Joe Cullinane from North Ayrshire recently announced his plans to introduce a scheme to increase worker owned businesses in the area as part of a community wealth building strategy. In this article we’ll take a look into what worker ownership means and why this could be good for North Ayrshire.
Worker ownership can mean a lot of different things; it can be a business where every employee gets a vote on decisions the enterprise makes, or it can be a business were the management is elected by employees to make these decisions. The structure is variable, but the basic principle is that every worker gets a say in how the business is run. This turns the workers into worker-owners.
The basic central idea is that people doing the job generally know the job the best- if given the chance to make choices in their work the people at the coal face will know the best course forward. We’ve all had managers that knew nothing about how the workplace actually runs, leaving you to try your best to cover for their (ahem) “hands-off” management style. Worker ownership avoids this awkward and annoying occurrence by making it so that management is more accountable to the workers, and not the other way around.
On top of this worker co-ops have a proven record of success; a taxi company in Texas was able to compete with and then drive out of Austin companies like Uber and Lyft, at a time when taxi companies structured like more traditional businesses are struggling to keep their head’s above water. This isn’t a one off example either, a study by former professor of Economics at the University of Leeds Virginie Pérotin showed that worker co-ops were able to compete with traditional firms and that many are in fact more productive. This is largely because workers tend to be more motivated when they have a say in how their labour is used. Professor Richard Wolff, an american economist suggests that a combination of the fact that co-ops are more productive and its workers are more motivated is why these organisations stay in business at a far higher rate in their first year compared to more traditional business.
This system is not only beneficial for the businesses themselves. The Emilia Romagna region of Italy has taken the concept of worker run businesses to heart, with nearly two thirds of its population members of a co-op, producing about a third of the region’s GDP. The north of Italy has always been a very economically strong place and the fact that co-ops can and have taken such a large claim to the local economy speaks to the strengths of co-ops.
Italy has another interesting policy in support of co-ops, namely that instead of taking their regular unemployment benefit, people can choose to take a sum of money up front and use this as start up capital towards a co-op. So rather than being unemployed and on the dole, you and a few friends can come together and start your own business. This helps keep unemployment low and means that instead of layoffs leading to mass unemployment, it leads to the nurturing of enterprise.
At the time of writing we don’t know that much about Joe’s own plan to introduce worker co-ops to Ayrshire, but what we do know is that it would likely be a lot less radical than the policy in Italy. Joe specifically spoke out about introducing co-ops to Ayrshire at a meeting discussing family business succession. Family run businesses form a large part of the local economy, unfortunately these don’t tend to last forever- eventually someone in the family decides they want to do something different with their lives and this, along with other factors, leads to many of these businesses not surviving past the second generation. Joe’s plan would give the workers a chance at running these businesses and could prevent them losing their jobs. While the specific details are not available at the time of writing, the policy is being worked on by the Community Wealth Building commission in North Ayrshire.
It’s no secret that North Ayrshire and Ayrshire as a whole have a long running issue with unemployment and an economy that lags behind the rest of Scotland, plans like this to revitalise the area are more than welcome in my opinion, and I will be watching for the CWBC’s final draft of the policy keenly. Looking at studies by Professor Wolff and Pérotin, as well as a working example in Italy my only worry is that this policy may not be radical enough.