Designed to promote collective ownership and democratic decision-making, worker cooperatives may offer workers a path toward better pay and control over working conditions

by Sydney Pereira

PRISMREPORTS – April 11th, 2022

Five years ago, the only full-service grocery store in the Walnut Hills neighborhood in Cincinnati closed

It was a blow to the neighborhood, home mostly to Black residents. Community activists, including Mona Jenkins, asked grocery chains to bring a new store to their area, but, she says, they weren’t interested.

“They felt like there wasn’t enough economic stability within our neighborhood,” said Jenkins, a cooperative food justice coordinator for Co-Op Cincy. “The next thing was, ‘OK, if no one wants to come in, what’s our next solution?’” 

After a series of community meetings with Walnut Hills residents, Jenkins and her two co-founders decided they’d open their own grocery store, and opted to design it as a worker cooperative. The trio, all three Black women, launched a fundraiser in March for the brick-and-mortar grocery store they named Queen Mother’s Market Cooperative. Their efforts built upon an interim food delivery program Jenkins and her co-founders helped launch in the wake of the closure. 

“We evolved out of the need [for] healthy food access being denied in our neighborhood,” Jenkins said. “It evolved out of the need [for] jobs in our neighborhoods that were paying a wage where we could still be able to live within that particular neighborhood.” 

Nationwide, grocery store employees and other retail workers are notoriously underpaid. The hourly mean wage among cashiers at food and beverage stores in the U.S. is $13.18 an hour, according to the Bureau of Labor Statistics. But for Jenkins, the co-op structure would ensure more than just living wages. 

In a cooperative, “you are building a collective of people who are working together to ensure that everyone succeeds, that everyone has opportunities,” she said. “It’s about economic benefits, it’s about social benefits, and specifically with a grocery store, it’s about health benefits.” 

How we work and how we think of labor has drastically shifted during the pandemic. The need for more power and agency in the workplace is why so many workers are unionizing and, at least in part, why millions have quit their jobs. Another often overlooked option for creating structural change is a worker cooperative. The business structure gives workers authority over their workplace, allowing them to set their own rules and, importantly, share in the profits. Prism spoke to worker co-op experts around the country to learn more about how they operate. 

What is a worker cooperative? 

A worker cooperative is a business where workers manage the company through democratic decision-making processes, as determined by the members. 

“It allows us to use our skills in order to change the power dynamic,” said Kristin Forde, a cooperative development specialist at the University of Wisconsin’s Center for Cooperatives. “Profit is shared in a way that is somewhat of an equalizer.”

Some experts argue cooperatives are ideal when recovering from economic crises. Over 600 cooperatives have been identified in the U.S., consisting of 6,000 workers, according to the most recent report from the U.S. Federation of Worker Cooperatives’ Democracy at Work Institute (DAWI)—though the organization estimates that in reality the numbers are closer to 1,000 co-ops and 10,000 workers.

Among the 180 co-ops that responded to the group’s survey, 53% of workers were white, 25% were Latinx, 13% were Black, and 4% were Asian American and Pacific Islander (AAPI). In a separate 2015 report, DAWI found that the bulk of co-ops were in retail, professional services, manufacturing, waste management such as cleaning firms, and the food services industry, though co-ops exist in a wide variety of businesses.

It may not appear different to customers, even in daily operations.

“It looks a lot like a normal business,” said Andrew Delmonte, the executive director of Cooperation Buffalo. The difference is that workers collectively make decisions and have the final say over operations.

There’s no boss? 

Not exactly. Many cooperatives still delineate roles in the running of the business, such as in a restaurant, where the head chef leads kitchen operations or a floor manager oversees the front of house. 

Hierarchy can exist, but the worker-owner model allows for transparency. 

“You still need to turn a profit so you can have that manager role to ensure that happens,” said Charity Schmidt, also a cooperative development specialist at UW. “But the key [is] that there is oversight of that manager. Not just one person, but through the board of directors.”

Board of directors? Isn’t that for nonprofits? 

Nonprofits often have a board of directors. But worker cooperatives aren’t nonprofits. 

Cooperatives are set up the same way a business would be created—through a limited liability company, or, in some states, a cooperative corporation. These entities are how the state categorizes your business.

In a co-op, the board of directors is a part of the cooperative made up of either all the worker-owners or a subset elected to represent everyone. Not all the workers necessarily have to be owners. 

Members vote on how the business is run—including wages, hiring decisions, and conflict resolution—by setting up bylaws. Some decision-making power may be delegated to committees to oversee specific responsibilities that don’t require board approval. Who decides what and how those decisions are made is ultimately determined by the workers: one worker, one vote.

Mo Manklang, the policy director at the U.S. Federation of Worker Cooperatives, said that smaller co-ops may make decisions between the entire group of member-owners or set up a committee that runs human resources or other administrative duties. In larger cooperatives, like the 2,000-member Cooperative Home Care Associates based in the Bronx, there might be a more traditional HR or administrative department. 

Do co-ops pay higher wages? 

They can, though the jobs still operate within what the market will pay for certain jobs. In a 2021 report from DAWI, more than half of respondents to the organization’s survey reported that pay was “somewhat better or much better” at the cooperative than a previous job. The wage boosts were an average of $3.52 an hour.

However, pay gaps still exist in co-ops. On average, men and white worker-owners made $24.56 and $22.63 an hour, respectively, compared to $15.15 an hour for women and $14.75 for people of color, the survey found.

Large pay gaps exist across different sectors; in professional, scientific, and technical services the mean hourly pay is $30.76, while workers in health care and social services make $11.67 per hour. Because of this, DAWI suggests pay gaps could be the result of “occupational segregation, which occurs when demographic groups are not equally represented in all occupations,” according to the 2021 report.

Profit-sharing is another element of equalizing pay among worker-owners; DAWI found in 2018 that 86% of co-ops had a pay ratio of either a 2-to-1 or 1-to-1 ratio between the highest paid and lowest paid worker-owners. For comparison, CEOs at the top 350 American firms were paid 351 times that of their workers in 2020. 

Does this change workplace conditions for workers compared to a typical business? 

The principles of cooperatives are intended to lay the groundwork to do so. “What cooperatives do is they provide a pathway to economic justice,” said Cynthia Pinchback-Hines, a racial justice educator and co-op developer with Co-op Cincy.

The underlying goals of putting people before profits, creating a one-worker, one-vote system, and opportunities for empowerment within the workplace are “three areas where historically we’ve been marginalized or kept from actualizing those things in our lives,” Pinchback-Hines, who runs a training program specifically for Black workers to launch their own co-op. 

The International Cooperative Alliance lists seven principles adopted in 1995. The Mondragon principles—named for a group of 96 cooperatives based in Spainfounded in the 1950s—is another frequently used standard. These include values around equity, democratic operations, and commitment to the sustainable development of the community they operate within. 

To fully attend to the needs of workers from historically excluded groups, including Black workers, cooperatives have to be structured in a way that attend to social and cultural needs, not just fiscal ones, according to Assata-Nicole Richards, the founding director of the recently launched home care co-op, Houston-based Community Care Cooperative.

“We’re not just designing good businesses,” said Richards, who is also the founding director of the Sankofa Research Institute. “We’re designing cooperatives that have the potential, based on how they’re structured, to address these issues.” 

This could mean setting representation requirements for the board of directors, setting a holiday structure that allows for people to take off culturally relevant holidays, or creating a pay system based on need to allow for true equity and account for historic disadvantages, she said. The social and cultural elements of creating a more equitable workplace by and for Black workers is critical.

“It is being valued, being seen, being heard, being protected, being connected,” said Richards. “We know that if you don’t attend to those pieces, then you may be making a little bit more money, but the other pieces that you need around dignity, respect, value are not being met.” 

What does ownership offer workers? 

Jeanette Webster, chief investment officer of Cleveland-based Evergreen Cooperative Corporation, said that a cooperative structure can affect a worker-owner’s mindset toward their job—taking ownership both literally and mentally.

Because worker-owners share profits, they “have a vested interest in how well the organization’s doing,” Webster said. “At the end of the day, no matter what industry the business is operating in, you want to have a stable business for the employees [and] you want to be able to wealth-build among the employees.”

Ownership also creates opportunities to learn new skills that workers may not have been able to acquire before—like management, leadership, and business operations.

“If you’re coming in and you’re a cashier, it’s not about just understanding how to ring up products, but what are the other aspects of the business that you can learn?” said Jenkins, the Cincinnati market cooperative co-founder. At Queen Mother’s, she hopes that regardless of how long someone works at the market, that they learn skills that can help them reach their aspirations. 

“It’s not about making profits,” Jenkins said. “It’s about individuals’ and a community’s wellbeing and health.”

Starting a business sounds expensive. And risky. How do workers pay for it? 

“The beautiful thing about a cooperative is that you’ve got many people shouldering the risk together,” said Delmonte, from the Buffalo group. “Many small businesses will fail, but the financial risk to each individual when you’ve got a group is quite small.” 

Conversions—when workers purchase and convert an existing business into a co-op—are another option when owners are looking to sell the business. In those cases, workers can band together and finance the purchase through a loan with a lender that specializes in cooperatives, or work directly with the seller to determine a payment plan.

“There are many, many, many businesses that are at this turning point that need a succession plan,” said Forde. Worker co-op advocates argue conversions can solve the looming crisis of small business closures. Sometimes, workers will present the idea to an owner. But an owner can also propose it to their employees. “It’s essential to have an owner who’s friendly to the idea.”

Other options include crowdfunding through direct donations, community investment shares, or requiring worker-owners to purchase a share of the company they would later sell back upon retirement or exit.

What are the challenges current cooperatives face?

Manklang said that low awareness among lending institutions about how co-ops work is one obstacle in getting new co-ops up and running. A quirk in federal law currently blocks cooperatives from accessing certain Small Business Administration loans by requiring one personal guarantor on the loan, which doesn’t align with the collective operations of a co-op. Colorado lawmakers introduced bill last year that would get rid of that requirement as well as open the door for the SBA to create new development pathways for co-ops, and federal lawmakers have signaled support for employee-owned businesses. In March, lawmakers directed the SBA to make it easier for worker cooperatives to access the agency’s loan programs.  

Businesses surveyed in DAWI’s most recent report also noted providing health insurance or other benefits and tackling administrative tasks were challenges.

How do I start?  

For workers interested in starting a cooperative, Webster suggested contacting existing ones in their own communities to see who they worked with, like lawyers who specialize in cooperative development or organizations that assist with logistics. 

Taking the time to develop the bylaws—the rules of the business—will determine long-term success. Richards said a part of creating good bylaws is understanding member-owners’ past experiences in the workplace in order to create a better business culture. 

“I think a part of that is listening,” Richards said. “How you structure the bylaws will really dictate how you deal with those historical, systemic issues.”

Editor’s Note: this piece has been updated to include more information about the SBA and access to loans. [2 May 2022]