The cooperative solution to stagnant wages

Australian workers are going through trying times. Wages have flatlined. Job insecurity, wage theft and penalty rate cuts are everyday realities. The election was supposed to be a referendum on wages but it did not deliver the change union movement leadership was looking for. It’s time for new strategies. It’s time to talk about worker cooperatives.

Worker cooperatives are enterprises owned and managed by workers. They describe a form of business where decisions are made on a ‘one worker, one vote’ basis rather than the ‘one dollar, one vote’ rule which dominates conventional workplaces. Workplace democracy is the next frontier of economic reform. The sooner Australian policy-makers catch up to their North American and European counterparts, the better off we will be in the future.

It should come as no surprise that worker cooperatives provide for a more equitable income distribution than conventional businesses. Financial decisions need to be ratified by the workforce so there is no room for a CEO’s salary package to be over 100 times an average employee’s pay, as former Commonwealth Bank CEO Ian Narev’s was prior to the Banking Royal Commission. Instead, workers might decide to pay a high salary for the right CEO but they will be looking for an effective return on investment. After all, democratic enterprises require key expertise in specialist fields as well as high-quality managers.

There are those who look on the prospect of ordinary workers owning and running businesses with abject disgust. Worker cooperatives might sound nice in theory but would they really be viable in the rough-and-tumble reality of business? To those detractors I simply say, look at the scoreboard.

On every measure, worker-owned enterprises as they actually exist today come out in front of conventional corporations. Worker cooperatives are more productive, resilient and socially responsible than their corporate counterparts. In 2016, Professor Virginie Pérotin of Leeds University Business School undertook a study of the available data on employee-run firms in Europe, North America and Latin America. She found that staff in worker cooperatives work ‘better and smarter’ allowing these enterprises to more effectively organise production. This overcomes the drag of some bosses who simply act as overpriced middlemen (with the emphasis on men), in the workplace.

Worker democracy also provides for greater resilience in the face of adversity. Workers grappling with a period of economic difficulty are far less likely to initiate layoffs. Instead, they tend to preserve jobs through temporarily scaling back working hours. Furthermore, workers are far more likely to keep capital and investment in the communities where they live. The dislocation and disruption felt by those left behind by offshoring and outsourcing can, therefore, become a thing of the past.

Given the urgency and number of crises we face today from workplace insecurity, global heating and growing inequality, it’s reasonable to question whether worker ownership can rise in time to the scale required to match the magnitude of our problems. There are thriving worker cooperatives in Australia today, such as the Earthworker Energy Manufacturing Cooperative, which makes solar hot water heaters in Morwell, Redgum Cleaning in metropolitan Melbourne, The Co-operative Life providing social care in New South Wales and the Resource Work Cooperative, which carries out a number of recycling services in Hobart. Australia’s sector nonetheless remains tiny in comparison to Europe and North America. Across those two continents, hundreds of thousands of workers own their cooperative enterprises across a diverse range of sectors, from manufacturing to care and hospitality. This is no accident but a reflection of divergent policy settings in Australia.

Last year, the notoriously gridlocked and then Republican-controlled US Congress managed to pass the Main Street Employee Ownership Act with bipartisan support. The legislation directs the Small Business Authority to take measures to increase technical and financial assistance for start-up worker cooperatives. This measure is reflective of a raft of legislative measures at a state-level in the US that provides greater legal certainty for worker cooperatives, as well as ensuring there is a level playing field for cooperatives when it comes to competing for limited state funds for industry assistance. Meanwhile in Italy, the Marcora Law provides state-assistance for workers to buy-out existing firms. Since its introduction in 1985, the law has helped save or create over nine thousand jobs across 257 new worker-cooperative enterprises.

There is no reason why Australia cannot build up a worker cooperative sector employing tens of thousands of people in well-paid secure jobs over the next decade. These are just the sort of jobs that anchor communities and provide hope for those who would overwise depend on sectors such as the fossil fuel extraction industry.

Conventional corporations receive a staggering amount of public subsidies and funding. If worker cooperatives had an equal shot at getting the same treatment, then we could all reap the social and economic rewards. Moreover, the twin traditions of worker ownership and entrepreneurship which runs through the very heart of cooperatives means the sector could cut through the traditional partisan divides in Canberra. This is one area of pro-worker reform that Coalition parliamentarians might even move on (with some pushing). The problem with Australian democracy is not that there is too much of it, but that it stops as soon we clock on at work. We can secure a new era of workplace cooperation, reform and prosperity but only on the basis of worker ownership.


Image: Leeds Museum and Gallery, Flickr

Godfrey Moase

Godfrey Moase is an Executive Director, United Workers Union. He’s previously written for the Guardian, Overland, Jacobin and New Matilda.

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  1. Thanks Godfrey for this compelling and strongly argued case. We are lagging internationally which is somewhat surprising given the great success of our union led industry superannuation funds. Perhaps we need some leadership in unions and state governments to incubate the growth of such worker owned businesses and to aggregate a pool of values-aligned, world class executives and board directors to support the push. I’m up for it.

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