A Democratic Workplace: An Evaluation of Worker Cooperatives
In the wake of the pandemic, workers found themselves acting on many workplace frustrations, and leaving their jobs in a phenomenon many call The Great Resignation. Reasons for leaving jobs included low pay, lack of advancement opportunities, feeling disrespected, childcare issues, lack of flexibility and more (Kim, 2022). Workers don’t have control over many of these issues in standard corporations; for example, managers or owners have power over wages and they choose who to promote. These pressures in a standard capitalistic corporation are exposed to many workers, but there is an uncommon workplace structure that may offer a solution: a worker cooperative.
A worker cooperative is an alternative style of workplace organization as compared to a standard capitalist firm. Worker cooperatives have three distinct features that make them unique: they are worker owned, worker controlled, and worker benefitting (Audebrand, 2017). Worker ownership means that the worker cooperative is not owned by investors like a standard firm, rather each worker has some shared stock ownership of the firm. Worker controlled means that all workers in a worker cooperative have equal voting rights and they vote on a board of directors for the cooperative (Audebrand, 2017). Worker benefiting means the surplus of the cooperative is not given to investors, instead it is distributed to members according to work hours (Audebrand, 2017).
One common question surrounding worker cooperatives is their comparative efficiency to a standard capitalist corporation. This is an important question, and it would intuitively be a compelling argument against worker cooperatives since the worker cooperative’s parallel is democracy, which is less efficient at governing than authoritarian regimes since authoritarians don’t rely on consensus for decision making. Many researchers have a similar line of question about worker cooperatives and have done work on measuring cooperatives’ efficency with regression analysis. Arando et al. in 2015 focuses on the Eroski group, a chain of supermarkets and hypermarkets originating in Spain, to analyze the efficency of worker cooperatives and their alternatives. The Eroski group is a uniquely promising case to analyze the efficency of worker cooperatives, because within its chain there are worker cooperatives, standard firms, and GESPA workplace structures which are cooperatives with limited employee ownership and voice (Arando et al., 2015). This in-chain variation allows researchers to hold other parts of businesses constant while analyzing variation in workplace structure. Using sales growth as a metric for efficiency there is a small but statistically significant increase in sales growth for hypermarkets, an insignificant change in sales growth for supermarkets, and a small statistically significant increase in sales growth for city supermarkets for cooperatives over conventional stores (Arando et al., 2015). These results indicate that there is almost no difference between the efficiencies of standard corperations and worker cooperatives and even that worker cooperatives are slightly more efficient than standard corperations.
The efficency of a firm is important, as well as the survivability of a firm. If a firm is likely to fail that produces bad outcomes for the firm’s owners, and the workers, because they would become unemployed, as well as the ownership of the firm. Burdìn in 2014 looks at a panel of firms in Uruguay and finds that worker cooperatives have a 12.6% lower failure rate than standard firms. The better survivability of worker cooperatives does not fit well into the categories of issues most important to workers, but it does reflect that worker cooperatives may be a superior alternative to standard firms when it comes to viability of the firm.
Efficency and wages are not the only area of importance for the running of a business, worker satisfaction is an important metric to measure worker cooperatives by, especially since the goals of worker cooperatives typically include benefiting the workers. Arando et al. tackles the question of worker cooperatives and finds that there is a statistically signifigant decrease in worker satisfaction in cooperatives for various specific workplace issues. Their current theory for the lower job satisfaction in worker cooperatives is that employees take on more decision making and have more stake in the firm leading to a more stressful environment for workers (Arando et al., 2015).
Worker cooperatives efficency benefits and job satisfaction are an important part of the equation, but as stated previously one of the most critical factors for why workers have left their jobs in such large quantities is low wages. This issue for workers does get addressed in a cooperative system. One foundational aspect of worker cooperatives is that they are worker benefiting and thus should pay more on average than a standard organization of a firm. This benefit is borne out in the data, in the Eroski cooperative, workers receive about a 20% premium in wages for non-managerial workers and a more compressed difference in wages between the top and bottom of the pay range as compared to standard firms (Arando et al., 2015). Arando et al. is not conclusive; there is evidence of slight but statistically significant lower wages for firms in Uruguay when compared to conventional firms (Burdìn, 2014). Even with the uncertainty of a cooperative’s effect on wages it is important to note that in a cooperative structure workers had more input on what their wages are, as opposed to standard firms, since cooperatives include workers in the decision-making process.
There are benefits and drawbacks for a worker cooperative as compared to the standard organization of a firm which are potentially higher wages for non-managerial workers, more efficency and survivability for the firm in worker cooperatives, and the primary drawback being the decline in worker satisfaction in cooperatives. It is also important to note that due to the small amount of worker cooperatives existing today, research is limited by sample size on these questions, which is demonstrated by the mixed evidence of cooperatives’ effect on wages, and there must be more research to uncover the topic’s nuances in the future.
Edited by Joshua Jacobs
Works Cited
Arando, Saioa, et al. "Efficiency in Employee-Owned Enterprises: An Econometric Case Study of Mondragon." ILR Review: The Journal of Work and Policy, vol. 68, no. 2, March 2015, p. 398-425. HeinOnline, https://heinonline.org/HOL/P?h=hein.journals/ialrr68&i=395.
Audebrand, Luck. “Expanding the scope of paradox scholarship on social enterprise: the case for (re)introducing worker cooperatives” , M@n@gement, vol. 20, no. 4, 2017, pp. 368-393, https://doi.org/10.3917/mana.204.0368.
Burdin, Gabriel. "Are Worker-Managed Firms More Likely to Fail than Conventional Enterprises - Evidence from Uruguay." ILR Review: The Journal of Work and Policy, vol. 67, no. 1, January 2014, pp. 202-238. HeinOnline, https://heinonline.org/HOL/P?h=hein.journals/ialrr67&i=202.
Parker, Kim, and Juliana Menasce Horowitz. “Majority of Workers Who Quit a Job in 2021 Cite Low Pay, No Opportunities for Advancement, Feeling Disrespected.” Pew Research Center, Pew Research Center, 10 Mar. 2022, https://www.pewresearch.org/fact-tank/2022/03/09/majority-of-workers-who-quit-a-job-in-2021-cite-low-pay-no-opportunities-for-advancement-feeling-disrespected/.
