Worker cooperative
A worker cooperative is a cooperative owned and self-managed by its workers. This control may mean a firm where every worker-owner participates in decision-making in a democratic fashion, or it may refer to one in which management is elected by every worker-owner who each have one vote. Worker cooperatives may also be referred to as labor-managed firms.
History
Worker cooperatives rose to prominence during the Industrial Revolution as part of the labour movement. As employment moved to industrial areas and job sectors declined, workers began organizing and controlling businesses for themselves. Worker cooperatives were originally sparked by "critical reaction to industrial capitalism and the excesses of the industrial revolution," with the first worker owned and managed firm first appearing in England in 1760. Some worker cooperatives were designed to "cope with the evils of unbridled capitalism and the insecurities of wage labor".The philosophy that underpinned the cooperative movement stemmed from the socialist writings of thinkers including Robert Owen and Charles Fourier. Robert Owen, considered by many as the father of the cooperative movement, made his fortune in the cotton trade but believed in putting his workers in a good environment with access to education for themselves and their children. These ideas were put into effect successfully in the cotton mills of New Lanark, Scotland. It was here that the first co-operative store was opened. Spurred on by the success of this, he had the idea of forming "villages of co-operation" where workers would drag themselves out of poverty by growing their own food, making their own clothes and ultimately becoming self-governing. He tried to form such communities in Orbiston in Scotland and in New Harmony, Indiana, in the United States, but both communities failed.
Similar early experiments were made in the early 19th century and by 1830 there were several hundred co-operatives. Dr William King made Owen's ideas more workable and practical. He believed in starting small and realized that the working classes would need to set up co-operatives for themselves, so he saw his role as one of instruction. He founded a monthly periodical called The Co-operator, the first edition of which appeared on 1 May 1828. This gave a mixture of co-operative philosophy and practical advice about running a shop using cooperative principles.
Modern movement
The first successful cooperative organization was the consumer-owned Rochdale Society of Equitable Pioneers, established in England in 1844. The Rochdale Pioneers established the 'Rochdale Principles' on which they ran their cooperative. This became the basis for the development and growth of the modern cooperative movement. As the mechanization of the Industrial Revolution was forcing more and more skilled workers into poverty, these tradesmen decided to band together to open their own store selling food items they could not otherwise afford.With lessons from prior failed attempts at co-operation in mind, they designed the now famous Rochdale Principles, and over a period of four months, they struggled to pool one pound sterling per person for a total of 28 pounds of capital. On 21 December 1844, they opened their store with a very meager selection of butter, sugar, flour, oatmeal, and a few candles. Within three months, they expanded their selection to include tea and tobacco, and they were soon known for providing high quality, unadulterated goods.
By 1880 some 200 cooperatives had been started in Britain, but they were generally short-lived and by 1975 there were only 19 remaining.
The International organization representing worker cooperatives is CICOPA. CICOPA has two regional organizations: CECOP: CICOPA Europe and CICOPA Americas.
Today
When the current cooperative movement resurfaced in the 1960s, it developed mostly on a new system of "collective ownership" where par value shares were issued as symbols of egalitarian voting rights. Typically, a member may only own one share to maintain the egalitarian ethos. Once brought in as a member and after a period of time on probation usually so the new candidate can be evaluated, they would be given the power to manage the coop without "ownership" in the traditional sense. In the UK, this system is known as common ownership.In Britain, this type of cooperative was traditionally known as a producer cooperative; and while it was overshadowed by the consumer and agricultural types, it also made up a small section of its own within the national apex body, the Cooperative Union. The 'new wave' of worker cooperatives that took off in Britain in the mid-1970s joined the Industrial Common Ownership Movement as a separate federation. Buoyed up by the alternative and ecological movements and by the political drive to create jobs, the sector peaked at around 2,000 enterprises. However, the growth rate slowed, the sector contracted, and in 2001 ICOM merged with the Co-operative Union to create Co-operatives UK, thus reunifying the cooperative sector.
Since 2006, Co-operatives UK's Worker Cooperative Council wrote and updated a worker co-operative code, the booklet that "sets out what anyone should expect and should work together to achieve, as a member of a worker co-operative".
In 2018, Google announced a $1 million grant to a platform cooperative development kit in collaboration with 5 pilot cooperatives, which are all worker-owned.
Cooperatives versus traditional firms
The evidence on the productivity between cooperatives and traditional firms are mixed, depending on location and sector. Worker cooperatives are generally less competitive and less profitable than investor-owned firms, leading to reduced growth rates compared to IOFs. In agriculture, coops tend to be more productive. In Portugal, they may be significantly less or as, but never more productive in any industry than IOFs. Coops tend to be risk averse, resulting in coops being more sustainable, and much more resilient against recessions but less profitable and less innovative. Generally speaking, coops are less flexible, preferring to adjust wages rather than change the number of workers they employ. This results in coops having 14% lower salaries than capitalist firms, more volatility in wages and less volatility in employment. Furthermore, the co-op wage system is more of an egalitarian one, where wages are sometimes, although not always, uniform. This system is less competitive, which can drive away talented workers who do not receive as much compensation as they otherwise could for their performance. A study by Faleye et al concluded that: " deviate more from value maximization, invest less in long-term assets, take fewer risks, grow more slowly, create fewer new jobs, and exhibit lower labor and total factor productivity." Evidence comparing co-op worker satisfaction to firm worker satisfaction is somewhat mixed, but tends to favor co-ops.Research
Longevity and resilience
According to an analysis of all businesses in Uruguay between 1997 and 2009, worker cooperatives have a 29% smaller chance of closure after controlling for variables such as industry. In Italy, worker owned cooperatives that have been created by workers buying a business when it is facing a closure or put up to sale have a 3-year survival rate of 87%, compared to 48% of all Italian businesses. A 2012 study of Spanish and French worker cooperatives found that they "have been more resilient than conventional enterprises during the economic crisis." In France, the three year survival rate of worker cooperatives is 80–90%, compared to the 66% overall survival rate for all businesses. During the 2008 economic crisis, the number of workers in worker owned cooperatives in France increased by 4.2%, while employment in other businesses decreased by 0.7%. More than three quarters of UK co-op start-ups are still flourishing after the difficult first five years, however, other business forms are far less likely to survive, with only 42% of all new UK companies making it through to the end of year five.Pay and employment stability
A 2006 study found that wages on co-ops pay in Italy were 15–16% lower than those that capitalist firms paid on average, and were more volatile, while employment was more stable. After controlling for variables, such as schooling, age, gender, occupation, industry, location, firm-size, user cost of capital, fixed costs, and deviations in its real sales, this changed to 14%. The authors suggest this might be due to worker cooperatives being more likely than capitalist firms to cut wages instead of laying off employees during periods of economic difficulty, or because co-op workers may be willing to accept lower wages than workers in capitalist firms. A study looking at all firms in Uruguay concluded that when controlling for variables such as industry, firm size, gender, age and tenure, workers employed in a worker-managed firm earn 3% higher wages compared with similar workers employed in the conventional firms. However, this wage premium declines significantly with increasing pay and becomes negative for top earners. According to research by Virginie Pérotin, which looked at two decades worth of international data, the tendency for greater wage flexibility and employment stability helps explain why some research observes higher and others lower pay in worker cooperatives relative to conventional businesses. A study by The Democracy Collaborative found that in the US, worker cooperatives can increase worker incomes by 70–80%.Pay inequality
In the Mondragon Corporation, the world's largest worker cooperative, the pay ratio between the lowest and the highest earner was 1:9 in 2018. The ratio is decided by a democratic vote by the worker-members.In France, the pay ratio between the highest and lowest paid 10% of the employees is 14% lower in worker cooperatives than in otherwise similar conventional firms.