This article is presented as part of New Economy Week, five days of conversation around building an economy that works for everyone. Today’s theme is
The face of local business has changed dramatically in recent decades as large companies have replaced neighborhood businesses. Remember your local barbershop? Chances are it’s been replaced by a Supercuts. Local burger joints? McDonalds. Your local drugstore? CVS or Walgreens.
Given the number of baby boomers, we have an opportunity to support retiring owners to sell to their valued employees.
Local business ownership is a critical economic option for people who lack formal education or access to capital. But today, large-scale absentee ownership abounds, and wages as a percent of gross domestic product are at their lowest level since 1948. People are paid so little that in Oakland, Calif., 45 percent of working adults don’t make enough to cover their family’s basic needs.
In contrast, worker-owned cooperatives bring tremendous benefits to workers, businesses, and the broader economy. They do this in many ways, but especially by increasing wages and benefits, reducing worker turnover and increasing business operational efficiency. Since they’re locally owned, they keep dollars in the local economy.
Employee-owned and democratically governed businesses already play a critical role in what we call the “new economy.” Yet there are only about 300 worker-owned cooperatives in the entire United States, according to data from the U.S. Federation of Worker Cooperatives, and they average 11 workers each. In other parts of the world—like Italy, Spain, and France—cooperatives have grown to employ 5-10 percent of the workforce.
These places have higher indexes of social well-being in health, education, crime, and social participation. It turns out that when business decisions incorporate what is good for both the bottom line and for the workers, those decisions benefit not only the workers and their families, but also the entire communities in which they live.
By now, you’re hopefully convinced that significantly increasing America’s worker-owned cooperatives would be a really good thing. Here are three ways to make it happen:
1. Focus on existing businesses as well as startups.
There are multiple pathways to increasing worker ownership. Many efforts focus primarily on starting up new worker-owned cooperatives. That’s important! But, given the gains we need to make, we must also focus on existing businesses—both expanding existing worker co-ops and converting other businesses to worker ownership.
Given the number of retiring baby boomers, we have a huge opportunity to support retiring business owners to sell to their valued employees.
2. Develop a cooperative-friendly ecosystem.
We need to influence the ecosystem of job and business growth to make sure we have the necessary inputs—business expertise, trained workers, and capital—to create and expand worker-owned businesses. We’ll also need to increase demand for those businesses through policy and by influencing the buying patterns of consumers, businesses, and governments.
One of the biggest holes in the ecosystem is business expertise. New economy advocates must mobilize business people by finding and focusing on the intersection between those with a commitment to the new economy, and those with business expertise.
3. Apply targeted geographic investments.
With limited investment dollars, we can’t take a scattershot approach. We must target place-based investments based on how to best expand worker cooperatives in a given area. In cities or regions that already have strong worker co-ops (like the San Francisco Bay Area) we need strategic investment and an approach that aligns multiple actors and stakeholders with clear roles. In regions that are just getting started, we need to focus on replicating (and improving on) pioneering practices from other places.
The recession of 2008 sparked a renewed interest in worker-owned cooperatives, as communities sought out paths to a more resilient economy. This presents a critical opportunity. Let’s roll up our sleeves and focus on scaling up the models we already know work.