Worker Cooperatives – Research

Worker Cooperators Win Grant From the Ewing Marion Kauffman Foundation to Study Coop Development

Abby Scher, Ph.D, a part-time faculty member in Sociology at Brooklyn College and a worker-owner of the cooperative Research|Action, was awarded a $218,000 3-year grant from the Ewing Marion Kauffman Foundation to compare entrepreneur support organizations that support worker cooperatives and single founder businesses to identify the most effective approaches to aiding the firms and what they might learn from one another. The grant was awarded through the CUNY Research Foundation. Dr. Scher is joined as primary investigator by Dr. Biko Koenig, Assistant Professor of Political Science at Franklin and Marshall College, who is also a worker-owner of Research|Action.

Worker cooperatives are businesses owned and governed by their employees. The research will focus on worker cooperative development in New York City, and explore municipal policy and the local cooperative ecosystem which includes 91 worker cooperatives, many owned by workers of color. New York City has funded worker cooperative development since 2015, the first municipality in the country to do so. The research will also compare how individualist versus cooperative support organizations conceive of entrepreneurship, including metrics of success and failure, and conduct a national survey of worker cooperative developers to further explore best practices.

Despite their benefits for stabilizing the lives and income of their member-owners, and their potential for strengthening a local economy, establishing worker cooperatives is challenging. As is well documented, it is hard to secure capital in a financial system that is not designed for worker cooperatives and with Small Business Administration-backed loans ill-fitted for these firms and their frequently lower income owners. It can be hard for new owners to navigate conflict and an unfamiliar ownership culture. Small businesses in general have a high failure rate and the consequences of failure on lower income owners of a worker cooperative can be devastating. It is important to get it right and position these companies and their owners for growth and success. Supporting that is the primary goal of the research.

Jessica Looze, the Kauffman Foundation’s Director of Knowledge Creation and Research, said this project “will help us better understand the systems and structures needed to support inclusive prosperity.”
The Kauffman Knowledge Challenge is a biannual program that aims at improving our basic understanding of entrepreneurs and the levers, tools, and methods that can advance entrepreneurship in the United States. The goal of the Knowledge Challenge is to produce tangible insights for entrepreneurs, entrepreneurship program and policy design, ecosystem leaders, and researchers. The Ewing Marion Kauffman Foundation is based in Kansas City, MO. A full list of Knowledge Challenge recipients is here.

For any questions, contact info@researchaction.net.

The State of the U.S. Worker Cooperative Movement

By Abby Scher, Research|Action member.

In mid-October, we got a preview of Democracy at Work’s (DAWI) latest census of worker cooperatives and democratic workplaces (think collectively run nonprofits) at the U.S. Federation of Worker Cooperative’s annual meeting in Baltimore. There were 414 of these workplaces in the United States in 2018, reported Tim Palmer, DAWI’s outgoing research director, with another 50 in Puerto Rico, an island hugely motivated to cooperate following the devastation of Hurricane Maria in 2017.

Drawing on a survey with 106 respondents, Palmer found an average hourly wage of $19.67 – kind of underwhelming – but also a surprising proportion of cooperatives distributing “patronage” payments at the end of the year. One third did, with the average payment about $8,241. The membership is heavily female (62%) and heavily Latinx (37%), no doubt due to the huge impact of Cooperative Home Care Associates in the Bronx, the nation’s largest worker cooperative with 2,200 workers (not all owners).

And that gets me to a number I didn’t catch in his presentation, which is the miserable number of total worker cooperators in the country, which is probably still hovering around 6,700 workers.

This is a tiny movement that Research|Action is part of. At least, we are part of the tiny worker cooperative wing of the cooperative movement, since credit unions and producer cooperatives seem to be operating at scale. Why this is the case was sprinkled throughout the topics of some of the sessions at the Eastern Conference for Workplace Democracy, where USFWC’s annual meeting was held. Two sessions dealt with conflict resolution. Another was on “preventing burnout and power dynamics in worker cooperatives.” Then there were the sessions on accessing loans and capital, a common logjam. I chatted with one Bronx cooperator who said if she were to do it over again, she would have gone on a tight savings plan with her future partners and have $10,000 in the bank each before launching their business. Shouldering the worry of maintaining a business in capitalism is not easy.

People are hoping our movement will get less tiny since last year’s bipartisan Main Street Employee Ownership Act directed the U.S. Small Business Administration (SBA) to update its guidelines so that its loan program no longer discriminates against employee-owned businesses. Business conversions to cooperatives in particular could be helped, hugely motivating for Congress with the “silver tsunami” of retirements coming our country’s way: the law provides for faster disbursement of loans financing the conversion of traditional companies to employee ownership. That is, if we learn to talk the language of retiring business owners, who are interested in money, not social experiments in cooperation, as Matthew Cropp of the Vermont Employee Ownership Center and Rob Brown of Cooperative Development Institute explained. The business owners are trying to fund their retirements after all.

The SBA guidelines shape lending throughout the financial system, so updating them could be a big help in tackling the financing and cash flow drought worker cooperatives face. But while SBA offices in New York State, for instance, have jumped on board to implement the act, word is that other SBAs are dragging their feet, requiring more lobbying. Kate LaTour, government relations manager of the National Cooperative Business Association, told the group that we’ve got to keep working, “hiking the hill,” talking to legislators, and inviting them to join the bipartisan cooperative business caucus to show support and do any other action needed for this law to really take hold.

If it does take hold, we still need to consider the other dynamics limiting the scale of the movement, and what they might mean.

(photo from DAWI)