Co-op Federation Seeks to Shift Worker Co-op Movement into a Passing Gear – Non Profit News

In September, over 700 worker co-op members, co-op developers, supporters, and organizers from across the country came to Chicago to celebrate the 20th anniversary of the US Federation of Worker Cooperatives (USFWC), the national worker co-op federation.

Worker co-ops are businesses owned and governed by their employees. Workers run the organization either directly as a group or indirectly by electing fellow worker-owners to serve as representatives on the board of directors. Because workers directly own the business, they receive equal shares of its profits.

At the conference, organized by USFWC and its affiliated Democracy at Work Institute (DAWI)—a worker co-op education and research nonprofit founded by USFWC 11 years ago—worker co-op members and supporters reflected on movement growth to date and considered what steps to take next.

In Chicago, speakers surveyed the growth of the past 20 years while setting forth goals to bring worker co-ops fully into the economic mainstream through movement infrastructure, public policy, and culture building.

Two Decades of Movement Growth

Since 2004, there has been tremendous growth in the US worker co-op movement. As Courtney Berner of the University of Wisconsin Center for Cooperatives wrote in NPQ, before 2010, only one percent of US co-ops formed were worker co-ops; between 2016 and 2019, the rate jumped to 47 percent. At the conference, it was reported that there are now an estimated 1,300 worker co-ops nationwide, up from an estimated 450 just five years earlier.

The federation’s own growth has paralleled the growth of the sector it supports. When it was founded in 2004, it had a single half-time staff member. USFWC executive director Esteban Kelly noted that as recently as 2015, it had only two staff members and a budget of $140,000. Today, the federation has a staff of two dozen and a budget that exceeds $2 million.

This all sounds—and is—very impressive. But while the number of worker co-ops has grown rapidly, the size of most worker co-op businesses remains small. Roughly 10,000 workers nationwide are member-owners of worker co-ops, with total revenues just shy of $500 million.

Building for the Future

At the conference, Kate Khatib, co-executive director of Seed Commons, a leading community development financial institution (CDFI) lender to worker co-ops, called on the movement to set the audacious goal of expanding to one million worker co-op members and $100 billion in revenue in the next 10 years.

How might such an acceleration be achieved? Khatib argued that declaring the goal was the first step in achieving it. “We have to be realistic, and we have to allow ourselves to be visionary,” she said.

Khatib added, “We have to not be afraid to ask for what we want, to demand what we want. Workers make up this country. We can control a tiny fraction of the economy, and we can do a lot with that.”

Other speakers at the conference sought to highlight some of the nuts and bolts of making that shift occur.

Vanessa Bransburg, co-executive director of DAWI, emphasized the importance of increased public and private investment and technical assistance, as well as the “heavy organizing of ecosystems,” referring to the support systems that can help speed the development of worker co-ops and increase the likelihood of their success. Some key ecosystem elements include groups that help with startups; groups that provide one-on-one support services (business plans, legal, accounting, and so on); groups that help convert existing businesses into worker co-ops; and groups that help with capital financing.

Stacey Sutton, an urban planning professor at the University of Illinois at Chicago, stressed the importance of grounding the development of worker co-ops in a broader social justice movement. “Worker cooperatives will not make the change that we want by ourselves,” Sutton cautioned.

The Role of Public Policy

Public policy was another area discussed widely at the conference as a potential tool that might be leveraged to increase the pace of worker co-op growth. Increasingly, worker co-ops are making public policy gains.

In 2022, for instance, the WORK (Worker Ownership, Readiness, and Knowledge) Act, sponsored by Senator Bernie Sanders (I-VT), was passed into law. The law authorizes $50 million over five years to create a new Employee Ownership Initiative. Hilary Abell, cofounder of Project Equity, which supports the conversion of family-owned businesses to worker ownership, was hired to head the new office in July 2024.

There have also been state and local gains. At the conference, John McNamara, codirector of the Northwest Cooperative Development Center, noted that Washington state had passed legislation that establishes a revolving loan fund to finance conversions to worker ownership. The legislation also provides a 50 percent tax credit for conversion costs for business owners who convert their business to a worker co-op or employee stock ownership plan (ESOP), an employee ownership vehicle commonly used for larger businesses.

Chicago, the conference’s host city, is undertaking significant projects on worker co-ops. Nneka Onwuzurike, who works in the mayor’s office, described Chicago’s $15 million community wealth building initiative that supports the development of worker co-ops, as well as community land trusts, limited equity housing cooperatives, and community investment vehicles.

More broadly, Sutton noted the need to build on these small but significant victories. Ten years from now, Sutton said, “we can’t depend on the whims of the city.” The goal, she said, was to “have socialized this work enough that we don’t have to depend on one source” and instead be supported by “multiple sources.” Examples like Chicago, she added, should not be seen as anomalies. 

Hard Questions Ahead

At the conference, there was a lot of good news—including policy gains, growth in the sector, and organizational maturation. Yet there are still significant obstacles to moving from steady growth to the accelerated growth needed to make worker co-ops a central economic strategy. If the main stage sessions tended to accentuate optimism, the breakout sessions dealt directly with some of these challenges.

One challenge is gaining control of real estate. David Lidz, who helped found WaterBottle Co-op, a worker co-op that rehabilitates vacant homes in West Baltimore, pointed out that in cities like Baltimore, the window for co-ops to acquire land is limited. As he put it: “Now the money is coming in. Land is available for ‘we the people’ to own. The oligarchs get it.” Lidz noted that his co-op has had to “compete against the private equity pressures.” WaterBottle Co-op has been fortunate in securing low-interest patient capital from worker co-op-friendly Seed Commons; many are not so fortunate.

Camille Kerr of Upside Down Consulting noted the difficulty of balancing infrastructure needs with capacity. She offered the example of ChiFresh Kitchen, a worker co-op she helped found, which needed to acquire land, but not too much land—since land has “holding costs” (such as property taxes) that the business would have to pay even when no revenue is coming in. Some, Kerr noted, will choose to take on a “$5 million project as their first project. It’s more of a roll of the dice.” By contrast, ChiFresh spent $365,000 on its building. “Start with what you can handle,” Kerr advised. “It lowers your anxiety.”

At another session, panelists dissected the ins and outs of converting a businesses to worker ownership, which most often occurs when a founding owner opts to sell their business to the employees.

Annie Winkler, who works at the Vermont Employee Ownership Center, noted that conversions to employee ownership are complicated and often require considerable technical assistance. At Real Pickles, a company where Winkler worked that converted to a worker co-op, Winkler recalled that the team held two-hour weekly meetings for 18 months to manage the transition. Even if not all businesses are as thorough in their conversion process as Real Pickles, technical assistance needs can be significant, so limits on its availability in the field can fetter movement growth.

Winkler noted that transitions can be done more rapidly—and there can be benefits to doing so. Among these are reduced risk of losing interest or key people during the transition, and more focused organizational attention. Yet going too fast creates a risk that the worker co-op will start without the needed trust levels, financial and management skills, and business knowledge to succeed.

Moving Toward Cultural Change

At the meeting, the USFWC previewed its strategic plan for the coming five years. Of its five main goals, two were largely internal: growing the organization sustainably (through increasing and diversifying revenue sources) and unlocking quality benefits that might be provided to all worker co-ops through the federation’s network. Three were more external facing: setting standards for the field, demonstrating the power of worker ownership (which includes making the policy case), and developing leaders.

Leaders acknowledged that much of the work to be done is cultural—or perhaps better said, counter-cultural to US capitalism. Xochitl Espinosa, cofounder and executive director of the Co-op Ed Center in Chicago, remarked that over six years running the center, she has found that a lot of the focus is “about shifting the culture and how hard it is in the most capitalist country in the world.”

Espinosa added, “When people come into cooperative development, we want to make sure people understand the commitment of personal and social transformation to make this happen.”