Prior to the pandemic, Opportunity Threads produced soft goods like blankets and pillows. During the pandemic, in collaboration with CHCA, they pivoted and retooled to help produce masks, gowns, shields, and other PPE for CHCA and other care providers. To meet safety standards, the Carolina Textile District network brought in a team of medical doctors and performed rigorous testing to ensure products met all health and safety requirements. By August 2020, Opportunity Threads and their partners at Carolina Textile District had already produced over 400,000 units of PPE. Despite the massive changes underway, Opportunity Threads made sure to keep themselves safe in the factory, taking extra precautions with sanitation, staggering lunch shifts, working six to eight feet apart, and taking temperatures before entering the workplace. They were also the first plant in their county to test all workers for COVID, and, when testing positive, workers were sent home (with pay) to quarantine. The creative thinking and collaboration between CHCA and Opportunity Threads allowed both organizations to quickly adjust early in the pandemic and keep themselves, each other, and their clients safe.
As the above stories begin to highlight, worker cooperatives are organized very differently from traditional businesses and, as a result, are better suited to meet their workers’ needs in moments of crisis, like the COVID-19 pandemic. Traditional business structures incentivize worker exploitation, as workers are seen primarily as a cost to be minimized in pursuit of profit maximization. The worker cooperative structure is based on shared ownership that places worker benefit at the forefront and allows workers to receive the full value they create and to control their workplaces democratically.
Workers in worker cooperatives may enjoy higher pay, increased health and safety, enhanced well-being, higher satisfaction, increased autonomy and control, and better training and dispute resolution. The cooperative itself may benefit from increased resilience and productivity. The overall structure, combined with these benefits, positions worker cooperatives as the ideal response to the ongoing crisis of COVID-19 and the resulting labor retention crisis known as the “Great Resignation.”
Due to these compounding crises, the world is more in need of worker cooperatives than ever and more primed for their success. Worker cooperatives have already proven more resilient during these crises and have created a path forward for future businesses; they allow workers themselves to adapt and respond. Individual cooperatives’ stories highlight the successful worker-driven approaches that have allowed worker cooperatives to succeed during this difficult economic time. Furthermore, worker cooperative formations are increasing and so are popular support and resources available to support their formation, increasing the likelihood of their success. However, forming worker cooperatives can be difficult, and significant barriers must be addressed.
In this Note, Part I compares the structure of traditional businesses to worker cooperatives and provides general background. Part II reviews studies and academic literature and discusses the relevant benefits of worker cooperatives. Part III introduces two of the crises facing workplaces today (COVID-19 and the Great Resignation) and the issues that the two events have highlighted and exacerbated. Part IV discusses how worker cooperatives have responded to these challenges and why they are best suited to continue to respond to challenges. Part V provides a brief look into some of the difficulties facing worker cooperatives as they continue to develop and respond to crisis. Overall, this Note concludes that worker cooperatives have shown they are best suited to respond to these two crises and that workers are in dire need of this unique business structure.
I. Business Structure and Background
To understand what makes worker cooperatives like CHCA and Opportunity Threads different, it is important to first understand the organization of the traditional corporate business structure. Traditional corporate business structures are often organized under the “standard shareholder-oriented model,” a model that guides the business under the principle of maximizing the wealth of the shareholders. These structures share the principles of our capitalist economic system, where profit accumulation for private owners is the focus. Workers’ wages, as well as added costs for things such as benefits and safety precautions, act as a cost which directly interferes with profits. Under the logic of profit maximization, businesses are incentivized to extract as much value from workers as possible, while paying the workers as little of that value as possible. Workers could never be paid the full value which they produce under a traditional business structure, because not only would this not maximize profits and wealth for the shareholders or owners, it would leave shareholders and owners with nothing at all. A job that pays a worker the full value that they produce cannot exist in these traditional structures.
Additionally, traditional business structures provide a hierarchical authoritarian workplace model where workers are expected to obey their bosses and do not have much input or control. Boards, executives, managers, and supervisors dominate and dictate how things are done, and attempting to assert control over your work can result in the loss of your job. This is likely in part because workplace democracy can be financially costly. Workers with control over their workplaces may be more likely to increase pay, safety, health, and flexibility, or to add benefits like paid family and medical leave.
In this way, these traditional business structures exploit their workers by not providing them the full value of their labor and limiting their control of the workplace; they use them unfairly for their own advantage. These two core issues (minimization of wages and worker-related costs with surplus going to shareholders/owners, and a lack of worker control) are intimately connected with (and perhaps even the primary causes of) many issues facing workers today such as horrific working conditions and a lack of sufficient wages. The law and our overarching economic system are central to creating the underlying conditions that create these structures and incentives and shape workplace dynamics. They define who counts as an owner and what rights flow from that status.
Worker-owned cooperatives are designed to bypass these legal limitations and misaligned incentives to create a structure in which workers have control and receive the value that they create by making them owners. In a worker cooperative, workers are the owners, and they receive the full value that they create. The workers receive this value through a mixture of wages and dividends. They receive wages (that are typically higher than traditional businesses), and then receive money from the surplus that they produce in the form of dividends in proportion to their labor, or decide how that money is allocated or reinvested democratically (for their own future benefit). To highlight the difference, in around six years John Deere earned more than $16 billion in profits, and nearly $10 billion was given to shareholders. With that money, John Deere could have paid each of its 69,600 employees an additional $142,000.
Furthermore, in a worker cooperative, each worker has an equal vote, and the majority makes decisions on behalf of themselves and the business. This does not necessarily mean all workers vote on every decision; in many cases, certain decisions are delegated to elected managers, and worker cooperatives are organized in a number of different ways. Organization and governance often depend on the size of the worker cooperative and its needs. Worker-owners may all vote on all issues, may elect a Board of Directors and management structure, may organize into “circles” and “sub-circles” that have responsibilities and authority over different areas, or may organize in other ways. Decisions may be made by single person with delegated authority, a majority vote, a super-majority vote, consensus, consent, or a mixture depending on the structure or even the type of decision. Additionally, workers may elect to change the structure or decision-making technique to fit the needs of the business as it evolves. Despite these differences in implementation, the bottom line is that, in worker cooperatives, the workers are in control.
Worker cooperatives have existed in the United States since the 1800s and have often been formed as a direct response to exploitation or hard times. During the Great Depression, thousands of new cooperatives emerged to create jobs. America’s early unions founded hundreds of industrial cooperatives to protect workers’ rights and share industry gains.
African Americans have a rich history of worker cooperative practice, particularly as a reaction to market failures and economic racial discrimination. This history includes many well-known figures like W.E.B. Du Bois, A. Phillip Randolph, Fannie Lou Hamer, and Ella Baker. Worker cooperatives expanded in the 1880s after the Civil War in response to African Americans receiving the worst jobs and the worst pay. Cooperatives (and related mutual aid) were a way to get around racist exclusion from traditional businesses and banks.
Worker cooperatives continue to form more often among exploited populations today. People who identify as women, Hispanic, and immigrants are highly represented in worker cooperatives compared to the overall U.S. workforce, and worker cooperatives tend to be formed in industries with highly exploited workers. In the United States, thirty-eight percent of people employed in cooperatives are Hispanic, and sixty-two percent are women, compared to seventeen percent and forty-five percent respectively in the U.S. workforce as a whole. As an example, CHCA is in the home-care aid industry and employs over 2000 workers, most of whom are immigrant women of color. The biggest worker cooperative in the country, the Drivers Cooperative, which is a rideshare alternative to Uber and Lyft in New York City, was formed during the pandemic in an industry highly reliant on immigrant workers.
Although there are not comprehensive data on the current number of worker cooperatives in the United States, Democracy at Work Institute (DAWI) has verified 612 worker cooperatives in the United States, and estimates around 900–1000 worker cooperatives and roughly 10,000 workers. This number has grown steadily in the past twenty years and is made up of well-established businesses, new and growing businesses, and, increasingly, businesses that have been sold to their employees by their owners. This growth seems to be accelerating, as worker cooperatives have grown in number by more than thirty percent since 2019.
II. The Benefits of Worker Cooperatives
A. Financial Benefits to the Worker
One significant benefit for workers in worker cooperatives is increased pay. Worker-owned cooperatives tend to pay higher wages than other companies in the same industry. Employee-owned companies pay five to fifteen percent more in wages than traditional companies. Employee-owners typically have more than double the retirement savings of employees who are not owners, especially during economic downturns. Some of this difference in wages and wealth can likely be attributed to the fact that the pay gap in worker cooperatives between the highest and lowest paid employees is drastically reduced. The vast majority of worker cooperatives maintain a pay ratio of 2-to-1 between the highest and lowest paid employee. For comparison, the ratio of CEO-to-typical-worker compensation is 351-to-1. These sorts of financial benefits are in fact an explicit goal of many worker cooperatives and are a result of workers receiving the full value of their labor, rather than their wages being minimized and the profit/surplus being taken by owners and shareholders.
These financial benefits are particularly impactful considering that many worker cooperatives are formed in low-wage industries among the most exploited workers. Thus, worker cooperatives are a particularly effective poverty reduction program. For example, low-wage cleaning workers in New York City saw their hourly wages more than double within a few years of forming their worker cooperative, “Si Se Puede!” Members of WAGES (Women’s Action to Gain Economic Security) worker cooperatives reported a seventy to eighty percent increase in family income after joining.
B. Non-financial Benefits to the Worker
Worker cooperatives also provide significant benefits to workers in terms of health, safety, well-being, satisfaction, training, autonomy, and dispute resolution. First and foremost, when workers control their workplaces, they can choose to make changes to increase their health, safety, and well-being—whatever that may mean for their individual workplace. Overall, worker cooperatives do seem to foster better health. In one analysis, cardiovascular mortality was lower in a town with high cooperative employment than in comparable towns with much lower cooperative employment. Other studies have demonstrated that control in the workplace significantly affects health and life expectancy by decreasing the risk of coronary heart disease and mental health issues.
Autonomy and control in the workplace, which worker cooperatives provide, are associated with higher engagement, increased job satisfaction, and decreased burnout. Worker cooperative workers have increased job satisfaction, autonomy, and voice, as well as greater job security. Additionally, flexibility and control can manifest in specific ways beyond just statistics, such as the ability to spend more time with one’s children and be more present in their lives.
There are numerous less obvious benefits as well. Worker cooperatives frequently provide increased job training. CHCA is an excellent example of how training can be used to benefit the business, as well as the local community. CHCA provides free training and certification for home health care workers. Graduates of the training are then guaranteed employment through CHCA. This process provides an employment pipeline for the local community and ensures well-trained high-quality home aids for their cooperative. Cooperatives may also provide continuing education opportunities. For example, the Island Employee Cooperative in Maine partnered with a local community college to provide free management training to worker-owners.
Research also shows that workers in worker cooperatives are more likely to use grievance procedures to resolve issues, rather than resorting to their right to exit. When compared to a traditionally organized cab company, worker-owners at a cab cooperative were much more likely to bring formal grievances or speak informally with a manager or co-worker. The cab cooperative actively taught its members about and encouraged the use of the formal grievance process. Despite similar workplace problems, worker cooperative cab workers rarely mentioned the possibilities of exiting because of the issues that they were experiencing.
C. A Holistic Worker Benefit Approach
Importantly, worker cooperatives deal holistically with worker issues. To highlight the importance of this approach, Professor Priya Baskaran contrasted existing efforts to ameliorate the dangerous working conditions and the mistreatment of workers in California nail salons. Nail salon workers face unhealthy levels of exposure to chemicals, as well as discrimination, abuse, wage theft, and more. She argued that, although the health advocacy group California Healthy Nail Salon Collaborative (CHNSC) has been successful in increasing worker protections by creating a “healthy nail salon” certification, these types of approaches can be limited when compared to the potential benefit of worker cooperatives. Baskaran identified two primary limitations with the certification program: the limited focus and its voluntary nature. First, the campaign fighting for workplace health protections generally ignored compensation and other employment issues. Second, the campaign was dependent on the continued interest and commitment of salon owners to maintain compliance with an optional certification. Alternatively, a worker cooperative would have a vested interest in continually providing high standards in wages and wealth retention in addition to those in health and safety. And while the limits on voluntary compliance could also be solved through a legislative mandate (such as one banning a specific dangerous chemical), those mandates can also be limited in that they can be reversed, only solve limited issues, and often do not address the full range of worker concerns.
D. Increased Resilience and Productivity
Studies show that cooperatives have a lower failure rate than traditional business structures, even after controlling for factors such as size, age, and industry. This is likely because cooperatives have higher measures of productivity in a diverse set of industries while controlling for the same factors. Furthermore, worker cooperatives are able to adjust labor costs in response to economic changes in ways that traditionally organized companies cannot. Studies also point to a cooperative member’s enthusiasm and commitment as a contributor to cooperatives’ resilience. Additionally, ownership tends to create an interest in a company’s performance, and workers tend to be more willing to work hard when they have a stake in a company, which leads to reduced employee turnover, improved productivity, better pay, and increased job security.
As discussed later, early research suggests that worker cooperatives were more resilient during the (ongoing) COVID-19 pandemic, which is not surprising since employee-owned companies historically are more durable and resilient during economic downturns.
III. COVID-19 and the Great Resignation—A World in Crisis
A. COVID-19
COVID-19 emerged in December 2019 and continues to cause illness and death in large numbers. The virus has caused millions of deaths around the world and can cause lasting health problems, such as lung and heart damage, in those who survive. Prevention involves physical distancing, mask-wearing, hand hygiene, increasing building ventilation, and quarantining from others.
Throughout the ongoing pandemic, and particularly early in the pandemic, employers and the public verbally praised the retail, grocery, health care, delivery, factory, and other workers deemed “essential workers.” Millions of these essential workers have risked (and continue to risk) their health and lives to provide essential services. To take one extreme example, in multiple meatpacking plants, half of workers became infected with COVID. In the first year of the pandemic, at least 59,000 meatpackers caught COVID, and 269 meatpackers died. Essential workers comprise approximately half (forty-seven percent) of all workers in occupations with a median wage of less than $15 an hour. In the grocery sector, where cashiers fell ill and died in high numbers, a typical cashier makes $10 to $11 an hour, a wage that would put a family of four below the poverty line. Many of these workers are forced to rely on food stamps for their own groceries. These essential workers are also disproportionately nonwhite.
At the very beginning of the pandemic, some essential workers received hazard pay, which was typically a $2 per-hour increase or a one-off bonus. However, three months into the pandemic, most retail companies quietly ended these limited hazard pay hourly increases, in some cases shifting to a one-time “thank you” bonus. This lack of hazard pay continued even as the pandemic worsened, and business boomed, earning many large companies record profits.
Additionally, essential workers often lacked the forms of protections that they needed, such as the ability to socially distance, and access to masks, hand sanitizer, training, and hand-washing opportunities. In one survey, sixty-seven percent of essential workers reported they felt unsafe at work, and workers also reported that work became more intense and stressful during the pandemic.
To make matters worse, many of these workers face substantial medical expenses if they get sick and require COVID-19-related medical services. In fact, twelve percent of workers in these industries do not have any medical insurance, public or private. To give an idea of how expensive this could be: nationally, the average billed charge for a complex inpatient COVID-19 case is $317,810. Additionally, forty percent of these workers do not have any life insurance, which would leave their families in an impossible position if they died of COVID-19.
Workers’ financial precarity also puts them in a tight spot when considering how they might react to an infection. Many workers are essentially forced to go into work sick or after being exposed to COVID, with insufficient testing or after insufficient quarantine periods. One factor is that workers who think they might have COVID cannot immediately find tests. Additionally, millions of American workers have no paid sick leave, so any time off work can be financially ruinous. In fact, studies have shown that a lack of paid sick leave results in a 1.5 times increase in the likelihood a worker will go to work while contagious. Some workers, such as nurses, were directly pressured and forced to go back into work while still sick with COVID.
COVID has caused workplace frustrations for all kinds of workers. Especially early in the pandemic, layoffs were widespread, pay cuts were common, and thousands of businesses slashed 401(k) contributions. Workers who were lucky enough to work from home (in September 2021, twenty-five percent of full-time workers worked totally from home, and twenty-percent worked partially from home) are increasingly being asked to return to the office, even though ninety-one percent of workers working remotely would like their ability to work at home to continue. In December 2021, the CDC shortened its recommended isolation time in large part to “get people back to jobs.” This change came in the wake of companies themselves requesting this change to deal with some of the staffing shortages discussed below.
B. The Great Resignation
While there has not been much official extensive research yet, COVID-19 is likely one of the primary causes of the so-called “Great Resignation.” Beyond the issues raised above creating extreme difficulties at work, the COVID-19 pandemic may have also allowed an opportunity for workers to reflect and rethink their careers, work’s role in their life, and their long-term goals.
The Great Resignation refers to workers quitting their jobs at historic rates, picking up steam at the end of 2021. According to the Bureau of Labor Statistics, at the end of November 2021 over 4.5 million people had left their jobs, resulting in 10.6 million job openings and 6.9 million unemployed people. While economists generally view quitting as an expression of optimism, these “quits” happened in the midst of an economic crisis. As a result, some businesses’ revenues are dropping as they fail to retain and recruit workers, often as a result of having to turn down business because of limited staff.
Other signs of worker frustration include “Striketober,” recent unionization efforts, and increased work-related outrage online such as on the “antiwork” Internet forum. During October 2021, over 100,000 workers in the private sector were on strike or preparing to go on strike, including workers at John Deere and Kellogg’s, and workers in coal mines, telecommunications, hospitals, cement factories, and theatrical jobs. In December 2021, the first ever Starbucks location unionized, and in the first year more than 260 other Starbucks locations voted to unionize. This transition has inspired workers at many other popular retail stores to follow suit with petitions for union elections. The antiwork subreddit, an internet forum about abolishing work that is filled with frustrations about specific workplaces, work culture, and the employment situation in the United States, exploded from 100,000 members at the beginning of the pandemic to 1.8 million members in March 2022.
Researchers are beginning to explore why workers are so frustrated and why they are resigning in such historic numbers. A McKinsey study points to a lack of sense of belonging. Other studies point to burnout and a lack of flexibility. Existing pre-pandemic research shows that one of the primary causes of burnout is a lack of control, and a lack of flexibility is likely in large part due to lack of control over where and when one can work. As discussed previously, employers are increasingly forcing employees back into the office, and those employees are not able to choose to continue their flexible work arrangements. Similarly, many articles about the Great Resignation point to lack of control as a primary reason for the increase in resignations. Perhaps a more obvious reason that appears in pre-pandemic studies is compensation issues. Other reasons include organizational fit and relationship problems with direct supervisors and managers. Some people are simply unable to return to work because of health and safety concerns or child-care responsibilities. All these issues—mostly present to some degree before COVID but in many cases exacerbated during the pandemic—have added to a growing frustration with mistreatment and a lack of control at work. The antiwork forum’s most popular posts often show workers attempting to re-exert control by quitting after being mistreated by bosses at work.
To make matters worse, companies and governments seem to be willing to pursue any number of “solutions” to avoid increasing pay and improving work conditions. A hospital tried to file an injunction to keep workers from leaving for better pay. A railroad sued to keep workers from striking. Congress lowered the age for long-haul truckers to eighteen. Businesses have advertised hiring kids as young as fourteen, and representatives have introduced legislation to limit child labor laws. Schools have asked parents to volunteer as teachers, and police officers have acted as substitute teachers.
IV. Worker Cooperatives in Response to Crisis
These crises, issues, and benefits are all interconnected. The reason worker cooperatives are an ideal response is because the structure of the workplace is fundamentally different in that it puts control in the hands of the workers. Consequently, the workers are able to respond to crises and issues as they occur and create the workplace that they desire (and do so with the goal/incentive of their own benefit and well-being rather than maximizing shareholder/owner profit at worker expense). This collective, comprehensive, and adaptive design is preferable to an approach that tries to make incremental changes to respond to individualized issues without ever addressing root causes or core design and incentive issues.
A. Worker Cooperatives as a Beneficial and Resilient Alternative
Historically, worker-cooperative formations have often increased during difficult times, and we are in difficult times. Worker cooperatives are needed to respond to our current crises and have already shown themselves to be more resilient and responsive to these crises. They represent an opportunity to boldly respond to workers’ growing frustrations and address worker concerns.
When considering the crises specifically raised by this Note, worker cooperatives offer a strong alternative to the current insufficient solutions being offered by both traditional business structures and the government. As discussed earlier, the COVID-19 pandemic has highlighted issues such as insufficient wages and benefits. Additionally, during the pandemic, workers have been laid off, have had insufficient safety protections, have been forced to go to work sick, have had wages and retirement benefits cut, and have been forced to come back into the office contrary to their wishes. As discussed in Part II, worker cooperatives tend to have better wages and offer increased health, safety, and well-being. Furthermore, workers in worker cooperatives can directly control their workplaces and address the safety issues, increase flexibility, increase wages, and more. Additionally, if wages or benefits do need to be cut to avoid business failure, this can be done temporarily as workers’ own choice, knowing it is for their own long-term benefit rather than to preserve shareholder and owner profits at their expense.
Worker cooperatives have shown themselves to be significantly more resilient during the COVID-19 pandemic. Worker cooperatives were more likely to redistribute business funds to pay workers and more likely to reduce wages, or temporarily furlough wages, rather than lay off workers. The member-centrality present in worker cooperatives makes this COVID-19 resiliency not particularly surprising. Additionally, eighty-six percent of worker cooperatives had structures in place to quickly make decisions in the workplace, enabling them to more easily adapt in response to COVID-19. Some individual examples of this phenomenon are described next. Incredibly, none of the sixty cooperatives that received funding from Seed Commons, a non-extractive loan fund, closed during the pandemic. While not a study about worker-owned cooperatives specifically, another study conducted during the COVID-19 crisis suggests that employee-owned companies were also more durable and resilient. They were more likely to retain workers, less likely to reduce pay, and more likely to take steps to protect workers.
B. Worker Cooperative Stories
As the stories below indicate, worker cooperatives were able to pivot and adapt to pandemic-related issues because of their shared ownership and unique worker-centered design. Red Emma’s Bookstore Coffeehouse pivoted numerous times during the pandemic to keep workers safe, while still maintaining their success. They shut down before the government mandates were imposed on businesses, gave away their food stocks to people in need, and later transitioned back to reopening by doing outdoor events and home delivery service. They also partnered with local cooperatives to form the “General Store” in May 2020, a combination of seven local businesses for shared distribution and delivery. As previously discussed, these decisions were not made by one person, which can be a huge benefit for several reasons. For one thing, it can be empowering. As Tre’ Ford, a worker-owner and newly trained line cook at Red Emma’s explained, “What I say actually means something for the future of the business. That’s empowering.” In June 2021 as the pandemic (temporarily) waned, Red Emma’s discussed whether to rent its kitchen out during the week to help with the pandemic’s huge hits on their bottom line. They ultimately decided not to, but that conversation resulted in many more discussions about revamping the menu, which had become limited during the pandemic’s delivery and takeout phase, and about adjusting hours, holding events, and staffing the restaurant and bar for the new schedules. By early September, their collective decision-making resulted in a boom of sales, jumping from $8000 in weekly sales to $14,000. Ino Aksentiev, a worker-owner, bartender and bookseller at Red Emma’s, said, “Being able to hash it out with a lot of people, you think of things that you wouldn’t think of if you were just doing it by yourself . . . . Also, it means that you make a decision together, and you’re all invested in going forth with that decision.”
The pandemic hit Taharka Brothers Ice Cream, who completed their conversion to worker-ownership in December 2020, hard. They lost seventy of their accounts and desperately needed new ideas. They started a home delivery system, where everyone pitched in to do deliveries at night throughout the area, to keep the business alive. In discussing worker cooperatives, Vinny Green, one of the worker-owners, said, “It makes you want to do better for yourself no matter what.” Another worker-owner, Detric McCoy, said, “We have an advantage of treating everyone fair . . . and that comes out in our product which is why I believe our product is so good.” Taharka Brothers fought through the pandemic and now offers nationwide delivery options to individual consumers along with wholesale options, working with over 150 restaurants, bars, scoop shops, institutions, and even caterers.
The pandemic abounds with worker cooperative success stories, like the ones above, or that of Joe Squared, a pizzeria dealt a death blow by the pandemic, closed by its owners and only able to reopen because the workers came together to take over the business. These stories illustrate the huge potential of worker cooperatives in responding to crisis. In a survey of worker cooperatives, other adaptive business practices taken include expanding childcare options for workers, increasing work flexibility, offering extra sick time, moving to virtual/remote business, moving services outdoors, implementing safety measures, shifting to provide essential services, closing brick and mortar locations, and increasing production.
C. An Increasing Desire for Worker Cooperatives
Beyond direct issues related to COVID, worker cooperatives are poised for growth, in part because of an increase in job-related frustrations and a desire for something better arising from COVID and the Great Resignation. In a November 2021 study, respondents indicated an extremely strong desire to transition to a fairer, more sustainable way of life in the wake of the pandemic. This desire manifested in several different ways, such as a desire for reduced pollution, a less individualistic and more caring future, and an ability to use time differently.
The Great Resignation has consistently demonstrated a desire for something better, and people have acted on that desire in the form of quitting. People are quitting jobs because of health and safety concerns, a lack of flexibility, burnout, a lack of sense of belonging, limited compensation, issues with managers and supervisors, and, overall, a lack of control. As discussed in Part II, worker cooperatives tend to offer better health, increased safety, enhanced well-being, increased satisfaction, higher income, ownership, and positive and trusted dispute resolution. Additionally, worker cooperatives can offer greater flexibility to adjust terms and conditions of work and how the business is run. In large part, many of the issues underlying the Great Resignation boil down to lack of control, which worker cooperatives are specifically designed to address. Even a lack of sense of belonging could result because workers have no control, ownership, or voice. In traditional business structures, executives and management dictate to workers what must be done, and workers have limited say in the matter. When workers are in control (and particularly when they are in full control, as in a worker cooperative), they can make their workplaces better in all these areas. If we have learned anything from COVID and the Great Resignation, it is that workers are tired of feeling powerless. Whether it be increased flexibility about where and when they work or just being able to avoid coming into work while sick, workers want control over their jobs and their lives. Worker-owned cooperatives can substantially change the way these problems (and future problems) are approached by business and society as a whole.
D. Worker Cooperatives Must Develop Intentionally
It is important to note that even if every business transitioned into a cooperative, it would not solve all business-related issues. Worker cooperatives still need to be formed intentionally and mindfully, with worker and community benefit as the focus, as collective organization does not automatically lead to collective action. Particularly now, when they are less common, worker cooperatives face pressure from within the capitalist marketplace, driven by the need to decrease costs and perpetually increase profits for shareholders quarterly, and worker cooperatives must learn to operate under the pressures of globalized competition. While worker cooperatives do offer competitive advantages, such as a lack of extreme compensation for executives, better treatment of workers can be costly. This tension between serving workers and serving the market is a constant struggle.
E. Worker Cooperatives Growing in Popularity and Support
The number of worker cooperative formations is growing, fostered, in part, by business owners increasingly selling their businesses to their workers, which, in turn, may be due in part to workers’ increasing interest in ownership possibilities. The Employee Ownership Foundation found seventy-two percent of respondents would prefer to work for a company owned by the employees, and turnover at employee-owned companies is three times lower than conventionally owned businesses. Many consumers are more likely to purchase from employee-owned companies and companies that put their employees first. Interest in ownership and control is likely to continue to grow, especially because of increasing worker frustration with traditional businesses.
Support for worker cooperative formation is growing among a variety of sources. Groups across the country are working to educate the public, create more worker-owned cooperatives, and push the government to create more favorable environments for worker cooperatives. Several states now have cooperative statutes which increase awareness and make it easier to form a business directly as a cooperative. There are also tax benefits to creating a business as a cooperative, increasing financial feasibility. Local governments are increasingly investing in the creation of worker cooperatives, seeing them as a sustainable method of poverty alleviation and community economic development. New York City, for example, passed legislation and dedicated significant funds toward cooperative building. Many other cities and municipalities have adopted legislation and budget initiatives to support worker cooperatives, as well, giving them regular business.
Activist groups are demanding support for worker cooperatives, even in cities where few cooperatives exist and where there is currently little institutional support. Additionally, more established organizations like Cooperation Jackson, Cleveland Evergreen Cooperatives, Green Worker Cooperatives, and many others are working to incubate new cooperatives and create local cooperative networks to transform the socio-economic system.
Creative technological solutions are being offered, such as “platform cooperatives,” which are similar to exploitative gig economy companies but operating with shared ownership and increased worker benefit. Even investment infrastructure is being built, such as Seed Commons, which provides non-extractive loans to cooperatives. Given the increase in formations, interest, support, and resources, and considering the potential for worker cooperatives to address the country’s most pressing issues and crises, now is truly the time to push to increase worker cooperative formations like never before.
V. Difficulties and Challenges in Worker Cooperative Formation
“If worker cooperatives are so great, why are there so few?” This is an important question, and, despite the increasing number of formations, the current number of worker cooperatives is still limited, and there are massive challenges and barriers to worker cooperative formation.
Some people have taken the relatively low number of worker cooperatives to mean that worker cooperatives tend to be less successful than traditional business structures. However, as has already been covered extensively in academic literature, worker cooperatives are not more likely to fail, and they are in fact as productive, if not more productive, than similar traditional business structures. This literature identifies barriers to formation as the primary issue. This Note briefly highlights a few major challenges, but this is by no means a comprehensive analysis of the topic. Some common worker cooperative barriers include financing, the risk of starting a new business, insufficient business experience, and a lack of awareness that worker cooperatives are a possible business structure.
One of the biggest barriers is financial. The requirement of money to start a business can particularly create a barrier for low-income communities that are interested in cooperatives, because they have less access to wealth or financing to start a worker cooperative. Workers often have little personal wealth, which can limit the ability to get credit to start a business. Additionally, getting a loan, although a valid option, can be more difficult given the large number of owners and the fact that most banks want specific individuals to put down collateral. These financial barriers are part of the reason that worker cooperatives have been more numerous in industries with relatively low capital requirements. However, particularly recently, there are an increasing number of resources for obtaining funding, as well as creative alternative funding sources. Additionally, some cities have set aside money in their budgets to support worker cooperative formation.
Another barrier, which applies primarily to worker cooperatives being formed from scratch, is simply that it is risky to start a new business. Everyone involved must be willing to take on that risk rather than pursue an initially less risky standard wage job. This is why it is important to have high motivation and organizations (like the Sustainable Economies Law Center) to support formation to reduce the risk. This is also why some advocates have increasingly emphasized turning current stable businesses into worker cooperatives when owners retire.
Another big barrier can be insufficient business experience within the pool of workers. This barrier is why having people with business expertise on a cooperative board or advisory board is often recommended. The lack of business experience is also a motivating factor behind cooperative initiatives such as the Democracy at Work Network (also known as DAWN), a peer-advisor network formed by the U.S. Federation of Worker Cooperatives to provide business-related advising to other cooperatives.
Last, a huge barrier is lack of awareness that worker cooperatives are a possibility. The general public is not very familiar with worker cooperatives, but even professionals such as lawyers, accountants, and business consultants have very little awareness of this option. This professional lack of awareness limits opportunities for existing businesses to sell to their workers and transform into worker cooperatives. Consultant Alex Moss suggests that one of the big shifts that led to a recent uptick in ESOPs (Employee Stock Ownership Plans) was that accountants and lawyers started to advise business owners to convert to employee ownership and showed them the advantages; Moss says that a similar thing could happen with worker cooperatives. Some worker cooperative organizers have identified educating transactional attorneys about these options as a key need in removing barriers to formation and have been working on this through law school clinics and educational programs. This work has included educational classes, clinics, advocacy groups and coalitions, and more. Passing more cooperative statutes at the state level has also been proposed as one small step to increase awareness.
Numerous models exist for incubating modern worker cooperatives. Three popular worker cooperative development models are the nonprofit incubator model, the union coop model, and the anchor institution model. Nonprofits committed to economic development engage in outreach, organizing, and education and can help connect workers to experts, resources, and support. They may also advocate for policy changes beneficial to worker cooperatives as the Sustainable Economies Law Center does. The union coop model involves unions, such as United Steelworkers, supporting the development of worker cooperatives as a means to provide strong wages, benefits, and a safe and dignified working environment. The anchor institution model involves worker cooperatives, such as the Evergreen Cooperatives in Ohio, collaborating with institutions like hospitals, governments, and universities to develop worker cooperatives that can rely on consistent business from these big, permanent, local institutions.
A variety of strategies and approaches will be needed to advance the worker cooperative movement, but it is a hopeful time in the movement’s history. It will not be easy, but the need is greater than ever, and the timing is right. As Murray Bookchin put in his book, Ecology of Freedom, which called for a radical reorganization of society along ecological and ethical lines: “If we do not do the impossible, we shall be faced with the unthinkable.”
Conclusion
Worker-owned cooperatives represent a preferrable alternative to traditional business structures. They also represent a unique opportunity to form moral, values-forward business structures that bypass the legal and economic limitations of our current system, providing an opportunity to create successful businesses that put workers at the center and can work toward building a better society and world. Cooperatives by no means will make this world a reality on their own, just as they will not automatically provide idealized worker conditions, but their structure allows for worker control with worker benefits at the center, which allows workers to build better workplaces and better respond to challenges.
Compounding crises such as COVID-19 and the Great Resignation have laid bare the exploitation and insufficiency of our current workplace model, and worker frustrations are boiling over. Worker cooperatives offer an opportunity to respond to these frustrations productively, by building better workplaces that address the core issues at the heart of these workplace crises. The timing could not be better as popular support and available resources for worker cooperatives continue to grow, but that does not mean it will happen on its own. Given numerous barriers, worker cooperative formation can be difficult, but it can also be incredibly rewarding.
