Building a Worker Co-op Ecosystem: Lessons from the Big Apple

What if a nonprofit wrote a report and city policy actually changed as a result?

Truth is, reports by nonprofits that advocate policy changes are written all the time, but most, even when full of good policy ideas, gather electronic dust.

But in New York City, in January 2014, the Federation of Protestant Welfare Agencies (FPWA) published a report, authored by its executive director Jennifer Jones Austin, titled Worker Cooperatives for New York City: A Vision for Addressing Income Inequality. There have been a lot of reports written on worker cooperatives over the past decade, including many by national nonprofits and one published by the Surdna Foundation. But none have been as influential as that 40-page report published in New York City in 2014.

The report, in its executive summary, made the following top-line policy recommendations:

By June, less than six months after the report was published, New York City, which had never before spent a dime to support worker cooperatives, had launched its Worker Cooperative Business Development Initiative, seeded with $1.2 million in city funds. In so doing, New York became, as Jake Blumgart wrote in Next City at the time, “the first city in the United States with a line item in its budget specifically for the development and cultivation of worker cooperatives.”

It was a big step in an astonishingly short period of time, even if the $1.2 million was a drop in the bucket of the $75 billion budget the city approved that year. Fortunately for worker co-op advocates, the program has been largely successful. City spending accordingly has increased over time to Fiscal Year 2020’s allocation of $3.6 million.

Of course, it wasn’t simply the report’s policy logic that led City Council to respond so promptly. The “who” behind the report mattered—a lot. First, there was the FPWA itself, a large nonprofit which in 2014 had over $6 million in revenues. It mattered too that a leading city anti-poverty agency backed the campaign, rather than just worker co-ops themselves. Additionally, Jones Austin herself was an influential city political leader, who then-mayor-elect Bill de Blasio tapped to co-chair his 60-person transition team. And FPWA was backed by its many coalition partners, who mobilized to support the budget allocation, testifying at a city council committee hearing held a month after the report came out. For example, at the hearing, Elizabeth Mendoza, a worker-owner of the Beyond Care childcare co-op incubated by the nonprofit Center for Family Life, located in Brooklyn’s Sunset Park neighborhood, told the Council committee:

In 2008, I had the opportunity to begin working with the cooperative Beyond Care. My life changed completely—personally, professionally, and economically. The beginning of the cooperative was not easy. No one knew about our co-op; we did volunteer work at organizations and universities and often gave childcare in exchange for opportunities to market our group in the places we volunteered. I had basic English then. I have learned so much more. I have also learned to use computers. My salary is better. I work the amount of time I want to work … My first daughter will graduate from college in June. My youngest son is in third grade. The best benefit of all of this is giving my children the opportunity to have a better education.

Mendoza added that the co-op, which had begun with 25 members, had grown to 40 members, while wages had climbed from $10 an hour or less before the co-op formed to $16 an hour.

Beyond Care, of course, was one of a number of worker co-ops that had developed in New York City before 2014, even in the absence of policy support. Now that the city has supported worker co-op development for over five years, what can we say about the policy’s effectiveness?

Understanding the Policy Framework

The framework established largely followed the vision set forth in FPWA’s report. The lead agency ended up being Small Business Services (SBS), one of the two city agencies named in the report. In its first-year report on what ended up being called the Worker Cooperative Business Development Initiative, SBS indicated that, the initiative, which disbursed funds to ten organizations, aimed “to share information with prospective entrepreneurs, support existing worker cooperatives, spur the creation of new worker cooperatives, and help small businesses transition into the worker cooperative model.”

The initial ten nonprofits involved in product delivery included a couple of national nonprofits that support worker cooperatives (Democracy at Work Institute (DAWI) and ICA Group), a couple of local co-op specific organizations (Bronx Cooperative Development Initiative and Green Worker Cooperatives), a worker co-op-focused loan fund (The Working World), the city co-op trade association (New York City Network of Worker Cooperatives), a nonprofit which had historically been the city’s leading worker co-op developer (Center for Family Life), and three community-based nonprofits (FPWA, Make the Road New York, and Urban Justice Center).

Over time, the composition of the nonprofit partners has changed, Two of the three community-based nonprofits (FPWA and Make the Road New York) are no longer directly involved, and Urban Justice Center’s role has been taken over by Takeroot Justice, which spun off from the organization. Meanwhile, five new nonprofits have been added to the mix, including two business-support nonprofits (CAMBA Small Business Services and Business Outreach Center Network), the City University of New York’s community and economic development law clinic, and two anti-poverty nonprofits (Urban Upbound and Worker’s Justice Project)

Different nonprofits have played different roles. Some nonprofits focus on community outreach and education. For instance, over the past three years of the program, WCBDI-funded nonprofits have conducted educational workshops and trainings that have reached over 8,000 New Yorkers. On the WCBDI website, nonprofits roles are set forth in five distinct categories—1) groups that help with worker co-op startups; 2) groups that provide one-on-one support services (business plan development, accounting, etc.); 3) groups that provide worker co-ops with legal support; 4) groups that focus on converting existing businesses into worker co-ops (which, as NPQ has detailed, is an essential strategy for maintaining existing businesses as Baby Boomer owners retire); and 5) one group (the Working World) that helps finance worker co-ops.

While most of the direct project work has been done by and through the nonprofit partners, SBS has played an essential role in helping legitimize worker cooperatives in New York City as a respectable way of operating a business. For instance, in the first year of the program, SBS created and offered a course called “Ten Steps to Starting a Worker Cooperative,” with sessions held at NYC Business Solutions Centers in Lower Manhattan, Harlem, and the Bronx. The agency also in the first year of the program created a two-page brochure on workers co-ops that remains available at the city’s seven SBS offices and on its website.

The Big Apple’s approach of working with multiple nonprofits reflected the coalition that had testified at City Council back in 2014 and had made passage of a city worker co-op support policy possible. At the same time, it is important to understand how the approach differed from past efforts. When the New York City policy was adopted, the leading philanthropic-backed US worker co-op development approach was the one pursued by the Cleveland Foundation, which had backed the launch of the Evergreen Cooperative network, a centralized model that aimed to launch a group of cooperatives from a single, well-funded incubator nonprofit.

New York City—perhaps by design, but more likely due to the momentum created by the organizing coalition—took a different tack. Rather than make one big bet, it made a lot of small ones. This has led to far more rapid creation of cooperatives than what a centralized single incubator model has been able to produce. The diverse network of nonprofits involved also likely helps reach the immigrant workforce that to date has been at the heart of New York City’s worker co-op boom. According to the city’s annual reports on the program, in the first year alone 21 new worker cooperatives were formed.

One challenge with the multiple nonprofit approach, though, is that the co-ops by and large formed in New York City have been much smaller than the co-ops created through a centralized single incubator model. While New York City’s program in Fiscal Year 2015 supported 21 co-ops, these co-ops had a total of 141 worker-owners, an average of less than seven worker-owners per co-op. (By contrast, Evergreen has formed three co-ops over the course of a decade, but those three co-ops as of 2018 employed 220 people.)

Despite their small size, however, the New York City co-ops have displayed considerable staying power. As the city’s Fiscal Year 2019 report indicates, “In its first year, the NYC Council distributed $1.2 million across 10 partner organizations who assisted in the creation of 21 worker-owned cooperatives. Fourteen (67 percent) of those businesses are still in operation — surpassing the national five-year survival rate for small businesses (about 50 percent).”

Whither Worker Co-op Policy Today?

It is worth noting that New York City’s model has had broad influence outside the Big Apple. A number of cities have, with tweaks, adopted what Michelle Camou and others have labeled the “ecosystem approach.” Madison, Wisconsin is one of the more prominent, allocating $3 million over five years to support worker co-op development through a process managed by the Madison Cooperative Development Coalition. Minneapolis, albeit at a smaller scale, has implemented a similar approach. In California, a policy passed in Berkeley last year aligns in a similar direction.

Meanwhile, efforts to strengthen the worker co-op ecosystem continue. Even as the effort in New York City has added more than 100 new worker-owners a year, these are still small numbers in the context of a city population that is close to 8.4 million people. A few years ago, a report by DAWI and the Oakland, California-based Project Equity highlighted three challenges:

1. “Build Member Skills and Capacity within worker co-ops, especially the 50 percent that were formed in the past ten years.”
2. “Increase the quantity and diversity of patient capital available as Financing for NYC worker cooperatives and Co-op Developers.”
3. “Make Cooperative Education and Business Supports available through educational institutions, community programs, and city agencies.”

For its part, the city’s most recent report noted that the worker co-ops that it had surveyed had reported problems, despite city efforts, in being successful in winning city procurement contracts. In response, the city recommends stepped-up efforts to assist co-ops with language translation, with assisting co-ops obtain certification as women and/or people-of-color-owned businesses, and with accessing city bond and financing programs.

In thinking about policy, it is also important to consider that it often helps to focus co-op development in industries where they have been most effective. Generally, as Melissa Hoover, who directs DAWI, pointed out last year, worker co-ops often do best in businesses that are “value-driven” and rely on teamwork. Co-ops in home healthcare and childcare are two prominent examples of this. As Hoover put it last year, “If there’s something that says we should do this in a humane or human-centered way, [people] often come to cooperatives because it enacts their values across-the-board and it dovetails with the work they’re trying to do.”