Saturday, September 27, 2014
Workers in Maine Buy Out Their Jobs
The cooperative movement has a long history, but what is needed most is a system of loan guarantees that encourages their establishment as even a first choice. In this way local people employ local people and provide real income stability and even a potential support net for job seekers.
It is also obvious that this form of structure is able to service the lower third of the economy in particular far better than any other system and should be encouraged. It can internally grow its own equity for expansion as well.
The system should also be linked directly to microfinance as well. Thus it can multiply its impact in the community.
Workers in Maine Buy Out Their Jobs, Set an Example for the Nation
Saturday, 13 September 2014 10:25
On remote Deer Isle, Maine, the movement for a more just and democratic economy won a major victory this summer. More than 60 employees of three retail businesses - Burnt Cove Market, V&S Variety and Pharmacy, and The Galley - banded together to buy the stores and create the largest worker cooperative in Maine and the second largest in New England.
Now the workers own and run the businesses together under one banner, known as the Island Employee Cooperative(IEC). This is the first time that multiple businesses of this size and scope have been merged and converted into one worker cooperative - making this a particularly groundbreaking achievement in advancing economic democracy.
Getting There: What It Took
When the local couple that had owned the three businesses for 43 years began to think about selling their stores and retiring, the workers became concerned. The stores were one of the island's biggest employers and a potential buyer probably would not have come from within the community or maintained the same level of jobs and services. Only a worker buy-out could achieve stability.
Because these workers were trying to accomplish something historic, it took more than a year - and it wasn't always an easy road. But the workers' strength lay in their own determination, and in the ability to rely on a group of allies dedicated to growing the cooperative movement. The Independent Retailers Shared Services Cooperative (IRSSC) and the Cooperative Development Institute, helped them develop their management, governance, legal and financial structures. They were also able to secure financing from Maine-based Coastal Enterprises and the Cooperative Fund of New England, both Community Development Finance Institutions (CDFIs). Without that dedicated technical assistance and available capital, it is doubtful the IEC would be here today.
More Is Needed
While the creation of the IEC maintained dozens of decent paying jobs and a remote community's only nearby access to essentials such as groceries and prescription medications, it also points to a successful model that could be used across the country to expand ownership and wealth to regular working people. This experience shows that if only we had more resources to experiment with grounded, practical economic policies, we could create many more of the living-wage jobs and community-sustaining businesses we desperately need.
The Great Recession has led many to consider better ways to organize our economy, as always happens during economic downturns. But the reality is that our economy, even during the "good times," has always been failing working people. So we need to think long term and change our strategies in order to build a durable, democratic, equitable and just economy.
The Great Recession in Maine: A Bad Situation Gets Worse
In the aftermath of the Great Recession, Maine has won back less than half of the jobs we lost (ranking us 46th among the states): We are second from the bottom for total job growth, and we have one of the highest numbers of part-time workers who want more employment but can't find it. Nearly one-third of unemployed Mainers have been looking for work for more than six months, which is more than twice the national average. And what little growth there has been has occurred almost exclusively in the Portland metro region, in far southern Maine.
But it's not as if our workers were prospering before the Great Recession.
Over the last 30 years, the incomes of the poorest Maine workers grew by only 27 percent, while incomes for the wealthiest Mainers jumped by 67 percent. Starting in the late '90s, Maine lost more manufacturing jobs per capita than any other state. Maine workers also have the lowest average incomes of all the New England states and, of Maine's 16 counties, 14 of them are among the poorest in the region. As a result, one in seven Mainers overall and more than one in five children live in poverty. Most shamefully, poverty characterizes more than one in four young children, and one in three in our poorest counties.
In short, Maine's low wages, limited job prospects, deepening poverty and growing inequality are not just the result of the Great Recession; it is structural and long-standing. We've needed to change the way the economy works for quite a while. And that's exactly why strategies to create sustainable, democratic businesses like the Island Employee Cooperative are so critical.
The Island Employee Cooperative: A Model for Maine and the Nation
Worker cooperatives hold the promise of fundamentally addressing our longstanding economic woes. Because they give members an equal voice in the co-op's governance, a worker co-op will almost never pick up and leave its community. Those jobs are democratically owned by the people who work and live there.
In addition, in worker co-ops, employees have an incentive to work harder and smarter, because they benefit from an equitable share of the profits. And when a worker co-op is facing financial difficulty, the first response isn't to lay people off. That's because the worker-owners are sharing the risks and burdens of the business as well. Instead, members often come together to find democratic solutions to their problems, such as temporarily lowering wages or cutting hours for all workers, so that no one person has to lose their job. This is one of the major factors that also make worker co-ops more economically sustainable in low-income communities.
For the new worker-owners of the Island Employee Cooperative, the transformation into a co-op will, over time, create profound changes in their lives as they begin investing some of the business' profits into better wages and benefits - something that is extremely uncommon for those in the retail business. The co-op is also already collaborating with the Maine Community College System to deliver education programs on-site so that the workers can improve their knowledge and skills. While retail jobs are often depicted as low-wage and dead-end, these retail workers are now business owners who will learn to make many hard decisions together. And because IEC is one of the island's largest employers, the cooperative ownership model will make a tremendous impact on the community as many more families build wealth through democratic ownership.
That's a model we can and should scale up.
A New Approach to Economic Development
Unfortunately, successful examples like the IEC are rare in the United States because worker cooperative development gets little to no support from city, state and federal governments. Instead, these institutions spend a fortune on economic development programs that create windfall profits for corporations, but very few sustainable, living-wage jobs.
The way states have traditionally pursued economic development relies primarily on "chasing smokestacks" and dreaming up new tax giveaways for out-of-state corporations. That serves to benefit the 1% while leaving workers in the dust.
A less costly, more effective and more equitable strategy of focusing on worker co-op development would drive investments into grassroots initiatives for economic sustainability. Some support already exists: For example, New York City just passed its 2015 budget and is investing over $1 million in a comprehensive program to support the development of worker cooperatives, including directing existing business-development resources to be more supportive of worker co-ops. Ohio has provided small grants for feasibility studies and technical assistance to employees considering a cooperative buyout of their workplace, using federal funds that are available in every state (but utilized by only a half-dozen or so). Rural Cooperative Development Grants from the US Department of Agriculture support state and regional groups that provide cooperative development services in rural areas (though not just to worker co-ops).
There are more examples of supportive policies, but they all amount to a tiny drop in the bucket compared to what is spent on typical economic development approaches that do little for working people.
In order to begin scaling up worker co-op development, we need to provide technical assistance and small pre-development grants to people starting co-ops within their own communities, make available better education on how to operate a cooperative, provide loan guarantees for groups who would otherwise struggle to access credit, and offer targeted, accountable tax incentives.
Communities across the country would benefit from more initiatives that support development of new co-ops, as well as converting existing businesses into worker-owned ones like the Island Employee Cooperative.
This approach would allow many more communities to sustain themselves, cultivate jobs with dignity, improve wages and help more people build wealth through democratic ownership. And then we might see a transformation into an economy that truly and sustainably serves the needs of all.