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Leveling the Playing Field for Worker Cooperatives

Municipal and state governments as well as NGOs that support small or independent businesses are finally beginning to address what changes they need to make to support the creation of worker cooperatives to fight poverty and spread workplace democracy.

Worker Cooperatives are designed to help build assets and wealth among low-income individuals and communities, and create entrepreneurs and community leaders. (Photo: Jay Gorman, Shaking hands via Shutterstock; Edited: EL / TO)

A quiet revolution is rumbling through New York’s municipal offices as they retool to support the creation of worker cooperatives as a way to fight poverty.

Spurred by the powerful example of immigrant-owned cleaning cooperatives and the longstanding example of Cooperative Home Care Associates in the Bronx – the largest worker cooperative in the country – progressive city council members are allying with a new network of worker cooperatives, community based organizations that incubated immigrant-owned coops and the influential Federation of Protestant Welfare Agencies to figure out how the city can encourage this still-tiny economic sector. Once fully in place, New York City will be a national leader in providing municipal support for these democratic enterprises.

Worker Cooperatives are designed to help build assets and wealth among low-income individuals and communities, and create entrepreneurs and community leaders.

The pace of change is dizzying. In January, the federation released a short report arguing that worker coops help improve traditionally low-wage jobs by channeling the enterprises’ profits directly to their worker members, improving their lives in tangible ways. Then in February, Councilwoman Maria del Carmen Arroyo, chairwoman of the Committee on Community Development, held a hearing which put staff from the city’s Small Business Services and Economic Development Agency in the hot seat about how they were promoting worker cooperatives. In their final budget agreement on June 19th, the mayor agreed to the City Council’s request for $1.2 million for training programs with the aim of incubating a minimum of 234 new jobs, 28 new worker coops and help another 20 existing worker cooperatives to grow.

“We got it. the whole thing, we are so excited and thankful to the City Council, the mayor, the public advocate and borough president for their support for workplace democracy” said Chris Michael, director of the NYC Netwrork of Worker Cooperatives.

In making the budget appeal, the City Council wrote, “Often times minimum- and low-wage jobs do not provide enough of an economic boost to provide upward mobility for many New Yorkers. Worker Cooperatives are designed to help build assets and wealth among low-income individuals and communities, and create entrepreneurs and community leaders.”

It continued, “This initiative will target the long-term unemployed and the growing number of under- employed and discouraged workers in high-needs neighborhoods.”

Worker coops are businesses that distribute more of the profits to employees because the worker-owners control the operation on the basis of one member, one vote. More than a third in the United States are in the service sector and are relatively small. They may operate with a staff hierarchy but even in larger coops the wage scale is relatively egalitarian. The businesses’ surplus gets circulated to the member-workers, not to external shareholders, as in traditional corporations.

The possibility of empowering low-wage workers inspires Rosie Mendez, a city councilwoman representing the East Village, including Colors, the restaurant coop formed by former staffers of Windows on the World in the World Trade Center. “It would go a long way to eradicating unemployment and strengthening our workforce,” she said following the May 14 rally on the city hall steps.

Activists flyered in front of the City Council to promote the funding, winning an offhand remark from a passing Mayor DeBlasio that he “loves worker coops”!

At the national conference of the US Federation of Worker Cooperatives in late May, executive director Melissa Hoover acknowledged the importance of strong allies to promote the vital public policy changes needed for growth, given the small number of the democratic enterprises – there are perhaps 300 worker coops in the entire country. Twenty-three of them are in New York City, and with coop incubators like the Center for Family Life in Brooklyn, they are much more likely to be immigrant-run than those in some other coop centers, such as Minnesota, Massachusetts or Wisconsin. (The SF Bay area, with two dozen enterprises, is also home to prominent immigrant-owned coops and the coop incubator WAGES.) While the Bay area, Madison and Western Massachusetts all have coop networks, the NYC Network of Worker Cooperatives is only holding its first conference June 21. It can’t carry the weight of a full lobbying effort. This makes the interest of the Federation of Protestant Welfare Agencies (FPWA) in worker coops particularly notable.

While researchers try to connect the dots about the power of worker coops as poverty fighters, they are faced with relatively thin data because of the low numbers of the enterprises in this country.

The 92-year-old organization is a network of social service agencies and churches led by Jennifer Jones Austin, a well-connected New Yorker who cochaired Mayor DeBlasio’s transition team and who once served in the Bloomberg administration. She had been executive director of FPWA just over a year when it released its report on worker coops. Its author, research director Noah Franklin, made the connection between worker coops and fighting poverty at the January conference marking its release. “Why are we advocating for worker cooperatives now?” he asked. “More than 20 percent of New Yorkers are living in poverty.” He added, “Business hiring trends have only added to the ranks of low-wage workers” – despite the usual city giveaways to big companies in the name of job creation. Here is a “policy misalignment.” But as democratic enterprises, coops are more than one piece of an economic development model. They give workers more control over their work environment, and their capacity for democratic participation in the wider world is enriched.

Workers in low-wage jobs can increase their income as members of coops, from receiving more and steadier hours of work and higher hourly wages, according to a recent report by Hilary Abell, the former director of WAGES. “Many members have health insurance and paid time off for the first time in their lives.”

Elisa Perez, a founding member of Si Se Puede, the large cleaning coop launched by Center for Family Life in Brooklyn, put it simply. “As a member, it has allowed me to have dignifying job.” For some in her coop, it meant tripling their former income to $25 an hour. Of course, worker ownership does not necessarily mean higher wages or better hours – they are subject to market forces and even the self-exploitation found in many small businesses.

‘We only recently got wages above $10 an hour,” said Michael Elsas, president of Cooperative Home Care Associates.

The federation’s structure representing social service agencies makes it no surprise that its strategy heavily supports the “service agencies” in the coop sector. These are coop incubators like the Center for Family Life, which is a large social service organization in Sunset Park that since 2006 has launched, or is launching, eight immigrant-run coops.

Councilwoman Arroyo, who led the fight in the City Council, represents the South Bronx, a borough that is rich with cooperative resources, including a school called Green Worker Cooperatives, which would receive funding. A coop policy promoter in another region, reviewing the NY plan, noted that it does not set up a democratic process for coop incubators to apply for funds: At least in the form presented to the mayor, the council plan would direct funds to particular organizations. When larger funds are in play, he advised looking to another model – the funding mechanisms set up by the US Department of Agriculture, arguably the largest coop promoter in the country, all in rural areas. Low-income coops also involve a lot of “workforce development” and training of the worker-owners and so need support from incubators for as long as five years; this makes multiyear funding commitments ideal.

While researchers try to connect the dots about the power of worker coops as poverty fighters, they are faced with relatively thin data because of the low numbers of the enterprises in this country. Advocates look to Quebec, the Basque region of Spain and Emilia Romagna in northern Italy, regions that are relatively dense with worker cooperatives, in part because of the support of government policy, strong mechanisms for funding and rich networks with other democratic enterprises including banks and sometimes unions.

Other cities are also inspired by these models – the mayor of Richmond, Calif., visited the Mondragon coops in the Basque region, and the mayor of Madison, Wisc., hosted a conference in June 2102 on cooperative businesses. Chokwe Lumumba, the radical mayor of Jackson, Miss., planned to create a coop incubator as part of city government, but that plan tragically derailed when he died earlier this year. Local activists are pursuing the same goal through nongovernmental means. Richmond’s coop developer is no longer on staff, but an independent $50,000 revolving loan fund to support coops is still operating. Madison has a strong network of worker coops, and a coop center based at the state university; the conference created an agenda for government action, and at this point, cooperators are reaching out to educate economic development agencies about how they can support the enterprises.

These are the low-hanging fruit – merely removing discrimination against coop business that might be in the practice of government agencies, and making their services accessible.

There is surprising momentum in Reading, Penn., a city teetering on bankruptcy. With the support of the Steelworkers, the mayor, and Philadelphia-based experts, coop incubation is in the works that is part of a larger economic development strategy. In Oakland, local coops and the Sustainable Economies Law Center are considering promoting policies that would give coops preference in city contracting, and reduce their permit fees, among other strategies, to foster healthy economic development. Richmond, Va.,’s mayor just created an Office of Community Wealth Building, helmed by an associate of coop promoter Gar Alperovitz. And Cincinnati’s mayor is reportedly intrigued not just by the Mondragon model, but potential alliances with Mondragon itself.

In New York, a mere month or two after the release of the FPWA report, city agencies took low-cost steps to support worker coops. By April, Small Business Services (SBS) staffers were distributing informational materials about cooperatives at its business solution centers throughout the city. The agency revised its standard class, “10 Steps to Starting a Business,” to include worker cooperatives; the new curriculum is now being taught in all five boroughs. SBS is also designing a new course entirely dedicated to how to start a worker coop that will be offered this summer at its NYC Business Solutions Centers in Washington Heights and Brooklyn. To craft this new curriculum, the SBS sat down with Joe Rinehart of the US Federation of Worker Cooperatives’ Democracy at Work Institute, Chris Michael of the NYC Network of Worker Cooperatives and other coop advocates, brokered by the Federation of Protestant Welfare Agencies. (In the Bay area, the US Federation of Worker Coops and the Sustainable Economies Law Center are creating a worker coop curriculum for a local community college. If successful, it could be taught in other community colleges in the state.)

NYC’s “business solution centers” offer pro bono legal help and financing, not just technical assistance, so training its trainers to understand worker coops could be a boon to the movement. Worker coops are often launched by people who have a skill – like cleaning – but not the business experience needed to create a viable enterprise. Some coops face complex and unfamiliar challenges when they aspire to operate collectively. Cooperators have already met with the business center staff to train them in the particular challenges worker coops face so they can field questions. NYC also provides affordable space for incubating small businesses that is open to coops. These are the low-hanging fruit – merely removing discrimination against coop business that might be in the practice of government agencies, and making their services accessible.

Cooperative Home Care Associates in the Bronx and its 2,300 workers – 1,110 of them worker owners – already benefit from city workforce development funds. This is another important area for other worker coops to explore, and has proven to be important for some Quebec worker coops in low-income areas.

“We think the city of New York, for the low wage sector, there’s a lot of work that needs to be done on the workforce development side before you start creating small coops,” said Elsas. “We think right now it’s all about workforce development.”

The next phase in developing the city’s policies toward worker coops is more challenging. Advocates and their city council allies are aware that there are daunting barriers to worker coops benefiting from vital loan and grant programs or city contracts because of the structure of their enterprises. SBS is charged with helping small, minority and women-owned businesses navigate the system. Even before the city hearing, coop activists were engaging SBS about contracts.

“One of the big ones is loans to expand the business, to have more funding support to invest in marketing,” said Ligia Guallpa, director of Worker Justice Project, which launched the Apple Eco Cleaning Cooperative in 2010.

“To get SBS grant funds, every owner has to fill out paperwork. In a coop of 2,000 members, that’s enormous,” said Councilwoman Helen Rosenthal, chair of the council’s powerful contracts committee. “It’s something we’re definitely wrestling with. This is part of taking responsibility as an owner. “

Coop advocates want the city to give preferential treatment to these enterprises in their contracts, much as it supports “minority- and women-owned businesses” with an “aspirational” goal of 20 percent of contracts. That is a tall order.

In early summer, Rosenthal plans to introduce legislation that requires city agencies to report on their outreach and contracts with worker coops. “That way we can start to introduce the lexicon of worker coops into these agencies who might not know about them.”

“As I’ve learned more about worker coops, instinctively I support them,” she said. “My mother started the first coop nursery school where I grew up. I know it’s possible. The trick is to find opportunities where worker coops make sense and use it for job creation and job stability, particularly among low-income workers.”

Cities are also an important arena for coop policy since national initiatives are at a standstill.

Another challenge: large-scale coop development. The NY Network of Worker Coops is working with a coop consultant to identify market niches where coops might grow. Impoverished parts of New York also have the potential to develop worker cooperatives servicing “anchor institutions” like universities and hospitals, as the Evergreen cooperative laundry, energy company and hydroponic farm have done in Cleveland. The MIT CoLab is proposing just such an initiative in the Bronx. In Cleveland, the city economic development agency played a key role in brokering funds for the initiative. This is not yet on the horizon in NYC.

But NY development under Mayor Bloomberg and his predecessors was notorious for giveaways to big real estate interests and corporations. Even now, groups are fighting $100 million in proposed government giveaways for an online grocer, FreshDirect, to move from Queens to the Bronx waterfront.

Reorienting economic development toward economic democracy may be easier when it travels the well-worn grooves supporting small businesses but not if it means shifting real resources that challenge established economic interests. Still, there is a strong argument for supporting coops and other forms of worker ownership at the municipal level because the usual tax abatements and other giveaways too often support extractive companies that pay as little as possible to the workers on the ground while sending surplus to stockholders or top executives.

Cities are also an important arena for coop policy since national initiatives are at a standstill. In early June, Vermont Senator Bernie Sanders again proposed legislation to fund state employee ownership centers like those in Ohio and Vermont that provide technical assistance to both worker cooperatives and employee stock ownership programs, companies that distribute wealth more equitably than most companies and are on occasion also governed democratically. His bill would also create a public bank that would provide much needed loans. Similarly, Congressman Chaka Fatta of Pennsylvania, working with the National Cooperative Business Association and Cooperation Works, devised a bill that would fund coop development in low-income communities through a Housing and Urban Development initiative. The vision is there, but the muscle right now is in localities. Where progressive mayors and city councils are in charge, as in New York, there are opportunities that can remake economic development for a new generation.

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