Democracy at Work: Worker Co-operatives in Australia
What is a worker co-operative?
A worker co-operative is a business that is owned and democratically controlled by its workers.
Through a worker co-operative workers can unite to meet their common economic, social, and cultural needs and aspirations. In order to form a co-operative, workers must be prepared to adopt the Cooperative Principles and Values.
The Australian Senate Economics References Committee undertook an Inquiry into Cooperative, mutual and member-owned firms where they outlined four types of co-operatives:
- Formed by members to increase their bargaining power in the market (e.g. bulk buying from suppliers to gain volume discounts)
- Members jointly purchase programs and services, improving value for money and access to expert advice.
Employee owned (Worker Cooperative)
- Provide member-employees with an income as well as a stake in the decision-making process of the business.
- Pursue long-term strategies that smooth out the peaks and troughs of the business cycle.
- Enable self-employed members and member businesses or community groups to band together and find strength in numbers.
- Includes secondary co-operatives, a consortium co-operative where all members are co-operatives and consortium mutual.
- Hybrid co-operatives combine any elements of the three other types of co-operatives.
In Australia, worker co-operatives have been termed by the Senate Inquiry as ‘Employee owned co-operatives’. Employee ownership can form part of a hybrid multi-stakeholder co-operative, and the self-employed may be included in an enterprise owned co-operative – however neither of these types can be described as an employee owned co-operative.
Benefits to stakeholders
Worker co-operatives are distinguished from other co-operative types, and also from ‘investor-owned’ businesses, by two key factors; worker ownership and worker control. Formal membership of a worker co-operative is generally restricted to active employees. What this means is that the people who currently work in the business, the worker-members, elect a Board of Management, often from among their own number, to represent their interests and advance the co-operative’s mission.
While conventional businesses generally work to maximise profits or shareholder returns, worker co-operatives have an explicit goal of providing employment for their members. Worker co-operatives strive to improve wages and conditions and increase workplace consultation and satisfaction through employee ownership.
All around the world, worker co-operatives have received recognition for providing fair, equitable and dignified work for their members, and for empowering workers with the right to make decisions about their workplaces. The International Cooperative Alliance’s World Declaration on Worker Cooperatives outlines some guiding principles for worker cooperatives to follow.
According to research conducted by the International Organisation of Industrial and Service Cooperatives, worker-owned co-operatives proved to be remarkably resilient during the Global Financial Crisis of 2009. This suggests that worker co-operatives, if properly structured and competently managed, can be a source of community strength and cohesion during times of widespread unemployment and economic downturn.
Worker co-operatives have a strong focus on worker empowerment, democratic decision-making, equitable employment, and the wellbeing of workers and the community. They provide direct benefits to workers and their families through stable, dignified employment. They also provide benefits to the community by advocating against precarious wage conditions and promoting community-led solutions to issues of unemployment and poverty. Along with the broader co-operative movement, worker co-operatives around the world are working towards a more equitable, sustainable and fair future for all.
Nearly 65,000 enterprises around the world are affiliated with the international worker co-operative movement, employing over 3 million people. Many worker-owned and governed co-operatives are small-to-medium enterprises, but there are also some notable examples of worker co-operatives that have successfully scaled their operations. These larger co-operatives are a significant force for change. Examples are:
- Mondragon, a federation of worker co-operatives in Basque country, Spain, that employs over 74,000 people in 247 companies and organisations, and operates in the finance, retail, education and manufacturing sectors.
- Cooperative Home Care Associates, a worker-owned home care agency employing 2,300 people in New York City.
- The Indian Coffee House, a restaurant chain in India run by a series of worker cooperative societies that operates nearly 400 coffee houses around the country.
- Suma, the United Kingdom’s largest independent wholefood wholesaler, employing over 160 worker-owners.
Challenges and Sustainability
Like any business model, worker co-operatives face unique challenges in achieving lasting success and sustainability. A book by Australian Co-operative Historian Gary Lewis entitled ‘The Democracy Principle- The History of Australian Co-operatives’ notes that two separate worker co-operative development programs in the 1970s and 1980s failed to produce a significant number of successful worker co-operatives, and that most of the newly formed co-operatives under these pilot programs failed within five years of formation (p.409). Like any business, worker cooperatives must ensure that they have a viable business model, that they have the correct management structures and systems in place, and that they are responsive to the changing conditions of the markets in which they operate. Worker co-operatives also have the additional challenges of securing long-term member commitment, incorporating democratic processes into a business environment, and maintaining a strong co-operative identity through times of growth, change and struggle.
The resources and links at the bottom of this page include many examples of worker co-operatives around the world, along with some suggestions for what makes a worker co-operative successful. We suggest that four main factors determine the success or otherwise of worker co-operatives:
- Access to credit and capital. The co-operative should develop ongoing relationships with banks and other funders, who may not be familiar with the worker co-operative model and may consider it a high-risk investment. Surpluses must be saved to safeguard against changes in the external economic environment.
- Initial member commitment. The co-operative should be, first and foremost, an initiative of the workers and/or their unions. Forming and running a worker co-operative is a challenging endeavour, and is dramatically different in many ways from being an employee of a typical company. If workers do not have the drive and desire to become the owners and managers of their co-operative, the venture is unlikely to succeed.
- Management quality. The co-operative should develop structures and processes that ensure fairness and transparency in the operation of the organisation. Employee-owners and managers must be educated in, and committed to, co-operative values, and must also address typical business management concerns such as customer service, marketing, and cash flow.
- Solidarity and co-operative identity. The co-operative should seek to build a sense of co-operative identity in all members and stakeholders. In the long-term, this commitment to the principles of co-operation will provide the cohesion and sense of collective endeavor that is key to worker co-operative success and sustainability.