Leeds University Business School Good Sustainable Jobs in

Leeds University Business School Good, Sustainable Jobs in the Community Virginie Pérotin, Leeds (UK) CETS Workshop “Co-ops are good for you!” Edinburgh, 8 May 2012

Introduction Findings of international econometric studies • suggest worker cooperatives create more sustainable jobs • key is employee control of the firm Worker co-ops should have beneficial effects on their members and their communities Leeds University Business School

Outline • Studies of employment and pay adjustment • Other studies (productivity, firm creation & closure) • Potential effects on communities and co-op members • Conclusion Leeds University Business School

Definition Workers’ cooperative • All or most capital owned by employees (individually and/or collectively) • All categories of employees can become members • Most employees are members • Each member has one vote regardless of capital invested Leeds University Business School

Employment and pay adjustment A series of studies compare the responses of workers’ cooperatives and other firms to changes in market conditions • Craig & Pencavel (1992, 1994) on 35 plywood firms of US Pacific Northwest observed every 2 years in 1968 -86 • Pencavel, Pistaferri and Schivardi (2006) on 2, 000 worker coops, 150, 000 conv. firms and 13, 000 workers observed in 198294 in Italy • Burdín and Dean (2009) monthly observations on 200 worker coops and 14, 000 conv. firms in Uruguay in 1996 -2005 Leeds University Business School

Employment and pay adjustment (cont’d) Findings: • Conventional firms adjust employment in response to changes in product prices and to demand shocks (only in the Uruguayan study do they also adjust pay) • Worker co-ops adjust pay and not employment in response to product price changes (Uruguay: only members’ pay changes, and change>> adjustment in conventional firms) • Worker co-ops adjust pay much more than employment in response to demand shocks or recession, and employment adjustment is slower and smaller than conventional firms’ • Annual change in employment always at least as good in co-ops as in other firms in France; co-ops preserved jobs better in 1990 s recession (Fakhfakh et al 2012) Leeds University Business School

Employment and pay adjustment (cont’d) The key role of employee control • Due to employee control over the firm, cooperative internalises employees’ interests in its decisions • Pay adjustments are incentive compatible • To members, a job in a workers’ co-op is more valuable than a job in a conventional firm: Ø Members have a say in working conditions, etc Ø Members have a say in decisions affecting employment risk • So job security is essential Leeds University Business School

Employment and pay adjustment (cont’d) Focus on job security is consistent with profit ploughback behaviour of worker co-ops in I, Mondragon, F • In all 3 cases bulk of K is owned collectively and co-op must plough back at least a certain % of profit annually • But in all three cases co-ops plough back considerably more than required • Plough-back may be a form of insurance (Zevi 2005, Navarra 2009): in I (and in F) members draw on collectively-owned reserves in downturns in order to preserve both jobs and pay • More profit is kept in the firm Leeds University Business School

Other Studies Productivity • Worker co-ops organise production differently from other firms (Berman & Berman 1989, Estrin 1991, Craig & Pencavel 1995, Jones 2007, Fakhfakh et al 2012) • Craig and Pencavel (1995) on US plywood industry, Fakhfakh et al (2012) on 6, 500 French firms with 20 employees or more incl. 550 co-ops (10 industries in manufacturing, construction and services) find that on average both co-ops and conventional firms can produce more with the co-op technology • Fakhfakh et al (2012) on France: in several industries conventional firms would produce more with their current inputs if they adopted the co-ops’ way of organising production Leeds University Business School

Other Studies (cont’d) Firm creation and closure / survival • Worker co-ops are more likely than conventional firms to be created in a recession • The business cycle has the same effect on the numbers of firm closures among worker co-ops and among conventional firms in France (Pérotin 2006) • Considerable survival (more than a century) not uncommon • Overall, annual rates of closure identical for co-ops and other firms in France (1979 -1998: 11%) • Burdín (2010) on Uruguay Cox proportional hazard on 22, 300 firms including 243 co-ops, monthly obs. April 1996 – Dec 2005: co-ops survive better Leeds University Business School

Conclusion International research findings indicate that worker cooperatives create more sustainable jobs than conventional firms do There may be beneficial effects on communities’ public finances and health Job preservation alone would warrant public support for durable forms of worker cooperatives (i. e. with provisions against demutualisation and degeneration) Support is particularly important for new co-operative creations Leeds University Business School

Workers’ cooperatives must be good for members and communities Worker cooperatives create good, sustainable jobs Implications for local communities • Public finance effects of better job preservation in recession • Spillover effects • Public health effects for community of reduced unemployment • and for co-op members (Whitehall studies on health effects of control in high demand jobs) Leeds University Business School