Pandemic Crash Shows Worker Co-ops More Resilient Than Traditional Business

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Above: A person walks past a closed business in Brooklyn on April 23, 2020, in New York City. By Spencer Platt from Getty Images.

While we have no way to know yet the full extent of the economic fallout from the COVID-19 pandemic, by all accounts it could be as bad — if not far worse — than the 2008 crash. In fact, in terms of unemployment alone, the numbers are already staggering: more than 33 million jobs have been lost so far in the U.S. during the coronavirus shutdowns, compared to the roughly 8.6 million lost in the Great Recession.

Following that crisis, many working people turned to the worker cooperative model as a way to build economic resiliency and stability for themselves. In the decade after 2008, the number of worker-owned cooperatives in the United States nearly doubled, increasing from 350 to 600. I know, because I am a member of one of those cooperatives that formed: The TESA Collective, which creates tools and games for social change.

A worker cooperative like ours is a business that is democratically owned and governed by the employees themselves, called worker-owners. Each worker owns one equal share in the business and has one vote in its governance structure. Essentially, it is democracy at work.

“It does the opposite of what a traditional firm does,” says Esteban Kelly, executive director of the U.S. Federation of Worker Cooperatives, an organization supporting the worker cooperative movement, and of which the TESA Collective is a member. “Traditional firms, when times are good, they take that surplus, they distribute it to the investors or maybe pay off debt, but they don’t necessarily do a lot of bonus pay for rank-and-file or increase wages,” Kelly told Truthout. “When times are bad, they panic. And then maybe they get bailed out, maybe they declare bankruptcy … but it’s basically a model of austerity. They’re slashing jobs and benefits.”

Kelly explains that on the other hand, when worker-owned businesses are doing well, they share the benefits among worker-owners. This is most commonly achieved by increasing wages, expanding benefits, distributing dividends to the employees (instead of absentee stock owners), and reinvesting in their communities. But when business is tough, a worker cooperative equitably shares the burden. Instead of mass layoffs, the workers, who are the equal owners, strive to find collective solutions. Worker-owners might vote to take voluntary pay cuts so no one person loses their job, and worker committees might try to find new markets the cooperative can expand into.

Kelly says that because worker co-ops share the benefits in the good times and the burdens in the hard times, they are a more sustainable form of business. And the data agrees with him:

One 2019 study found that worker cooperatives in the United States survive through their first six to 10 years at a rate 7 percent higher than traditional small businesses. And in 2012, research revealed that in France and Spain, worker cooperatives “have been more resilient than conventional enterprises during the economic crisis” that followed the 2008 crash. Another study of businesses in Uruguay from 1997 – 2009 demonstrated that “the hazard of dissolution is 29% lower” for worker-managed firms. In fact, as documented by the Sustainable Economies Law Center, there is a growing body of evidence that shows across the world, cooperatives in general are a more resilient business model.

Cooperating Their Way Through Crisis

Resiliency does not equal immunity to a global pandemic and economic crisis, however, and worker co-ops have certainly felt the impact from the coronavirus outbreak.

“Whole segments of work have disappeared overnight,” says Ross Newport, a longtime worker-owner at Community Printers. Community Printers, a cooperative with 33 members, is an industrial-scale print and packaging shop, having been in business since 1977.

Still, how a worker co-op business responds to and absorbs its losses is decided through cooperative decision making, not passed down from owners and managers.

“We have not laid anyone off,” Newport reports. Community Printers, which has been deemed an essential business in California and remains open, has had to significantly restructure the shop to maintain social distancing. Half of the workers are voluntarily furloughed and receiving unemployment, all while the co-op continues to pay for their benefits.

Yet, in a worker cooperative, protecting the voices of members and their democratic structure is also key. Here too, cooperatives have found creative solutions during this unprecedented crisis.

“It is very difficult to make group decisions with everyone physically separated,” says Newport. So the decision-making processes of the co-op have evolved to match the needs of the current emergency, with members forming small groups that are entrusted to make decisions that the whole cooperative would normally make together.

“We have made it clear that as we come back together all the decisions that have been made by smaller groups can be reviewed. So far, it seems that people appreciate that the crisis requires new solutions.”

Allie Wilson Plasek, a worker-owner at the Mariposa Gardening and Design Cooperative, also said that their business quickly dried up when the pandemic came into full swing. But she believes the cooperative’s democratic ownership structure has been critical for its survival.

“Co-ownership has made this pandemic much easier to swallow as a small business,” Wilson Plasek says. “Based on skill-set, interest, and experience, we have all sort of divided up what we can and should be working on. It makes it so employees have a stronger sense of well-being. If we were a sole proprietorship, I think someone would have burned out already with all the expectations of keeping the business afloat.”

This crisis has made clear that one of the strengths of a worker cooperative is not just the democratic ownership structure, but also the ability for workers to pool their collective knowledge and passion.

“Because there are so many of us, and we all deeply care about our studio’s mission and survival, we were all willing to make certain concessions,” says Catherine Murcek of Samamkāya, a yoga studio cooperative with 19 worker-owners. “We adjusted our pay scale so that it is similar but allows the studio to make a little bit more money…. Furthermore, many of us volunteered a lot of time to researching different options for moving forward through the crisis.”

Samamkāya had to quickly adapt to the new social distancing reality: the co-op moved its yoga sessions to online classes only and began working together to access emergency funds through cooperative support organizations, such as the $5,000 they received via the Disaster Recovery Fund grant offered by the Cooperative Development Foundation.

“I just have to say I am so appreciative of the fact that I have a vote in how the business is run,” Murcek says. “We were all able together to come up with a solution that was the best possible for both the worker-owners and the survival of the business.”

Transforming Cooperatives to Meet New, Urgent Needs

The democratic ownership structure of cooperatives also allows them to collectively adapt to a changing world.

The worker-owners of Mariposa Gardening and Design Cooperative realized that while they couldn’t offer their normal landscaping services, several of their members were already skilled in growing food gardens. So they launched a new service to build and maintain food beds throughout the Bay Area, in anticipation of growing food uncertainty due to the stress COVID-19 has put on the food system. The purpose of these food gardens is to allow community members to have direct access to food. The co-op will offer to build food beds for customers outside of their homes or apartments, which Mariposa can maintain and harvest — or community members can do themselves.

Meanwhile, the workers at Community Printers have chosen to shift to a model where they are prioritizing work for essential services, manufacturing products that aid in the struggle against the pandemic. They have begun designing and printing large health education posters for freeway overpasses and the sides of busses. And they have also started to expand the type of materials they are producing, manufacturing hospital gowns as well as building partition walls for emergency facilities and homeless shelters.

Some cooperatives have even teamed up to shift their production models to meet aid and relief needs of other cooperatives. Cooperative Home Care Associates (CHCA), the largest worker cooperative in the United States with over 1,000 members, offers home care visits throughout New York City. But shortly after the pandemic struck, CHCA began running out of masks for its staff. Meanwhile, there was a national shortage of surgical masks, and price gouging was making purchasing them in bulk almost impossible.

That’s when CHCA came up with a creative solution: members reached out to another worker-owned cooperative they knew that was skilled in the textile industry. Opportunity Threads, which employs over 50 people and primarily immigrants, typically makes products like special order t-shirts. But by working with CHCA to refine their production line, the worker-owners of Opportunity Threads were able to begin manufacturing the surgical masks for CHCA’s home care workers — offering a desperately needed resource to protect the co-op’s staff and their clients.

Worker Cooperatives as a Path Forward

During a recent online teach-in, author and activist Naomi Klein brought attention to the potential of worker cooperatives as a pathway out of the looming economic crisis.

“As small businesses go into crisis, we need to be pushing for worker ownership. Rather than being shut down, every workplace should have the option for workers to turn it into a cooperative before it goes into bankruptcy,” Klein said.

Many in the worker cooperative movement are already moving quickly to lay the groundwork for such transitions. Matt Cropp, co-executive director of the Vermont Employee Ownership Center, says that many small business owners will likely just decide to close down rather than struggle to become a “re-start-up.”

“Staring down the prospect of 70+ hour weeks and going into debt to recapitalize, many will be giving serious consideration to simply liquidating and walking away,” Cropp told Truthout. “Worker co-op developers are working on how we might reach business owners with the worker co-op conversion idea.”

Converting traditional businesses to worker-ownership has been growing trend for the worker co-op movement over the past few years, and it appears the coronavirus crisis will speed up the necessity of these efforts. Typically, this transition is achieved when owners sell their business to the employees, which gives owners a safe way to exit the company while allowing workers to keep (and democratize) their jobs.

On the national scale, the worker co-op federation is mobilizing and advocating for existing worker co-ops. Together with a coalition of other cooperative organizations, they successfully lobbied to have cooperatives included in the stimulus funding for small businesses. As a result, Samamkāya was able to be included in the first round of stimulus relief offered by the Small Business Administration, while Community Printers and Mariposa were approved in the second round of funding.

Perhaps most impressive, however, is how the worker co-op federation has been helping to repurpose cooperatives that are temporarily closed to aid in relief efforts.

“We’re trying to organize our members into rapid response co-ops,” says Kelly of the federation. “So taking workforces that are not viable during social distancing and repurposing them into some of the value chains that are needed, like more meal delivery co-ops.”

One of the best examples of the formation of rapid response cooperatives is the above story of CHCA and Opportunity Threads. But beyond that, others have emerged as well, such as Sustainergy, a green home improvement cooperative based in Cincinnati, which has pivoted some of their operations to grocery delivery services for the time being. This is in response to the fact that many people will not be looking to do home improvements while belts tighten, but an increasing number of community members need food brought to their doorsteps.

Worker cooperatives, business models based on mutual aid and solidarity, will likely once again see an explosion of interest and energy as this crisis wears on, just like they did after the 2008 crash. We are heading toward a period of great economic upheaval, and worker-ownership may be one of our most powerful tools in the immediate and long-term aftermath to build economic resiliency for everyday people.