Worker-Owned Cooperatives - A Resilient Model for Grassroots Economic Development
By Meche Sansores / spotlightonpoverty.org
Mar 9, 2013

The persistently sky-high unemployment in the U.S. has clouded an equally problematic trend—deteriorating working conditions and diminishing pay for unskilled and low-skilled work. Home healthcare workers, childcare providers, and housekeepers are the backbone of our economy, but they receive low wages, practically no benefits, and face a dearth of opportunities to build assets and accumulate savings. In this economic climate, we must find ways to help disadvantaged individuals and families become self-sufficient.

One powerful, but underutilized approach is to build community-based cooperative businesses. This model delivers increased earnings, provides better benefits, and creates asset building opportunities for low-wage workers. What’s more, it is a model that has proven to be a workable solution during this challenging economic time because it creates the very economic activity that generates opportunity for workers.

At their core, worker co-ops are businesses that are (1) owned and often created by their workers, and (2) governed by democratic decision making. There are approximately 300 worker-owned cooperatives in the U.S. across a variety of industries, from grocery stores and daycare centers to manufacturing and tech companies.

Cooperatives distribute the surpluses of the business to the workers – otherwise known as co-op members – rather than inequitably diverting profits to executives and shareholders. Worker co-ops are also democratically controlled, meaning that co-op members generally set company policies, including what benefits are provided. This often translates to benefit packages that are well above industry standards.

Co-op membership provides a unique avenue for asset building for low-income individuals. In the U.S., most families build wealth by buying homes, investing in a business, or saving through employer-sponsored retirement accounts. But these types of investments are often out of reach for low-wage workers.

Co-owning a business can be a pathway out of poverty and a much more accessible asset building approach for low-wage workers, as co-op members can collectively share the responsibility of acquiring small business start up capital.

Women’s Action to Gain Economic Security (WAGES), the organization I lead, provides a compelling case for this approach. WAGES is a non-profit that builds cooperatively owned businesses to create healthy, dignified jobs for women. To date, WAGES has built five eco-friendly housecleaning businesses in the Bay Area, which bring in $3.2 million annually and provide healthy, dignified work for over 100 low-income immigrant women.

Co-op members are doubling and tripling their incomes after joining, which translates to changes at the personal and family levels that then ripple into communities. Co-op members are also taking English as a second language classes, sending their children to college, and becoming financially literate.

Members also have internal capital accounts that grow with their business. Last year, the median amount of this business asset for each member was nearly $3,500—a remarkable sum considering that each member invested a mere $400 in the business. In addition to these benefits, our co-op members have the opportunity to use interest free loans from the co-op, protecting them from predatory lenders and providing a critical safety net.

What is striking to me is how fiercely resilient our model has proven to be during these challenging economic times. All five WAGES co-ops have grown steadily in recent years. In fact, two of WAGES’ five co-ops were launched during the recession – one in 2009 and another in 2011 – despite the fact that the national small business failure rate increased by 40 percent during this timeframe, and California's was the worst in the country.

Perhaps we shouldn’t be surprised at this success. It was actually mass unemployment and widespread poverty in Spain’s Basque region during the 1950s that prompted the creation of the largest cooperative in the world, The Mondragon Cooperative Corporation, which now boasts 100,000 workers, and is located in a region that consistently has the lowest unemployment in that country.

What is the secret behind co-ops’ success? Many point to the mutually supportive environment and the collective pride of business ownership as contributors to co-ops’ remarkable survival rate, which a 2008 study suggested is twice as high as other enterprises over a ten-year period.

To be sure, cooperative development requires intensive training, resources, and skill building. WAGES has seen a burgeoning interest in cooperative development recently, and created a technical assistance guide to assist other groups around the country interested in building worker-owned co-ops. There are a host of other resources and ample opportunities for policy change to help facilitate the growth of co-ops.

As we inch slowly from the recession and lament the lack of dignified work for low-income individuals, policymakers and community organizers should take note of an up and coming model that is moving disadvantaged individuals above the poverty line.

To print a PDF version of this document, click here.

Meche Sansores is the executive director of Women’s Action to Gain Economic Security.

The views expressed in this commentary are those of the author or authors alone, and not those of Spotlight. Spotlight is a non-partisan initiative, and Spotlight’s commentary section includes diverse perspectives on poverty. If you have a question about a commentary, please don’t hesitate to contact us at info@spotlightonpoverty.org.

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Worker-Owned Cooperatives - A Resilient Model for Grassroots Economic Development