Essay by: Eileen Gao, Student Intern, Cornell University
Democratizing education, democratizing data, democratizing work—all these phrases apply democracy to areas beyond government to mean increasing access in order to increase equality. The phrase “democratizing work” caught my eye in particular. The COVID-19 pandemic has had particularly devastating effects on work as millions of Americans lost their jobs and thousands of essential workers were required to return to their workplace in order to keep theirs. The increased risk of in-person work due to the pandemic has caused tragic numbers of essential workers passing away from COVID-19, provoking a petition led by three scholars calling for the democratization of work. The petition has been signed by more than 5,000 researchers and reported in more than 43 newspapers around the world.
Democratizing work typically looks like employee ownership, which is defined as providing all employees an opportunity to be employee-owners. The primary employee ownership structures are employee stock ownership plans (ESOP), employee ownership trusts, and worker cooperatives. It’s funny because I always associated the word “co-op” with those hip, new grocery stores stocked with organic, vegan, and gluten-free food, but I was a part of another kind of co-op this whole time: a credit union. Like I discussed in my last post “Community Banking”, although I always banked with my local credit union, I never even realized that that credit unions are consumer owned. Through further research, I was surprised to discover 40% of Americans already belong to a consumer owned organization which include credit unions, farmers’ cooperatives, municipally owned power companies, etc.
Employee-owned businesses are unfortunately less common. The National Center for Employee Ownership estimates that 32 million Americans or 10% of the population participate in employee ownership through owning employer stock. Employee ownership has proven to have widespread benefits including improving business performance, benefiting employees, and positively impacting the local community. For example, one study demonstrates that worker cooperatives are 29% less likely to close down compared to a traditional company. This impact means that not only do employee-owned businesses create long term jobs including proportionally fewer layoffs during the 2008 recession, but they also can benefit their local community in the long term. Worker cooperatives and other employee-owned businesses tend to be small businesses and research strongly shows that revenue earned by small businesses circulate almost twice the amount of the revenue of comparable national businesses.
A specific way that employee-ownership increases the longevity of small businesses is by providing retiring small business owners an alternative option. Many small businesses lack a succession plan, meaning either the business is sold to an outside party or the business is shut down after the owner retires. Project Equity recently analyzed Census data and found 2.34 million businesses are privately owned by baby boomers. Moreover, only about 15% planned to pass their business to a second generation while some businesses are sold, leaving many to quietly close after retirement. These businesses could be saved by converting the business to employee ownership! Not only can organizations such as Project Equity assist interested businesses in converting to employee ownership, right here in Detroit, Center for Community-Based Enterprises (C2BE) is doing the same work! C2BE provides legal, business-planning, marketing, and employee-training expertise to help you create living-wage jobs through employee ownership. Some local businesses C2BE has helped include Pingree Detroit, Data Driven Detroit, Church of the Messiah, Zingerman’s, and Arbor Assays. Arbor Assays is a life sciences firm previously owned by Russ Hart who, partly inspired after drinking a beer created by an employee-owned brewery, decided to seek C2BE’s help to convert his business to employee ownership as he retired.
Representatives at all levels of government have recognized the benefits of promoting employee ownership. For example, in the Michigan House of Representatives, two employee ownership related bills have been introduced: Michigan HB 5201 and Michigan HB 5202. Michigan HB 5202 aims to make the transition for a business to employee ownership easier by amending the Income Tax Act of 1967 to provide a tax deduction for the sale of business to employees. Michigan HB 5201 amends the Employee-Owned Corporations Act of 1985 to provide assistance for employee ownership in business.
Although democratizing the workplace may feel less actionable than community investing & banking as discussed in my last post, I hope this article motivates readers to further educate themselves about employee ownership. If you find yourself excited by employee ownership, I hope you find ways to promote it at your own workplace or encourage business owners in your network to pursue it. Also, encourage your representatives to support employee ownership related legislation and of course support the great work of organizations such as C2BE!