Worker Owned Businesses

 

Building Community Wealth on Long Island

The Long Island Progressive Coalition’s commitment to economic justice has led us to begin a campaign to Build Community Wealth through promoting worker ownership of small businesses on Long Island.  Long Island has long been a place of economic inequity and it’s time for grassroots solutions that build an economy for all Long Islanders.

The American Dream: Promise Vs. Reality

In 1947, entrepreneur Abraham Levitt broke ground on a planned community located in Nassau County, Long Island. Within a few years, the Levitts had transformed the former farmland into a suburban community housing thousands of men—many of whom were veterans returned from World War II—and their families. This was the creation of Levittown, the first suburban community, and with it the promise of the suburb: a place where you can have a nice home, car, good schools, and a family-sustaining job. This promise became the American Dream.

In practice, however, the suburbanization of America has actually contributed to the exploitation and entrenchment of exclusion and segregation. Long Island was the first suburb, and we are one of most segregated regions in the country, home to some of the wealthiest communities and some of the poorest. There are pockets of poverty that have poor performing schools, lack of public transportation, and lack of access to healthcare and affordable housing. All of this, of course, is connected to persistent income inequality, which in turn hinders our economic development.

A New Economic Strategy for Long Island

The LIPC proposes that we challenge this status quo and transform our local economy by enabling Long Islanders to become worker-owners in locally-based businesses.

Worker-owned cooperatives are business enterprises that are owned and governed by their employees. All worker cooperatives have two common characteristics:

  • member-owners invest in and own the business together, and share the enterprise’s profits, and
  • decision-making is democratic, with each member having one vote.

Worker-owned cooperatives play a critical role in building community wealth for several key reasons:

  • They create quality, empowering jobs for community members.
  • Since most workers are community residents, worker cooperatives are more likely than other businesses to employ sustainable business practices that do not harm the local environment, and profits are more likely to remain and circulate within the community.
  • As democratically run organizations, cooperatives help member-owners develop critical leadership skills and practice direct, grassroots decision-making.
  • They allow employees to accumulate wealth and build assets through having an ownership stake in the cooperative.

A Proven Model

Worker cooperatives are not a new concept. Currently, over 500 worker-owned cooperatives, large and small, operate in a diverse range of industries throughout the United States. They have been thriving in the US since the start of the country with the Shaker furniture company, which was a woman-owned cooperative. There are many other success stories, for example that of King Arthur Flour, which transformed a family owned business into a business owned and run by its 325 workers.

Worker cooperatives have also proven themselves elsewhere. In the Emilia-Romagna region of Italy, a full 40% of companies are cooperatives. In Spain, the Mondragon Cooperative Corporation currently consists of 102 federated cooperatives employing over 73,000 people. The vast majority of these worker-owned businesses are in the industrial and distribution segments of the economy, competing successfully in global markets. In addition, the Mondragon cooperative system owns its own bank, university, social welfare agency, several business incubators, and a supermarket chain.

Studies also show that worker owned businesses are more profitable in part because when maximizing profits isn’t the only goal, companies can actually work better. Virginie Perotin of Leeds University Business School synthesized research on “labor-managed firms” in Western Europe, the United States and Latin America, and found that, in addition to the holistic social benefits of worker autonomy, giving workers a direct stake in managing production enables a business to operate more effectively. On balance, Perotin concludes, “worker cooperatives are more productive than conventional businesses, with staff working ‘better and smarter’ and production organized more efficiently.”

The Time Is Now

Long Island is swiftly approaching a small business closure crisis, sometimes called the Silver Tsunami, due to the retirement of the largest cohorts of the Baby Boomer generation. A recent Stony Brook University Study found that while an astounding 46% of Long Island business owners intend to transition their business in the next ten years, only about 10% plan to pass the business onto a family member. What will happen to their businesses? Will they sell them to new owners? Move them off of Long Island? Close down? And how will these changes affect our communities?

Of course, many business owners hate the idea of abandoning their legacy and possibly having to lay off their workers, yet most do not have a family to take over the business. We spoke with one owner who operates a very successful pest control company. He said, “My daughter is a doctor, my son is a lawyer…. They do not want to take over my company.” At the same time, he thinks about what will happen to his company’s employees, who are already managing the bulk of the company’s day-to-day operations. “There are workers who have been here for 30 years and it kills me to think they might not have a job here. They know how to run the business.”

For the owners there are currently significant federal tax incentives to sell to their workers. Owners sell their businesses at full value and, depending on the structure of the sale, they can reduce or possibly even not pay any capital gains tax.  For these and a host of other reasons, now is the right time for owners to learn more about converting their business to worker cooperatives.

A Cooperative Approach

Due to quickly approaching the Silver Tsunami, the Long Island Progressive Coalition is focusing our efforts on preventing job loss and stabilizing communities through converting successful businesses into worker cooperatives. We are co-op developers. We do this by educating the larger community about the benefits of becoming worker-owned and building an ecosystem of support for the owners and workers to be able to successfully convert a business. We have support from local universities and experts in the field, and we have two loan funds to purchase the businesses through.

To learn more about Long Island Progressive Coalition’s efforts to Build Community Wealth through worker ownership contact Dan Fingas at dfingas@lipc.org.