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How to Put Workers First

Traditional Solutions and Beyond

Unions. Labor unions have been enormously important in raising the lot of working people. It is due to unions that millions of workers have been able to rise to middle-class status. But unions are not likely to be the long-term solution. That is because reliance on unions continues the adversary relationship between owners and workers, but simply gives workers a little more power in that struggle. Unfortunately, the nature of that struggle provides owners an inherent advantage, as is evident in their present ascendency. The long-term goal has to be to turn workers into owners. There are a number of ways to do that; all should be encouraged.

Worker Cooperatives. This is probably the purest form of worker control as the workers are owners and decision-makers. What in a share-holder owned corporation would be “profit,” is called “surplus” by worker cooperatives and is shared among all the workers. Although worker coops are small compared to the large corporations, they are growing. The US Federation of Worker Cooperatives estimates that there are more than 300 in the United States and employ many thousands of workers. You can learn much more from the website of the US Federation of Worker Cooperatives. This is an important movement, but nothing happens by itself. Local, state, and national laws can either help or hinder. The U.S. Congress as yet does not appear very sympathetic, but some local governments have realized that coops can boost local economies. The City Council of New York, for example, has established a Worker Cooperative Business Development Initiative.

Richard D. Wolff in Democracy at Work: A Cure for Capitalism calls this form of cooperative (where workers have both the power and the profits) Workers' Self-Directed Enterprises (WSDEs). His book is one of the most thorough examinations of what worker-ownership really means. He also discusses them on his website.

ESOPs. Employee Stock Ownership Plans are the most common form of employee ownership in which all or most employees are included. That is because ESOPs are given significant federal tax benefits. While popular, and unquestionably a (small) step in the right direction, ESOPs give employees little, if any, real power. Their stock-ownership plans are essentially a form of defined-contribution retirement plans. The ESOP is, at heart, an attempt to save capitalism from itself by one of those rare capitalists who can look to the long term, a fellow by the name of Louis Kelso, who invented the ESOP. That is clear just from the title of the book he wrote to promote the idea: The Capitalist Manifesto. He created the ESOP in order to preserve capitalism by creating more capitalists. It does not so much empower employees as it gives them a perceived stake in the company for which they work. Such companies usually do better for that reason and thus make lots of money for the major owners.

ESPPs. Employee Stock Purchase Plans are watered-down ESOPs. Employees are not automatically enrolled and do not receive stock as a standard part of their compensation. They are merely allowed to purchase company stock. There is not much more to be said about ESPPs.

The Stakeholder Model. This is something that exists only in theory in the United States, although something like it is operational in parts of Europe, in particular in Germany. It is a theory of ethical business management that is starkly opposed to the shareholder theory prevalent in America. In the latter view management of a corporation has a legal duty to consider the financial interests of the owners, or shareholders, before all else. According to stakeholder theory, there are many different interests at stake: not just owners, but employees, communities, customers, and other businesses such as suppliers, retailers, and banks that are in some way dependent on the company. Such ideas can be built into the law, but in the United States, they are not.

Germany presently has a strong and thriving economy, and unlike the United States, the workers do well because the law provides that they should. The laws that determine German Corporate Governance require that boards consider not just the interests of shareholders, but the interests of the company's employees, other interested parties and, to a degree, the public. In other words, German law recognizes the reality that the behavior of a large corporation impinges on many others besides the stockholders. And the German economy has not collapsed, despite the screaming from the right that the American economy would be destroyed if we did something similar.

But perhaps only genuine cooperatives really go far enough. Richard Wolff argues that, “Historically, experiments in workers' self-management (for example, at Volvo in Sweden) have ended when they no longer served the interests of their capitalist directors. In contrast, WSDEs represent a social transition beyond capitalism.” Again, nothing can truly change until we put workers first.

But this still doesn't eliminate poverty or guarantee everyone a productive job at a living wage.

[Next: Building from the bottom up.]