nationally, there are also local networks and federations scattered throughout the San Francisco Bay area, Minnesota, Wisconsin, Oregon, the Boston area, and in western Massachusetts and southern Vermont. The University of Wisconsin released a study about the economic impact of the entire cooperative sector. You can access the study here.
Founded in 2004, the USFWC is a national grassroots organization of and for worker cooperatives, democratic workplaces, and organizations that support the growth and development of worker cooperatives in the US. Not only does the USFWC provide support to cooperatives, it also provides educational outreach to the public through conferences and events.
How are worker cooperatives different from other businesses?
For the most part, worker cooperatives operate just like most conventional businesses. Cooperatives develop a product or service and offer it for sale to the public. Cooperatives operate with the goal of making enough money to support the business and its owners. Just like conventional businesses, cooperatives incorporate with the state, obtain a business license, pay state and federal taxes, and manage payroll and benefits for their workers.
One difference is that worker cooperatives tend to be closely connected and are held accountable to their community. Unlike many conventional businesses (unfortunately), the workers-owners in a cooperative make the choice to do business in a way that creates a community benefit.
Some worker cooperatives evaluate their success by looking not only at the money they make, but also at things such as their sustainability as a business, their contribution to the community, and the happiness and longevity of their workers. Many US businesses are concerned only with the bottom line, not taking into account the greater social effect they have on communities.
In worker cooperatives, it’s common to see workers who are happy to be working where they are, and who are committed to the business as owners. Again, this isn’t present in many (perhaps most) businesses.
What are the benefits of a worker cooperative?
One of the major benefits of a worker cooperative is that the workers own their jobs. Thus, the workers have not only a direct stake in the environment of the cooperative, but they also possess the power to decide how to create a sustainable business. Worker cooperatives have been increasingly recognized as part of a larger movement for sustainability. A benefit of creating a sustainable business is creating long-term and stable jobs.
In addition to providing stable jobs, cooperatives offer asset-building opportunities for workers of all income levels. Through self-help and self-responsibility, cooperatives offer the ability to develop important business knowledge and experience to otherwise inexperienced individuals.
Cooperatives support their local communities and can play an important role in building movements for economic justice and social change across a variety of communities and industries.