Immigrants fuel the rise of worker cooperatives

The number of worker cooperatives has tripled in the last three years, according to an unreleased report by the New York City Department of Small Business Services (SBS). The businesses, which are owned and controlled by the people who work for them, have benefitted from millions of dollars in city funding. But despite the financial support from local government, these democratically-controlled enterprises continue to face significant barriers.

Advocates say worker cooperatives, often simply called co-ops, provide a unique opportunity for poor New Yorkers by allowing workers in typically low-wage industries, like cleaning and child care, to form their own businesses and take collective control over how much revenue should go to advertising versus wages, for example. The city, in partnership with over a dozen social service-focused nonprofits and other organizations, has invested in incubation and supportive business services for the cooperatives, banking that the result will be better jobs for vulnerable New Yorkers.

“It's not just any job. It's a sustainable job. It's a well-paying job,” said New York City Council Member Helen Rosenthal. “I am very proud that an additional 40 or so worker cooperatives have taken off.”

Female immigrant entrepreneurs – many of whom are undocumented – are driving the current surge in New York City worker cooperatives, according to organizations that work closely with the groups. The vast majority of workers are women of color, largely Hispanic. For many of these women, English is a second language.

“It's a particularly attractive option for a recent immigrant to the country, because you can own a business without employment papers,” said Michael Paone, who works on the policy team at the Federation of Protestant Welfare Agencies. “It's an interesting actualization of American values that you don't have to be documented to start your own business.”

Just over $5.5 million in funding has been set aside to grow more worker cooperatives, in steadily increasing amounts – $1.2 million for 2015, $2.1 million for 2016, and $2.25 million for 2017. Rosenthal, along with 21 other council members, also sponsored a 2015 law that mandated that the city track and report on the progress made in creating more worker cooperatives.

New York Nonprofit Media acquired a fiscal year 2016 report by the SBS New York City Worker Cooperative Business Development Initiative (WCBDI) that noted 17 new worker cooperatives were created that year, while 21 were reported the previous year, presumably adding to the 23 established worker cooperatives reported to the city council in 2014.

The growth in New York is a reflection of a dramatic increase in the number of worker cooperatives nationally.

“Of the 500 worker co-ops that we believe are out there right now, about 60 percent of them have been formed since 2000,” said Esteban Kelly, executive director of the US Federation of Worker Cooperatives, a national membership group. “And 30 percent of all worker co-ops that exist now have just been formed since 2010.”

“What we’re really seeing is a really sharp curve in that growth,” Kelly said.

Exactly how many worker cooperatives are currently operating in New York City, however, is unclear.

Worker cooperatives are largely defined by their ownership and governance structures. They are not all organized under a single legal framework and do not register their unique structure with any government agency. As a result, city officials and worker cooperative advocates said it’s difficult to pin down exactly how many there are in New York. Especially since, as several WCBDI partner organizations noted, small businesses often fail.

An SBS spokesman did not provide an estimate of how many worker cooperatives the department believes are currently operating in the city, and the department is not required to track this information. Organizations regularly working with worker cooperatives estimated the total was between 30 and 60 businesses, but none doubted that there has been rapid growth in the sector driven by the city’s investment.

Nevertheless, advocates for the new worker-owned enterprises said that they have been operating with significant disadvantages compared with other small businesses in the city. Due to the city’s lack of experience with worker cooperatives, many banks have been reluctant to grant them loans, business lawyers and accountants have had scant experience with them and the city’s contracting system does not accommodate them.

While the city touts its success in “building an ecosystem of support” to provide loans, legal and accounting services, and promote awareness of worker cooperatives, city contracts appear to be a distant goal.

"This is what we're working on: How can we get a worker co-op city contract? That hurdle we haven't figured out yet,” said Rosenthal, citing bureaucratic and procedural barriers. But considering the headaches involved with holding a city contract – notably often having to wait months for reimbursement – it may not be a good fit for worker cooperatives anyway.

"That's just a whole beast in itself,” said Gowri Krishna, supervising attorney at the Urban Justice Center, which provides legal services to worker cooperatives. “Not getting paid for eight months is huge. You have to be in a place where you already have enough business that if you take on (city) work, that you can wait as long as it takes for the city to actually pay you."

Many worker cooperatives already operate in low-wage industries. And according to Krishna, city work doesn’t seem like a winning proposition for them.

“Maybe down the line,” Krishna said. “But not now.”

On Staten Island, co-op incubator La Colmena is preparing to launch the borough’s first worker cooperative: an at-home child care service.

Immigrant workers on the island often have terrible jobs with poor pay and no benefits, said Gonzalo Mercado, executive director of La Colmena. But he’s hoping the democratic model offered by worker cooperatives can galvanize the entrepreneurial spirit of the immigrant community. In the future, Mercado hopes to create a worker cooperative for the many day laborers who currently line park benches and curbsides along Forest Avenue. He thinks they could do construction site cleanup or commercial cleaning.

“For us it was a way to lift up the workforce and make sure our members can have pathways out of poverty into entrepreneurship,” Mercado explained

Advocates and city officials said the business model benefits all kinds of disenfranchised people.

“Worker co-ops are a really good tool for people having trouble accessing the economy,” said Tamara Shapiro, co-director of programs at NYC Network of Worker Cooperatives. Some worker cooperatives have been started by people with disabilities and another may soon be started by formerly and currently incarcerated people, she said.

“The immigrant population, you know, that's where we grew first, but we'll be able to build in a lot of these other communities as well,” Shapiro said.

Caracol Interpreters Cooperative might be a case in point. Most of its workers, including non-owners, identify as queer or LGBTQ. “Our mission is to make it accessible to everyone,” said Patri González-Ramírez, an interpreter and one of nine worker-owners at Caracol.

But while Caracol holds LGBTQ acceptance as a central value, González-Ramírez touts practical business considerations in explaining the benefits of being in a worker cooperative. By carefully laying out a sliding scale of interpretation rates for the nonprofit clients it targets, Caracol helped set a standard for the city’s interpretation industry, she said.

“If we didn’t have a cooperative, the alternative business model would be a freelance model where each of us would be competing for the jobs … it would be harder and less sustainable,” she said. “I would be making less money.”

Beyond simply raising incomes and creating jobs for low-wage workers, it’s not uncommon for leaders in the worker cooperative sector to see a much larger role for the business model – particularly as an answer to the country’s income inequality and even racial inequality.

Brendan Martin, founder and director of The Working World, a cooperative financial institution that lends money to worker cooperatives, agrees that the business model can solve those problems but also points to another looming economic problem for which he believes worker cooperatives may be the answer.

The graying of the American workforce, the so-called “silver tsunami,” could result in aging business owners who are looking to sell, but who will face a market without enough buyers, potentially leading to the shuttering of businesses and losses of millions of jobs – many of them here in New York. It’s here that Martin sees a golden opportunity for the worker cooperative model.

“The only really viable candidates to buy these businesses are the workers,” Martin said.  “They are the ones who have the vested interest. They are the ones who know how things run. So that's our only practical choice.”

“So, this could go from an overwhelming crisis for workers to an incredible opportunity. Really, one that's never been offered before," Martin said.

But many cooperative workers are focused on more immediate fears associated with their business, stoked by a presidential candidate’s promises to deport millions of undocumented immigrants.

“The fear is that there's a paper trail to you and it could alert people that you are undocumented,” said Krishna, the Urban Justice Center lawyer, citing concerns from cooperative workers. “I don't know. I don't want to tell them, ‘Oh, you have nothing to worry about – that would be ridiculous.’ I'm not the one living in that fear.”

And how justified are those fears?

“How real is it that Trump becomes president?” Krishna asked. “You know, it's scary.”

Editor's note: This story has been updated to clarify the SBS spokesman's response.