Building a Worker-Owned Innovation Economy

Tucked between the steep mountains and rugged coast of northern Spain, a vast network of worker-owned businesses is producing everything from electric cars to advanced robotics. It's also inspiring equitable growth strategies in low-income neighborhoods in the United States, from Cleveland, Ohio, to Richmond, California.

Mondragon Corporation is a network of over 100 worker-owned cooperatives and businesses with nearly $20 billion in revenue and 74,000 employees. Its home province, where the corporation employs one in 14 workers, is an economic driver for the nation, and has the highest per capita income in the country. Mondragon is an impressive business model to build an equitable innovation economy.

Economic resilience in action

Growth and innovation have been central to Mondragon’s mission and success, but for reasons different from most companies. “Our purpose is to create wealth and jobs in society. Work with dignity, this is the goal,” said Mikel Lezamiz, director of cooperative dissemination at Mondragon.

Executive pay is capped at eight times that of the lowest-paid worker in the company. “And we still attract top talent,” said Lezamiz. Worker-owners are involved in major decisions in their companies, and annual profits are distributed among them. Wages before profit sharing for entry-level workers are roughly equal to industry averages, according to Mondragon.

The bulk of Mondragon’s companies are in advanced industrial manufacturing and services. The corporation also runs a major local bank, a national grocery store chain, several vocational schools and universities, and over a dozen research and development centers. While headquartered in a small town in the Basque region of Spain, the corporation generates over half of its jobs outside of the region, including a growing number of manufacturing subsidiaries around the globe (at present, 122 plants employing 12,000 workers, who are not worker-owners).

Solidarity across the businesses has allowed most workers, if not the companies themselves, to weather the economic crisis that has crippled much of Spain. Unemployment in the area is less than half that for the rest of Spain. And when staffing at one company needs to be reduced, the cooperatives help each other place workers in job openings elsewhere. During the recent recession, over 1,000 workers in struggling cooperatives were moved to jobs in more stable ones, according to Lezamiz.

However, businesses are not immune to exposure to risk. Last year, Mondragon’s first and oldest cooperative, a household appliance manufacturer that was hard hit by the housing foreclosure crisis, filed for bankruptcy, threatening the jobs and investments of 1,800 worker-owners. The cooperative group is trying to relocate affected workers to other cooperatives.

Humanity at work

Mondragon’s slogan — “humanity at work” — is a marriage of its social justice roots and business smarts. It represents a business model that places workers as the strongest asset of a company, not a cost to be minimized. A growing number of American business leaders are recognizing the competitive advantage this approach can bring to companies, particularly ones competing in a global marketplace.

In practice, at Mondragon, this means a commitment to worker-owner participation at the highest levels of governance. Members meet annually to set the overall direction and mission of the business group, and they elect representatives to the governing council that oversees management of the businesses. All members are given full access to internal financial documents of their companies, and time during work to read through them and discuss with co-workers.

It also means a strong investment in education. Mondragon runs three community colleges and a university that offer degrees in engineering, cooperative business, humanities, and more. Students from low-income families get preference for scholarships and access to jobs to make it more affordable for them to attend, according to Lezamiz.

Spreading the model

Fifty years ago, Mondragon began with a technical school and one small factory. Soon after, they started a local bank to keep workers’ wealth in the community and reinvest it in new cooperative ventures. Today, the bank has over $32 billion in assets.

This is perhaps the greatest lesson from Mondragon. What began as a tiny venture 50 years ago is today a global powerhouse. And this was accomplished by building community wealth and maintaining a commitment to worker dignity and empowerment. In recent years, Mondragon staff have worked to spread their business model to new places, including in the formation of the Evergreen Cooperatives in Cleveland, Ohio, an initiative in Richmond, California to start several worker co-ops, and a new partnership with the United Steelworkers to develop a union-cooperative model. If these projects can replicate Mondragon’s success, they may become important drivers of an equitable economy in the United States.

In June 2014, Angela Glover Blackwell, Anita Hairston, and Chris Schildt from PolicyLink traveled to Bilbao, Spain, to participate in a German Marshall Fund summit on urban transformation, and visited Mondragon Corporation headquarters in Gipuzkoa Province, Spain. To learn more about the German Marshall Fund summit, read this blog post.

The Benefits of Paid Sick Days: What’s Good for Workers is Good for Businesses

In 2011, Connecticut became the first state to require workers to be able to earn paid sick leave. For many part-time workers, especially in industries like retail and hospitality, it was their first opportunity ever to earn paid sick leave. Though opponents to the law claimed that it would negatively impact business in the state, an evaluation of the law to date by the Center for Economic and Policy Research, however, found the opposite to be true. Not only was the impact on business minimal, employment actually rose in several sectors, including hospitality and health services, again proving that what is good for workers is good for businesses.

The need for basic work supports, like paid sick leave, was a cornerstone of the White House Summit on Working Families last week. The Summit brought together advocates, business leaders, elected officials and workers to focus on ways to help support working families. As part of the Summit, several business leaders testified to how providing work supports not only helped increase productivity and returns, their businesses also thrived and expanded. Ranging from large, multi-national corporations to small, local restaurants, providing paid time off and flexible work schedules improved staff morale and productivity and also helped business growth.

Moreover, these basic work supports are being offered by small businesses and industries that are in highly-competitive and predominantly low-wage industries. In Seattle, Plum Bistro Restaurant led the successful effort to increase the city’s minimum wage to $15 an hour. A member of the Main Street Alliance, a network of small business owners, Plum Bistro’s owner stated that while offering paid sick days costs only pennies per plate, the costs are more than made up for by improved retention, higher employee morale and increase customer satisfaction.  Costco uses a model counter to most retailers and pays living wages and provides paid benefits to all its employees. Not only do its profits steadily grow, Costco has a remarkably low turnover employee turnover rate--only 5 percent for employees who have been there over a year leave.

Currently, 41 million people do not have access to paid sick leave. Women and people of color are overrepresented in industries that do not offer paid sick leave. African American and Latino workers, in general, are far more likely to not have access to paid sick days than white workers. While businesses would see little to no impact on their bottom line, offering paid sick leave is the number one policy women living in poverty or right on the edge say would give them a leg up, even more than a wage increase or other benefits.

Giving workers the ability to earn paid sick leave is more than the right thing to do, it’s a smart business move that underscores how what’s good for workers is good for the economy.
 

Collective Courage: Jessica Gordon Nembhard on Black Economic Solidarity

Worker cooperatives and other cooperative enterprises can spur neighborhood revitalization and equitable, sustainable growth. That's because they create meaningful jobs and build community wealth while grooming local leaders and inspiring democratic participation. So argues scholar and activist Jessica Gordon Nembhard, whose new book, Collective Courage: A History of African American Cooperative Economic Thought and Practice, reveals the rich, hidden history of African American cooperatives. The 30,000 co-ops in the United States today have helped create 2.1 million jobs and contributed more than $150 billion to our total income, according to a study from the University of Wisconsin. In an interview with America's Tomorrow, Gordon Nembhard explains how the lessons of the past can foster an even stronger, more inclusive cooperative movement.

Let's start with basics: what is a cooperative?

It's an enterprise, a business model, based on a set of values and principles that are grounded in economic democratic participation. It's about supplying and supporting economic activity based on need, not based on profit, and about building assets that will stay in the community, because it is owned by the community.

How can co-ops advance community revitalization and build a stronger economy?

Cooperatives address problems created by market failures, discrimination, and underdevelopment. They help people collectively to get the goods and services they need that they can't get anywhere else or that they can get only under inferior conditions. For example, many African Americans started credit unions because banks wouldn't serve them or charged unfairly high interest rates. Co-ops are a way for groups that have faced discrimination to gain some amount of economic stability, and from there you are in a much stronger position to gain political and civil rights. Fannie Lou Hammer said you can't have civil rights if you don't have economic independence, and that's still true today.

The biggest problem is that people don't know enough about this model. We're all brought up to operate as individuals and to compete individually. But the problems we face are too big to solve individually. Cooperatives are a way for people to come together, to pool together what they do have to get something for their community, for themselves and their families. You get all these interlocking benefits, more dignity of work, more connection to the community, social and human capital development, in addition to a viable business that is stabilizing a community.

How far back can African American co-ops be traced?

I began my research by reading W.E.B Du Bois. He wrote a book in 1907, Economic Cooperation among Negro Americans. He starts reporting about enslaved people working together to save enough money to buy somebody out of slavery, or to do a community garden so that they all can get some extra vegetables and fresh food to eat. And the roots of collective action and pooling of resources go back even further. Every society, every group in the world through history has used some form of economic cooperation. To say it came only from a European tradition, which I sometimes hear, is unfair and untrue.

But what is true is that this work — actually doing alternative economics in black and other communities — was always very dangerous work, which is why I titled this book "Collective Courage." I've documented how there was physical violence and many times there was economic sabotage against these businesses. I often found instances of people getting killed, co-ops being burned down, commercial banks not lending or providing financial services to these businesses.

You describe hundreds of fascinating examples of African American cooperative activity through the centuries.

Right. I thought this book would take two years and I'd find maybe 10 examples. Fifteen years and hundreds of examples later, I'm still finding new information. I didn't expect that I would find such a rich history of African American cooperatives and cooperative activity, from slavery times to today. And I found that in each of these periods, there were black organizations that were deliberately promoting co-ops. So in the 1880s it was integrated unions, like the Knights of Labor, and black organizations like the Colored Farmers' National Alliance and Co-operative Union. In the 1930s and 40s it was the Young Negroes Cooperative League — which had Ella Jo Baker as the executive director — and the Ladies Auxiliary to the Brotherhood of Sleeping Car Porters, led by Halena Wilson, with support from A. Philip Randolph. And then in the 1960s and 70s, the Student Nonviolent Coordinating Committee and the Black Panther Party started cooperatives; and the major civil rights organizations created the Federation of Southern Cooperatives, which is still around today promoting cooperative development in the South.

In each of these periods, having strong black organizations that were deliberately doing co-ops seems to have really made a difference. And today, we have a resurgence of cooperatives, especially worker cooperatives, among immigrant communities, young people, and people of color. And again, this is being led by strong organizations, like the U.S. Federation of Worker Cooperatives, which I helped to start 10 years ago. People also start cooperatives during bad economic times, such as during the Great Depression and during the Great Recession.

What surprised you the most in doing this research?

One of the biggest surprises for me was how many black leaders were actually talking about and creating co-ops, but that's not what they were famous for. W.E.B Du Bois, A. Philip Randolph, Marcus Garvey, Ella Jo Baker, and others all spoke or wrote about, and were involved in black cooperatives and democratic ownership. African American cooperatives grew side by side with the European American cooperative movement, and grew side by side with the long civil rights movement.

Ten years ago, I'd go to co-op gatherings and find very few black people in the room. Urban African Americans felt like the co-op movement had nothing to offer them and was not relevant to them. I still get people who tell me that blacks don't have this tradition, that this is not an indigenous model. Part of my work is to remind African Americans of our long and strong history of cooperative economic activity. And once they hear some of the examples I've researched, people start to realize that this is in their own family history, and start sending me stories of their aunts or grandparents who were involved in a co-op.

Tell us about a cooperative that's around today.

One of my favorite examples is about a 25-year-old co-op, Cooperative Home Care Associates in the South Bronx. It was started by a nonprofit with the purpose of giving low-skilled women, mostly black and Latina women, much better jobs. There are over 1,000 worker-owners today, and they provide themselves with health care, good pay, a matched savings programs, and annual dividends. They really galvanized the home care industry throughout the city to get better wages for everybody and to provide better training and job-ladder support.

What's needed to advance cooperative development?

First is education. We really need more people to just understand the option, understand the model. We need to be teaching it to kids in middle school and high school. Second, we need more financing, especially if we want to do co-ops with low-income people. We need bridge loans, start-up funds, and grants; we have to educate and interest the funding community, whether it's foundations or municipalities or workforce development programs. Third, what we need is strong, uniform co-op laws. Some states have great co-op laws. Some states have none. For example, you can't license a worker co-op through Mississippi state law. We need to fix that.

What's next for you?

My book came out less than a month ago, but I have many more stories and materials that didn't fit in the first volume, and I am learning more every day. So I'm working on volume two.

To learn more about starting or supporting cooperatives in your community, go to the U.S. Federation of Worker Cooperatives , the Federation of Southern Cooperatives, and Grassroots Economic Organizing Newsletter.

Read the rest of the May 7, 2014 America’s Tomorrow: Equity is the Superior Growth Model issue.

Fast Food Nation: Why Higher Wages for Workers Benefit Us All

From New York to San Diego, thousands of fast food workers have gone on strike for higher wages and the right to form unions. Roughly three million people – disproportionately people of color – work in fast food, earning a median wage of $8.94 an hour. Better pay would not only benefit them and their families; it also would strengthen the U.S. economy. Here's why:

  1. Increase consumer spending. Every $1 increase in the minimum wage increases a household's consumer spending by $2,800 a year, estimates the Chicago Federal Reserve Bank. Multiply that by three million fast food workers, and the nation would see tens of billions of dollars in new consumer spending.
  2. Create better-paying jobs in low-income neighborhoods. Fast food establishments tend to cluster in low-income neighborhoods where there are few other employment options, including in poor suburbs. Raising wages for fast food workers would provide better employment opportunities, helping to revitalize neighborhoods while we continue to work to improve food choices in these communities.
  3. Reduce strain on our public assistance programs. Restaurant workers, including fast food workers, are on public assistance programs like food stamps at twice the rate of the rest of the U.S. workforce, according to Saru Jayaraman from Restaurant Opportunities Centers United. More than 80 percent of fast food workers earn less than $10.10 an hour, or $18,500 per year, which means they are eligible for food stamps if they're in a family of two or more. Raising the wage would allow our public dollars to go towards necessary investments in infrastructure and education, not subsidizing employers for low-wage jobs. 
  4. Raise the floor for all. Higher wages for fast food workers would put upward pressure on other low-wage industries that hire from a similar pool of workers, like other restaurant work and retail. Restaurant, retail, and service occupations are projected to have the largest employment growth in the economy, and even though many who work in these occupations have some college education, these are among the few jobs that do not require a high school diploma. Raising the floor for these jobs is an essential step towards rebuilding a middle-class economy.
  5. Create better opportunities for the next generation. More than one in four fast food workers struggle to support at least one child. Research from the Partnership for America's Economic Success shows that an increase in household income to 150 percent of the poverty line (roughly $14/hour) during early childhood can lead to increased earnings – by as much as $200,000 over his or her lifetime.

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