The Performance of Worker Cooperatives vs. Capitalist Firms




In this careful and robust examination of all of the evidence currently available, Virginie Pérotin, the leading expert on the economics of employee ownership and worker cooperatives, compares the performance of worker cooperatives to that of conventional capitalist firms.

One of the virtues of Pérotin’s analysis is her key insights into the methods that should be used to compare these two types of firms. Rather than using the traditional measures of profits or return on investment, she focuses on productivity and firm survival.

On productivity, her analysis shows that,

contrary to popular thinking and to the pessimistic predictions of some theorists, solid, consistent evidence across countries, systems, and time periods shows that worker cooperatives are at least as productive as conventional firms, and more productive in some areas. The more participatory cooperatives are, the more productive they tend to be.

On the issue of survival, Pérotin shows that both of the main concerns about the institutional stability of worker cooperatives have solid solutions that have been adopted by a number of cooperatives around the world.

Furthermore, worker cooperatives are uniquely situated to weather changing market conditions—they “generally preserve jobs better.” This is because

employment in a labor-managed firm is not the same thing as employment in a conventional one. In a labor-managed firm, members participate in the decisions that affect their unemployment and income risks… [this] makes it possible for worker cooperatives to adjust pay rather than employment in response to demand shocks.

This is the opposite of how conventional firms respond—they reduce employment in response to adverse market conditions.

While drawing these important conclusions, Pérotin is also clear that more research needs to be done, especially comparing worker cooperatives to “specific segments of the firm population and other types of cooperatives… We need to know how cooperative specificities relate to success.”

This is a vitally important academic study that clears away common misconceptions, sums up what we know about the performance of worker cooperatives, and provides a roadmap for the further work that needs to be done.

The full analysis can be found in Chapter 8 of 'The Cooperative Business Movement, 1950 to the Present' and is available for download here.

George Speckman is a middle school teacher, an editor of Democracy at Work's Coop Talk, and an ordinary participant in Richmond, CA's local progressive movement. He has written on topics of Catholic theology, inspired particularly by Gustavo Gutierrez. His most recent work is The Suffering of the Impassible God: Innocent Suffering as God's Very Own.

Virginie Pérotin is a leading expert on the economics of employee ownership and worker cooperatives. She has been researching the topic for the better part of twenty years, and has an extensive list of publications in English and French examining the performance of worker cooperatives.

Prof. Pérotin has been a Professor of Economics at the Leeds University Business School since 2001. Before joining the University of Leeds, she was a Senior Research Economist at the International Labour Office in Geneva (Switzerland). She has also held research positions at the London School of Economics and the Centre d'Etude des Revenus et des Coûts (CERC), a research centre of the French Prime Minister's Office in Paris. Prof. Pérotin has also acted as a consultant to the World Bank, the OECD and the European Commission on issues of profit-sharing, employee ownership and employee involvement schemes. She is a member of the Council of the International Association for the Economics of Participation and of the editorial board of the Journal of Entrepreneurial and Organizational Diversity.

Showing 6 comments

  • Jami Murdoch
    commented 2017-11-25 12:07:30 -0500
    I am not an economist. I am not a politician. I am a casualty of the last 10 years American, capitalist free market.

    As much poorer countries have now the opportunity to improve their standard of living due to free market globalization, it was absurd to think those workers would be paid a wage in line with what American workers were making. The ONLY possibility was for American wages to be lowered to compete with cheap international labor.

    However, laws were changed some 30 or so years ago (I’m not sure who was president at the time) lowering tax rates on American businesses and allowing corporations to pay their executives exorbitant salaries and benefit packages. At the same time, many unions were busted so wages could be dropped to compete.

    The current situation is untenable. If Americans try to reinstate unions, corporations will send all of their work overseas.

    It is a mystery to me why the very wealthy are allowed by our U.S. government to shelter their money offshore through laws they’ve lobbied for to protect themselves from taxation. The rich are getting richer at an exponential rate.

    The only possibility I see to improve all Americans earning power is to form business/corporate co-operatives. It’s not a perfect solution but it’s a way to take back our country from the ultra wealthy (including the ultra wealthy in our own government) and save our countrymen and women from destitution.

    If you see some other way to save this country from total demise, speak up.
  • Stan Bies
    commented 2017-06-19 16:44:34 -0400
    Based on substantial experience working with traditional business structures in the United States I have no doubt that a cooperative business structure could be a very viable, beneficial alternative to more traditional approaches and, more importantly, might form a key basis for local Community Development .

    This article seems to me to support that conclusion with an in depth analysis using appropriate and practical criterion, very valuable and informative addition to the literature.

    My own view, based solely on my experience in working with a variety of traditional business structures large and small in the U.S. is that in order for the Cooperative model to be widely considered as a viable alternative in the the United States, some customized elements will need to be emphasized.

    For Example,

    1. A totally apolitical, nonpartisan, non discriminatory approach must be taken. This will require some updated terminology .

    2. Any proposed venture needs to be demonstrably economically viable on its own merits as outlined in a realistic business plan.

    3. Details of member qualification and ownership and the decision making process must be specifically explained since such concepts may well be initially viewed by some as foreign, impractical and therefore unworkable and even dangerous.

    4. Provision of currently unavailable, affordable. quality, goods and or services to a target, underserved community market must be emphasized, along with the fact that profits will remain in the community.

    5. An organizational structure combining customer/member and worker/member approaches should be considered in appropriate circumstances to guarantee loyal and participating customers and fairly compensated and dedicated workers sharing in the success of the organization in both short and long term.

    6. The Mission Statement, By Laws and Business Plan of the organization should be well integrated and address all economic and social input groups e.g. customers, workers, community based non voting equity, operational lenders, and or service and product providers from the community.

    In any event I firmly believe Cooperative structures are a key to solving many of our societal and economic challenges. I have emphasized a high degre of community focus that clearly is not in and of itself a Cooperative requirement, just an added benefit.
  • Chris Clarke
    commented 2017-06-18 04:05:40 -0400
    I was born in the Lancashire mill town of Rochdale, where the first Cooperative was established in the 19th Century. It was founded to free the millworkers from the company store and to allow them to share in the success of the enterprise. It grew to be a giant organisation with production, wholesale, farming and even financial and funeral services. Today, its remnants wallow in the shadow of capitalist competitors. It should have spread to take over the world. That did not happen, because management and control was focused on those with the right ideology rather than commercial skills.
    A better example is the John Lewis Partnership in the UK. This runs one of the UK’s most successful grocery and department store groups.
    The business was donated to a trust by its founder. The trust is run on behalf of current employees, (partners). It is not perfect, but it has fought off, succeeded and grown against giants like Walmart Tesco and Sainsbury. Its essence of success is that it is run to compete in a market economy, rather than by ideologues with limited commercial skills.
    In my political novel ‘Revolution’, written as Aaron Aalborg, I postulated a mixed economy where larger enterprises were confiscated and run along the same lines as the John Lewis Partnership.
  • Cort Galbreath
    commented 2017-06-16 13:16:08 -0400
    Mr. Troutman, Involvement of the rank and file in productive, progressive dialog is central to the theme here. Mr. Speckman contributed a synopsis of a valid study that contributes to our common knowledge or we can opt to reject it if we find fault, but I don’t need him to have credentials to make a contribution. Thank you Mr. Speckman. I hope to see more from you.
  • David Audette
    commented 2017-05-19 11:29:49 -0400
    I propose we subject comments to screening to ensure basic quality requirements and reject pointless, abusive, insulting, and otherwise offensive disruptions.
  • Yeboah Troutman
    commented 2017-05-10 22:43:27 -0400
    Wow, did you guys even research this or did you just roll with the first thing that comes from your feeble brains? Good to see one of the contributors is a middle school teacher…no credentials and can poison young minds, you must love it. Take your sickness elsewhere (like venezuela), we don’t want you.

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