When the trash collectors of the 1930s (then known as “scavengers”) formed cooperatives to organize their work, they did so to meet an immediate and pressing need for better jobs. Their intervention in the labor market was a crisis response to market gaps. But they also laid out a vision and a set of principles that pointed at a different way to organize economic activity. Cooperatives have always walked this line between practical and visionary.
Market gaps change with the times, but employee ownership is once again being used to fill them. As job creation in our economy concentrates in the service sector, Americans increasingly find themselves working contractor gigs and patching together multiple part-time jobs. They are too often put in the position of organizing their work lives through online platforms and programming their replacements. Even in small business, which employs about half of the entire private sector workforce, job numbers are shrinking and are becoming less stable.
Cooperatives, employee trusts, employee stock ownership plans (“ESOPs”), and other employee-owned business forms are being used as tools for people locked out of good jobs to create jobs that they own. Worker cooperatives in particular, which in the 1960s and 1970s had come to be used as a strategy to exit the mainstream economy, are increasingly being used as a strategy to enter the economy, a major shift from utopianism to equity and inclusion. In the past five years, we’ve seen major US cities commit to supporting employee-owned businesses that create and save jobs. Last year, even the federal government passed a law to make it easier to finance transitions to employee ownership. These initiatives aim to meet real needs, but they are also infused with bigger ideas, particularly the hope that employee ownership could not just fill gaps in the market or help working people gain access to new labor markets, but that it could potentially be an effective response to systemic market inequality.
What does it look like to create and improve the full range of these jobs? What does it look like to in fact own these jobs? In three critical areas— shifts in the role of small business, automation, and the rise of contingent workers—employee ownership serves as both an immediate, practical intervention to make jobs better, and a longer-term structural intervention to reshape the workplace. In short, employee ownership can help us see a future of work that puts worker benefit at its core.
Entrepreneurialism: Expanding Access
The capital and small-business support landscape that produced the golden age of American small business has fundamentally shifted. Consolidation—of retail, of service sectors, of banks—has crippled (and in some cases wiped out) Main Streets. Consolidation has also radically decreased the amount and type of capital available to small business owners. Not only is it now more difficult to start and compete as a small business but a millions-strong wave of baby boomers is nearing retirement, overwhelmingly facing the closure of the businesses they built. It is unlikely that these businesses will be replaced by new, locally-owned startups.
But small businesses—and the jobs they anchor—don’t have to go away. Many of them can be preserved if their employees become the new business owners.
An employee ownership strategy for preserving legacy businesses and maintaining vibrant local service and manufacturing sectors, as well as stabilizing commercial corridors, is being implemented by major US cities, such as Philadelphia, Pennsylvania; Atlanta, Georgia; Miami, Florida; and Durham, North Carolina. A national community of practitioners has emerged, and unprecedented resources are being invested in financing these employee ownership transitions, from the Federal Home Loan Bank to mission-driven community development financial institutions (CDFIs) to philanthropic capital. Employee ownership doesn’t just save small businesses, it also creates a new class of small business owners—notably women, people of color, and low-wage workers—who have traditionally not had access to this opportunity.
Automation: Evening Out the Effects
In manufacturing, automation is having and will continue to have profound effects on jobs and job quality. Productivity increases are driven in part by automation, and jobs are being replaced—partially and unevenly, but steadily. As we contemplate a future where machines assist with and, in some cases, outright handle work that used to be done by human beings, we need to explicitly ask the same question we ask for small business: who owns and benefits from these assets?
There is one sector in US industry where employee ownership is developing dominance, via ESOPs, and that is engineering, professional, and scientific consulting firms. Joseph Blasi of Rutgers University’s Institute for the Study of Employee Ownership and Profit Sharing tells NPQ that, according