How Worker Cooperatives Can Improve the Economy

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SEATTLE, Washington — Chances are that most people have heard of worker cooperatives or at least labor unions in the United States. While worker cooperatives draw on ideas from the works of Marx and from socialist theories, they do not have to be correlated. In fact, worker cooperatives are actually generally privately owned and exist in many capitalist societies. There are many examples in the United States; however, one of the most successful cooperatives exists in Spain, the Mondragon Cooperative. It is one of the most successful coops in the world, and one of the most successful businesses in Spain.

What Are Worker Cooperatives?

Democracy at Work Institute defines worker cooperatives as “a values-driven business that puts worker and community benefit at the core of its purpose.” This is very broad and does not specify how coops operate, but the institute further explains two essential aspects of a worker cooperative. First, while the business may be privately owned, it must be collectively owned by all the workers employed there. Since the workers contribute labor, they “participate in its financial successes.” Second, each worker has one vote to elect, for example, the board of directors. More broadly, there is some form of democratic decision-making by the business.

To further highlight the democratic trait of worker cooperatives, one can compare it to typical capitalist enterprises or business models. Usually, when workers accept a job offer, they enter a contract or agreement with the employer. This agreement would typically include details about wages, working hours, how many days a worker may have off during a year for holidays and much more. The difference between this and the way cooperatives operate is that workers of a coop have a role in how those terms are set.

This is possible to achieve in many ways. For example, workers can elect the board of directors who decide how to distribute the company’s surplus or profits. In other types of firms, a smaller group of shareholders or owners usually elect the board of directors even if they do not contribute labor. That is not to say that capitalist firms cannot satisfy the needs of their workers and achieve high standards in the workplace. Both structures have their ups and downs. However, research suggests that there are benefits in democratically run forms of business.

Saving Jobs and Boosting Pay

By 2014, Apple had roughly 98,000 employees and earned around $40 billion in revenue after taxes the previous year. One author argues that based on the company’s revenue and the number of employees, had Apple functioned as a worker cooperative, each worker would have received a minimum dividend of $403,000 in addition to their salaries. This is due to a few factors. First, worker cooperatives usually have a limit on the ratio of the gap between CEO and employee wages. For example, some cooperatives have rules limiting CEOs to earn less than or equal to nine times as much as their employees. The second reason is the democratic nature in which the workplace runs. This prompts the board of directors to emphasize worker satisfaction, which can be in the form of dividends and benefits.

There have been examples where worker cooperatives even contribute to a rapid economic recovery following an economic crisis. Argentina faced a severe economic crisis in the term 2002-2003. Unemployment rates reached 24% at the peak of the crisis with 54% of the population living in poverty. Afterward, the country was able to contribute to the creation of several worker cooperatives. In the long-run, these worker cooperatives provided services and goods to the public and helped the country recover. President Kirchner, between the years of 2003 and 2007, created 50 worker cooperatives under the pilot program. By 2010, Argentina’s unemployment rate reduced to less than 8%.

Helping the Current State of the U.S.

The United States’ population currently makes up about 5% of the world’s population; however, its deaths caused by COVID-19 represent about 20% of the world’s deaths. Plus, it is likely the country will continue to face economic difficulties; the unemployment rate has already been increasing and a large portion of people have lost housing. The creation of a large number of worker cooperatives could improve the economy. They can provide employment opportunities not only for those unemployed for a long time but also for those who were recently unemployed due to an economic downturn.

In conclusion, worker cooperatives can be a potential solution to combating unemployment and fostering working environments that emphasize worker satisfaction. They do this by implementing democratic means of decision-making. Worker cooperatives exist in many societies all around the world and the United States. The example from Argentina proves that government can play a role in promoting or enforcing the creation of worker cooperatives. Perhaps federal funding can be allocated to entrepreneurs interested in starting worker coops as a means to incentivize their creation.

– Fahad Saad
Photo: Wikimedia

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