Co-operatives and mutuals can tip the balance back to workers

| April 10, 2018

A widely owned economy, where workers are fairly rewarded for their work, where business owners of small and medium enterprises can compete in markets that favour larger entrants, where consumers and the community can benefit equitably from growth and business prosperity and where and the benefits of a technologically enabled economy are shared equitably – will achieve a more sustainable, inclusive and prosperous Australia for all.

Co-operative and mutual enterprises (CMEs) can provide safe, secure, sustainable and equitable work for people, including vulnerable and marginalised communities. This has brought the use of co-operative models into the debate about how to ensure that workers are not disadvantaged in the new sharing economy or its workforce equivalent, the “gig economy”.

Technology is changing the way we live and work. This challenge is huge – akin to coping with the large-scale shift from an agricultural work economy to manufacturing that occurred in the early 20th Century.

The policy and ethical challenge is how to harness the economic, social and environmental benefits of technological innovations for the betterment of all.

Based on evidence in Australia and internationally, the Business Council of Co-operatives and Mutuals (BCCM) believes that policies to expand the Co-operative and Mutual Enterprise (CME) sector in Australia would help ensure the impacts of technology and other changes, work in the interests of all Australians.

Mutuals boost engagement and productivity

When people have ownership of the enterprise they work for and derive value from being members, those enterprises are more productive, create better jobs, with higher staff engagement and their staff are more motivated to serve customers with quality service. Member-owned enterprises are also more resilient in economic downturns8 and compared to other organisation forms, they distribute the benefits of wealth creation more equitably amongst their stakeholders.

Building a stronger CME sector in Australia will add diversity in Australia’s economy. This will facilitate greater consumer choice, particularly in the context of increased demand for services. This is especially so in sectors like health and human services where the relationship between a consumer and the service provider is a key driver of success. Hundreds of thousands of new jobs need to be created in these services sectors to support an ageing population and the National Disability Insurance Scheme (NDIS).

Compelling evidence that CMEs deliver higher satisfaction for service users and lower employee turnover has already led to the announcement of Australia’s first employee-led mutual to deliver services under the NDIS. Supported by both South Australian and Federal Governments9, the $47 million staff mutual will secure at least 50 allied health jobs in SA and continuity of care for children living with disability.

Co-operatives thrive worldwide

Co-operatives and mutuals are globally recognised for creating, sustaining and equitably distributing real wealth, understood as access to quality goods and services and dignified work. They are estimated to provide at least 250 million jobs worldwide. There are at least 2,135 active CMEs in Australia providing direct employment for 146,000 Australians. There is also a substantial flow-on effect in terms of job creation and sustainable work.

Producer co-operatives undertake purchasing, processing, marketing or provide other services for members who are small businesses such as farmers, independent retailers or freelancers support more than 174,000 Australian businesses including more than 13,000 primary production businesses.

For example, the Capricorn Society supports 18,000 independent Australian automotive repairers. By sharing back office functions and bulk purchasing, independent mechanics can remain competitive in markets that favour larger chains. Reducing the costs of overheads and inputs allows owners to grow their business and workforce.

CMEs have this effect because of their ownership structure, which distinguishes them from both investor-owned firms and not-for-profits. CMEs are locally-owned and embedded in communities so they are more focused on retaining local employment and reinvesting wealth locally.

HunterNet sustains more than 200 local manufacturing firms and provides direct employment for thousands of skilled workers in the Hunter and Central Coast of NSW. The timely formation of HunterNet preserved manufacturing jobs in the region in the major economic upheaval caused by the departure of BHP Newcastle in the 1990s. Today, the Hunter is an internationally recognised advanced manufacturing hub.

Serving more than one master

CMEs are hybrid organisations, meaning they have more than one purpose. Hybrid organisations derive a majority of their income from trade but also pursue two or three additional and explicitly stated objectives such as producing a surplus and having a social and environmental impact. Unlike other organisational forms, CMEs are designed around International Co-operative Principles which focus the purpose and intent of the business on delivering benefit to members rather than profit to shareholders.

There are different forms of member-owned organisations. These include worker co-operatives or employee-owned businesses, user or customer owned CMEs, and enterprise or producer co-operatives, as well as multi-stakeholder options that represent wider community interests.

Where the members are the employees, such as a worker co-operative, the enterprise exists to provide sustainable, meaningful and productive work. Mondragon in the Basque region of Spain is the world’s largest employee owned business comprising a conglomerate of 260 manufacturing firms co-owned by 85,000 employees. During the Global Financial Crisis, Mondragon’s unemployment rate was half the national average owing to the focus of the business on sustainable employment.

Albeit on a much smaller scale, Nundah Co-operative in Queensland provides sustainable employment for people with intellectual disability. The twenty worker-owners have been in permanent employment in the real economy for more than a decade, enjoying the benefits of secure work such as long service leave, secure housing and the ability to save for retirement. This model contrasts with the disability job services they experienced that were not employee owned.

Compared to other countries such as the UK, the proportion of employee-owned enterprises in Australia is very low. Where governments overseas have fostered the right economic and regulatory environment to support the growth of employee-owned enterprises, the evidence shows that productivity has increased. This is particularly in higher rates of employee and consumer engagement, lower rates of absenteeism, and resilience during economic downturns.

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