Can worker cooperatives alleviate income inequality?
america.aljazeera.com
america.aljazeera.com
Given that the average corporate CEO in the US makes a bit under $200k/year (per the US Federal government), it would require a definition of "traditional corporation" that has been stretched to the point of misleading. Even for multi-billion dollar publicly traded companies, the CEO base pay is frequently <$1M (this is largely public record). With very rare exception, no amount of bonuses or vested stock options will close the gap between that and a minimum of $9M/year at most large corporations.
Some people at companies may be overcompensated but let's be honest about what typical figures actually look like.
"Only about 20 percent of a CEO's pay is base salary; the rest is made up of incentives based on the company's performance." http://www.salary.com/executive-compensation-it-starts-with-...
Looking at Ratio of average compensation of CEOs and production workers, 1965–2009. Source: Economic Policy Institute. 2011. Based on data from Wall Street Journal/Mercer, Hay Group 2010. Yes, CEO's only make 200-300 times "production" workers (not lowest paid worker). Fucking break out the champagne, we have beat income inequality!!!
http://www.fastcodesign.com/3036217/infographic-of-the-day/t... gives it as "In the United States, the average American CEO makes a whopping 354 times the salary of the average worker." (One of the comments says it used to be 600:1.) Note that the "S&P 500" got dropped from the description.
I am really troubled by the way traditional companies exploit workers, and see that as a major problem of our age. If you could show the world that a worker coop could succeed doing something highly technical like robotics, it would serve as proof that the cooperative model can work for more than just chicken farms. I'd be focused on growth like a silicon valley startup to some extent, but quality of life for everyone in the organization would be a big deal.
I'm also kind of curious about B-corporations, which allow a specific public benefit to share standing with profit as a legal goal. This would be more silicon-valley friendly as far as funding, since worker coops don't have the same revenue generating opportunities for investors. Though the coop could agree to some kind of internal "revenue tax" to pay back investors or save money.
I'd love to see some wealthy people just give their money away to talented organizations that want to spread public good. What I'd love most would be to just work on open source robotics that help the world. I've been developing a system for 3D printed robotics that use as few non-printed parts as possible, making it easier to collaborate online with hardware designs. I don't typically even use screws, since sourcing them can be expensive and slow - most parts just snap together or interlock.
An alternative plan though is for me to get rich the traditional way and then use my own money for good, so I am going to be checking out the new YC RFS for hardware whenever that comes out. I have some good ideas about improving life in the kitchen that might be workable. :)
I'm actually under the impression that everyone would get paid the same, as everyone would have an equal share of the company and profits. I honestly don't mind if the staff packing shipping boxes gets paid the same as I do designing new robots, though it is also possible to contract out nonessential parts of the operations so that the coop employees only form the core of the company. However that seems like cheating, since you're relying on exploited workers.
I believe open source robotics and solar power can free us from the shackles of work we put on ourselves in the name of productivity. I have a lot of respect for Karl Marx, but I also appreciate why so many of the Marxist experiments failed in the 20th century, and I hope that 21st century tech can change things.
I also believe food and housing should be made available at no cost to anyone who needs it. We can easily afford that in the US, we just have a near-religious aversion to it.
So yes, I am genuine.
This means that if you're making 1 million a year in profit, and you have 10 employees, everyone gets 100,000.
But it also means that if you have to pay 1 million a year as interest service payments on your bank loan, and your profit is 2 million, you still only make 100,000 per person. To address your point, the salary is set by every current employee based upon the financial condition and strategy of the company in real time. If sales are down for a quarter, salaries will go down. If the company is saving for a big investment, salaries will be lower. It all depends on how the owner-employees decide to allocate the funds. As such, you wouldn't so much be an "employee" looking for a competitive market salary, as the 25th co-founder signing up for whatever the current compensation/investment package the present owner-employees have decided upon within the financial strategy of the company.
Basically, expenses and costs are shared equally across the company. As in, every single worker is a co-founder.
This is an ideal model and I'm surprised it hasn't taken off more in tech. We are rapidly approaching the point where talent and capital are the two fundamental bottlenecks to innovation, profits and progress. Offering Engineer #1 one percent compared to the co-founder's 30% seems absurd in this climate. The engineer will just go and co-found his own company, and charge for consulting services.
The co-op is the natural end state of a capitalist society where the only means of progress is through hard innovation, research and optimization. This is the only solution when there is no more easy sweat-shop exploitable work which prints money.
Personally, this future can't happen fast enough. Most talented people I know are fed up with the tyrannical power structure of startups and corporations in general.
But the worker coop model is not for people who want the most profit. However we cannot simultaneously have a world where no one is exploited but the most capable maximize their profit. In order to have more income equality the elite would have to accept less pay. We see major inequality because those who could have taken as much profit as possible. That kind of thinking would need to end if we are to end worker exploitation.
However there are non-pay related benefits to working for a coop and we would find people who appreciate those benefits more than money. Certainly this is not for everyone.
But what if the coop makes millions and every worker gets $500k per year? That would be an awesome place to work.
You may not mind, but this sort of salary system would undoubtedly make it very difficult to attract people to more senior, in-demand positions. If the going rate for a highly experienced robotics engineer is 300k, and you can only offer 100k because you can't afford to pay everyone 300k, it will be nearly impossible to fill the position.
Alternatively, we could only hire people like me. If you want to make the most money, go work for a traditional exploitative company with a lot of extra money. If you want to live with a clean conscience, take less pay. Teachers do this for example. They teach because they care even though the salary is less. A tech coop could offer better pay than teaching with similar non-monetary benefits.
We will never end exploitation as long as everyone focuses solely on maximum profit, but if anyone out there wants something different we will find them. I am not saying this is guaranteed to succeed but that it is worth trying. Elon Musk didn't think SpaceX would succeed but he knew it was worth trying even if he lost all his money. Not trying the coop model means accepting the status quo of exploitation, and I'm not sure I can do that.
You say that a company that pays me what the market says I'm worth, is "exploitative." Your coop won't exploit me, and results in me earning less.
So why are they the exploiters again, and not you?
In a coop, many people will get paid more than they would otherwise, as no one gets paid starvation wages unlike most companies in the US.
Highly productive workers may get paid less in a coop than in a typically arranged company however because typical companies exploit the workers at the very bottom in order to reserve more money for those at the top. It is possible for highly technical workers to get paid more in a coop though. Apple's latest profits were something like $750k per worker per quarter (this includes apple store employees), though clearly they are exceptional. If a coop does very well, they could easily provide more money to all workers than the typical pay of a highly successful company.
A coop that makes a lot of money can also contract out some work to coops that make less money, thereby taking advantage of cheaper labor without relying on exploitation of workers. A coop that ships boxes will earn less per worker than a coop that designs robots, but such a system is generally more fair to workers.
So some people may get paid less than normal but most would get paid more. Traditional companies can afford to pay more to those at the top by exploiting those at the bottom. This does not happen in a coop.
From what I understand, Marx's definition of exploitation involves companies paying some workers less than what the fruits of their labor are worth. For example, McDonalds might pay an employee $9 an hour while getting $12 an hour in revenue from that employee's work. But, it sounds to me like your coop would be guilty of the same thing.
To take an extreme example, suppose your coop includes a janitor and a heart surgeon. Both used to work as independent contractors and bill for their time to whoever needed work done, and now your coop sends the bills and takes in the money. Before joining your coop, the janitor was making $8.50 an hour and the surgeon, $500 an hour. The coop now pulls in $508.50 an hour and gets to decide how to distribute it. I gather from your comments that you find income inequality and starvation wages to be undesirable things. Therefore, you equalize things somewhat and give the janitor $20 an hour and the surgeon $488.50.
Now, haven't you committed the same sin as the exploitative companies, namely paying an individual less than the fruits of their labor have produced?
However in a market with excess labor, workers can get paid a very small fraction of the value they produce, keeping large sums of profit for those at the top. In a coop the workers simply won't allow this, and more reasonable pay rates can be determined.
According to another commenter, many coops operate with some kind of market rate pay scale and place limits on the ratio of highest pay to lowest pay. This prevents one CEO from gobbling up half of the money used to pay workers and leaves more money to pay those at the bottom.
So you are correct that in all cases workers are paid less than the value of what they produce, but in a worker-run coop the ratio of pay to value can be much higher than in a typical business.
As far as workers getting paid what they are "worth", I think you are missing something. Yes, workers are only worth what someone is willing to pay for them. However I don't think workers get paid the maximum a company is willing to pay, especially in a market with excess labor. A company may be "willing" to pay programmers $180k per year before their business model fails, but due to a good supply of desperate people they may only need to pay people $80k per year. So in that situation the workers are getting paid much less than they are worth.
Would you agree that workers typically do not get paid the maximum the company would be willing to pay but instead get paid the minimum the market will bear?
Simply put, most workers would get paid more than they typically would, but the workers at the very top may get paid less. This would be true in any scheme that seeks to balance out the pay of those at the top, since there would no longer be huge sums of money from the exploitation of those at the bottom.
If you don't believe exploitation exists, I urge you to look into the state of capitalism in the 1850's when Karl Marx was forming his opinions and compare that to the state of WalMart workers today. Exploitation is a default component of capitalism and is not simply some imagined issue made up by those who wish for a more egalitarian society.
And apparently other commenters have mentioned that coops can have the same kind of pay structures as normal companies. For example someone noted that one company limits the pay to the CEO to 75x the lowest worker's pay, and he currently sits at just 60x. This is closer to pay differences we saw in the US in the 1960's.
But certainly when you pay the people at the bottom a fair wage, there may be less cash to throw around at the top. This is not a design flaw.
Real-world worker's cooperatives have equal voting shares for employees, but not necessarily equal pay (though generally not as unequal pay as is common in traditional corporations.)
They feature democratic control, and its quite possible for a consensus to exist that some labor is more valuable to the coop than other labor.
My worker co-op started out in the Bay Area and now is bi-coastal; SV is full of like-minded folks so you're among good company.
PS, check out http://www.reddit.com/r/cooperatives.
http://techworker.coop/sites/default/files/TechCoopHOWTO.pdf
I wish this was easier to set up where I live; too many big companies holding all of the area's mindshare (for instance, our city is less than 50,000 in population, and we have two sizable startups, one incumbant and Oracle commanding the tech staff in the area). I can't imagine any of these companies tolerating hiring out work to a tech co-op.
Why should the internal structure of a subcontractor matter to the client?
~ Bakunin
The model makes it hard to get investment, since there are no "super owners" like investors typically are. The coop could pay the investment back like a high interest loan with flexible terms, but I haven't seen exactly how that would work. I'm interested in that though - see my other comment here.
And if these people really think this is a reaction against "capitalism", in its capacity as all-powerful bogeyman rather than description of how economic transactions work...
"but to Henry Lezama, the goal is to keep growing, to bring more people into the cooperative."
... they're in for a shock because as they bring in more people, in the limit this just becomes another form of business, and as more regulations kick in based on their size they won't be able to help becoming a "business", to say nothing of how "flat management" becomes practically impossible pretty quickly and hierarchy will set in. (It's a human thing, not an ideological thing or a government thing or a "capitalism" thing. We instinctively, and I mean that fully literal, structure ourselves into social hierarchies.)
It's fantastic that people are starting to realize this and move the gains of this sort of business structure down the economic ladder. It's a powerful and flexible structure for both the members and society itself.
Are the cooperatives going to take on slackers or averagely skilled people wanting to join? How would that cooperative compete against more 'competitive' cooperatives?
The idea is that, in a traditional company, the owner (or stockholders) puts up all the investment and risk and in return, get the lion's share of the payoff. In the coop, there is no 'owner' and any profits that aren't reinvested in the company are divvied up by the workers. The trade-off is the difficulty in finding investment capital to get started, which is why many coops are simple businesses like cleaning services that can be started by workers pooling their resources.
Also, in regard to below average workers, I suppose that in many fields a coop could use productivity/skill/experience/etc to scale how big a slice of the pie each worker gets. This would allow any reasonable worker to be hired, while encouraging competitive productivity. It would all depend on the coop's rules.
This allows some room for exploitation but it would probably better adjust for real market value of workers than what we have now.
I think a mix of cooperatives and a guaranteed base income, healthcare, and housing would allow those that wish to work to continue to do so while not forcing anybody to work who doesn't wish to offers a much better alternative to keeping inequality in check than the current system.
[1] http://www.technologyreview.com/view/519241/report-suggests-...
Part of the reason for less income inequality is that the types of people who join them aren't primarily concerned with their monetary compensation. They are more concerned about a cause or outcome than earning money.
It's selection bias.
The majority of people want to get paid the most they can. It seems like a co-op tends to pay the in demand and highly skilled people less, and the less skilled people more.
I think it would be hard to attract and retain high-end talent if they can earn more in the standard workplace.
http://www.forbes.com/sites/maryjosephs/2014/11/05/millionai...
Also Bi-Mart, fantastic coop chain.
Another way to think about it is that cooperatives are the ultimate expression of a democratic workplace. Yet it's not as if every law were discussed by everybody in a democracy.
In a way, that shows that we have a lot to learn about how cooperatives can work. The quote of the union representative is very relevant: Cooperatives aren't magic dust, even though I personally believe that they are one of the key tools for dealing with the problems of capitalism. As a society, we simply have too little understanding of how cooperatives work, and until enough experiences is collected and networks exist to advise founders of cooperatives, and all those other little things that help traditional business founders are extended to cooperatives, it's going to be difficult.
Except for very small coops, they generally don't -- they generally either appoint managers directly, or elect a board, which generally appoints managers much like the board of any corporation. Cooperatives may require more decisions to be voted on by the membership than most corporations would require be voted on by shareholders, but they generally delegate day-to-day management and much long-term strategy and oversight of management.
> Enough with the ignorant pop-econ articles laced with
> subtle political pandering.