When Workers Become Owners: Taking Co-Op Movement To Next Level

Above Photo: New Era Windows Cooperative was formed in Chicago by workers after they twice had to occupy their factory to keep their jobs. (Photo: Peoplesworld)

There’s a revolution taking place in the US workforce – but you may not have heard about it.

Around the country, workers are starting businesses that they democratically control and that financially benefit them. These businesses, called worker cooperatives, are owned and governed by the employees. Every worker is a member of the co-op, which gives them one share and one vote in the company’s operations.

Worker cooperatives come in all shapes and sizes. Equal Exchange, a distributor of fair trade chocolate and coffee, has over 100 worker-owners, with a board of directors and co-executive directors, all ultimately accountable to the employees. My own worker cooperative, TESA (The Toolbox for Education and Social Action), has three members, and we operate with a more horizontal, collective governance structure. Cooperative Home Care Associates is a cooperative that has thousands of worker-owners and a traditional management hierarchy. Pedal People is a bicycle-powered trash, recycling and compost removal co-op with roughly 15 members; they all serve on the co-op’s steering committee and make decisions for the company using consensus.

TESA has been educating and organizing for worker cooperatives since 2010. We built and produced Co-opoly: The Game of Cooperatives, which has become the game of the movement, and has been played in thousands of homes and towns. We’ve also traveled across the country, giving trainings and helping to develop cooperative education programs. During the past five years, we’ve seen a surge of interest in cooperatives, and new ones springing up in different industries and communities every week.

However, even though the worker-cooperative movement is growing and employees are increasingly banding together to democratically own and run their workplaces, we still have a long way to go – proven by the fact that you may not have heard of us before. Right now, we’re only a small fraction of the workforce. We have a harder time getting access to capital from financial institutions that don’t understand our model. Plus, we’re constantly rediscovering that democracy can be a messy thing: Cooperatively making decisions for our businesses takes practice and time, especially when we’re so used to one or a few people having almost total control. Of course, many laws also need to be changed to make launching new co-ops more viable. And the list goes on.

So, I asked Esteban Kelly and Melissa Hoover, two prominent figures in the worker-cooperative movement, what they think needs to be done to bring our movement to the next level and really make large-scale change. Esteban Kelly is the co-executive director of the US Federation of Worker Cooperatives (USFWC) and a worker-owner with AORTA: Anti-Oppression Resource and Training Alliance (a worker-owned social and economic justice facilitation, design and consulting co-op). Kelly has also founded and served on the board of numerous other cooperative endeavors. Melissa Hoover is the founding executive director of the Democracy at Work Institute and the former executive director of the USFWC. She’s also previously been a worker-owner at a co-op, helped start other co-ops and serves on the board of multiple co-op movement organizations.

Brian Van Slyke: Let’s start with the successes of the worker co-op movement. What do you think are the main factors driving the current rise in attention given to worker co-ops? What needs to be done to build off these achievements?

Melissa Hoover: I think there are a couple of things at work with the success of the worker co-op movement. First, at an immediate and material level, people are more precarious in their jobs than ever before. The sort of contingency that used to be relegated to low-wage service sector work – part-time work, contract work, seasonal work, little to no control over your schedule, no benefits, few opportunities for advancement, very little investment in the workforce – is becoming more and more widespread. Low-wage workers in the service sector, as always, suffer the worst, but we see these trends now in health care, in education, in tech work, in professional class jobs. And I think this is directly related to people’s interest in worker cooperatives. When you own the business, you do have control over your schedule, you can learn new skills, you do have a say in how decisions are made.

There’s one other factor that I think is important to call out: From the 1970s to about the mid-1990s, the vast majority of worker cooperatives were formed by people seeking an alternative, wanting to build a different way and in some cases using the cooperative model to exit the mainstream economy. By and large these were people with options. What changed about 20 years ago was that we started seeing people using worker cooperatives not to exit, but to enter the economy, and to try to do it on their terms. By and large these are people with not many options. And I think that difference is critical – it shapes how we support the form, how we understand people’s needs, how we build a movement around it. I think it’s an incredibly exciting evolution, and one we can learn a lot from if we pay attention, because ultimately that distinction of exit/enter and options/no options is shrinking. Lots and lots more of us are going to have fewer and fewer options in the economy if we continue on this current trajectory, so let’s start figuring out now how to grow this strategy so that it can really meet people’s needs on a larger scale.

Right to left: Melissa Hoover of DAWI and Esteban Kelly of USFWC. (Right photo: Andria Lo Photography; left photo: Esteban Kelly)

Esteban Kelly: There is a lot that needs to happen to build off of this surge in interest, but most of what we are focused on in the US Federation of Worker Cooperatives (USFWC) is to help existing and start-up worker co-ops succeed. We are a young sector, and still in the early stages to build up the infrastructure for our model to thrive. Some of that is technical assistance; some is getting laws, lending policies and other codified systems to recognize that our ownership and management structure exists and so they don’t punish our model. Some of it is getting our own house in order as a representational body, so that people outside of our sector have an accessible face for who we are and what we stand for. Given our history, it would be too easy for those who stand to gain the most from worker-ownership to be alienated instead. So we need strong leadership from worker-owners of color and poor, undocumented and working-class co-op leaders. We need to maintain our diligent confrontation with patriarchy, ableism and other systems of oppression so that we have the capacity to absorb the interest that is coming our way – with or without our active cultivation.

On the flip side, what are some major factors standing in the way of people starting worker cooperatives? What do we need to do to address these hurdles?

Kelly: I only started to mention this earlier. We have a longstanding regime of economic and business policies that are catered to three models of doing business – none of which really consider cooperatives. So many policies, from getting a loan, to getting business planning support, to even navigating state and federal tax or inspections and certifications, are written and organized around just those three models, overlooking cooperatives in part or entirely. We need for worker co-ops to have access to small business loans, workforce development programs and the ability to get access to capital without having a single guarantor to open a new or expanded business.

Lenders (including banks and other community development financial institutions) often lack underwriting experience for cooperatives, and they de facto turn down co-op borrowers because of our “weird,” shared-ownership structure. On the contrary, cooperatives are a safer financial risk, because the debt is spread out among a group, rather than falling on one person or family who either have to pay up if a venture goes belly up, or claim bankruptcy or default. There are more examples than I could get into here, but our entire economy has all this inertia around businesses that are owned by random (wealthy) people, rather than the people who work at, manage or purchase from those businesses. There’s a lot that needs to be brought up to date for a modern economy.

How are worker co-ops being used within low-income communities and low-wage workforces? What can the movement as a whole do better to serve these communities?

Kelly: Worker co-ops are ending structural extraction of wealth by anchoring money and resources in low-income communities. Worker co-ops are a great strategy for low-income workers to plug into economic opportunities. Workers are gaining access to owning business, not just waiting for a paycheck from one. Those wages feed into community needs and resilience, from educational opportunities and child care for kids or elderly care for older people, to remittances abroad and financial literacy for people who might not have access to those skills. Worker co-ops are also a great option for undocumented workers to legally work in the US, which nationals of any country can do if you are a part or full owner in a business in the US (a loophole created for wealthy men from overseas to show up in the US and mettle in their American investments).

Hoover: I think within the worker cooperative world, the first thing we can do to better serve low-wage workforces is understand that quality jobs come from viable businesses. We have to be creating and helping people create viable businesses that operate in the market with a clear revenue model and enough margin for people to make a living wage. That is our primary obligation. We need to get our business hustle on; we need to understand marketing, finances, business strategy, management. This doesn’t mean we accept the logic of conventional business as right or just; it means we have to understand its logic so that it doesn’t destroy us. It doesn’t mean we don’t try to transform the relations of capital and people within our cooperatives – we are always trying to do that; it’s fundamental to the model – it just means that we understand that what most people need first is a better job and a big part of a better job is a job that supports you materially. Another part of a better job is one you control, where you have a say over how things happen, and where your dignity is upheld and your humanity is respected. These two things are absolutely inseparable, and yet, I think in the worker co-op world we actually de-prioritize the good job/viable business part in favor of talking about participation. You can’t have one without the other.

A graphic explaining the cooperative model at its core. (Photo: TESA Collective)

And to be clear – I don’t think it’s solely up to worker-owners or co-op developers to make viable businesses. We have to start with that commitment at the cooperative level, but let’s acknowledge that we are trying to do something very, very difficult – go against the grain of the dominant system while still within the dominant system – so we have to take a systemic approach.

I also think we need to ask the communities themselves what will support their cooperatives most effectively, and follow their suggestions.

Recently, there have been high-profile stories of cities beginning to support the worker co-op movement. Organizers in New York City convinced the municipality to agree to invest $1.2 million in worker co-op development. The next year, the city increased that support to $2.1 million. In Madison, Wisconsin, the co-op movement collaborated with the city on a $5 million budget (over five years) to establish new worker co-ops. Why did these two cities get on board with worker co-ops? How do we broaden this approach to more cities?

Hoover: In general, I think cities are where innovation in policy and economic development is going to happen, more and more. One, cities are desperate – they are dealing with the inevitable consequences of growing inequality. When poverty concentrates by race, when inequality deepens, it does it in a place. And that place is usually a city. And two, cities have the flexibility and the opportunity to do something different. Federal and even state governments are deadlocked and bought by big money. Federal housing, tax and workforce policies created the problems that cities have to deal with. And the problems are only going to be addressed creatively at the city level. There’s also a sort of peer pressure among cities, to innovate, to be the one first to the solution. And I think that can work in our favor as cities replicate – it’s well known that the mayor of Madison explicitly said he wasn’t going to be outdone by New York City when he decided to invest $5 million in worker co-op development over five years.

In New York City, it was a combination of three things: a powerful policy partner (the Federation of Protestant Welfare Agencies) taking up the banner for worker co-ops as a new economy strategy, the grassroots activism of cooperative developers and co-ops, and the existence of an infrastructure (the US Federation of Worker Cooperatives, the Democracy at Work Institute and the New York City Network of Worker Cooperatives) – even in its early stages – to legitimize and coordinate and catalyze the effort. And actually a fourth thing that might be the most important: a political moment of possibility when the de Blasio administration came in looking for new strategies.

We are right now trying to figure out how to replicate or broaden this approach. The Democracy at Work Institute has just started a Cooperative Ecosystems program area with the explicit goal of doing just that. One of the challenges is that even if we can discern some patterns or key ingredients, each city is different. We think it’s probably some combination of finding standard ingredients and then responding specifically to the needs and drivers in each city. Right now we are drawn to a collective impact approach that centers worker co-ops as part of a much broader approach to addressing inequality, quality jobs and business retention, so that we can build powerful partnerships and expand our reach.

There’s also been a string of transitions from traditional businesses to worker co-ops. What’s the benefit of employees taking over their companies? And how can we make this happen more often?

Hoover: In terms of benefits, there are many for the selling owners, like a chance to ensure their business keeps running rather than being closed or sold for parts, and a chance to ensure their values and legacy within the business while it’s in the process of transition. In terms of [benefits] for workers, there’s ownership and control, which is the same benefit as all worker cooperatives. For the community: a business stays open. Once you lose a small business – especially in a rural area – it’s not coming back. That’s a huge loss.

Another potential benefit we’re exploring that I’m super excited about is the role of conversions for people-of-color-owned businesses. We know that there’s a potential small business succession crisis, and this is especially acute among Black-owned businesses of a certain generation, and will likely be true for immigrant-owned businesses as well. And there’s a complex relationship between small business ownership and gentrification of neighborhoods where people of color live. We’ve been playing with the idea – with a couple national partner organizations – that you could use small business as a bulwark against gentrification. Specifically, that retiring retail business owners in gentrifying neighborhoods could sell their companies to their workers as a way to keep the business going, and in that way also help preserve the character of the neighborhood.

What roles are existing worker cooperatives playing in building their movement? What more could they be doing?

Kelly: The US Federation of Worker Cooperatives is fully a project of worker co-ops. We were started by worker co-ops. Our board is made up of worker-owners, and our strategic initiatives are driven by their perspective and leadership. Our sector is and must remain led by worker-owners. I myself am a worker-owner, working part-time for AORTA, my worker co-op that does social justice consulting and facilitation. That vantage point is invaluable because the situation of worker-owners is unique. Worker-owners are also our primary liaisons to federations in other countries and the international worker co-op federation itself.

I think there is a lot of room for cooperative developers (usually nonprofits) and allies in building out the sector, but we need to be aware of not running roughshod over the presence of co-opers themselves. As we grow the sector, worker-owners are being called upon to wear many hats … some as part-time peer technical assistance providers, some as community organizers, others as ambassadors to convince lenders that our businesses are legit, and others still for lobbying and advocacy – or even international solidarity. Being a worker-owner in the US in the 21st century is about the hybrid job of running your business while building out the field.

Is there anything else you’d like to add?

Kelly: Generally speaking, there is a growing sense among progressive efforts for community economic development that co-ops, and particularly worker co-ops, are among the best strategies for building community wealth, creating meaningful and sustainable work, as well as building resiliency at the neighborhood level. Beyond this, co-ops also build up a stronger civic community. When your workplace involves democracy in the day-to-day over resources and decisions that matter, you bring that with you into other aspects of your life. When we zoom out and envision a future with real democracy in communities and our society at large, we start to see how the practice we get from workplace democracy is crucial to a thriving democratic society.