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4. Case Studies in Economic Democracy and Cooperative Economics
© 2001 GEO, P.O. Box 115, Riverdale, MD 20738-0115

Norman Hill is President of the A. Philip Randolph Education Fund in Washington, D.C., USA and Christopher Mackin is President of Ownership Associates, Inc. in Cambridge, Massachusetts, USA.

Case 1: Craft Union Cooperatives: An Entrepreneurial Approach to Overcoming Discrimination, a project of the A. Philip Randolph Education Fund.

In the fall of 1991 African-American union bricklayers in the City of Los Angeles approached their union leadership with a problem. These workers were not obtaining their fair share of work opportunities from area employers. Efforts to combat these problems through both diplomatic outreach and even litigation directed toward area employers had not yielded results. New approaches were called for that would result in the immediate placement of these skilled but underemployed workers.

Research into the ownership patterns of the masonry construction industry strongly suggested an important but often overlooked cause of employment discrimination. Out of 144 signatory union contractors in the masonry industry of southern California, ten firms were found to be owned by Hispanics, one hundred and thirty-four by whites, and zero by African-Americans. While continued efforts to persuade these employers to change their hiring practices was stressed, it was concluded that what was also needed was a direct, entrepreneurial effort to inject minority and primarily African-American ownership into the southern California masonry construction industry.

At the urging of the International Union these workers turned to the A. Philip Randolph Education Fund (APREF) of Washington, D.C., an independent, 501(c)3 non-profit organization, for help with an ownership solution. Seven years of organizing and fundraising efforts culminated in foundation grants for a pilot enterprise, the APR Masonry Arts Corporation, which was launched in August, 1998. Individual workers have made “at-risk” investments of $5,000 per person in the business. Current construction projects include a medical building at the Los Angeles Zoo and a Boys and Girls Club in the Watts neighborhood.

The success of this pilot enterprise in Los Angeles will help accomplish five objectives, all related to distributing power more equitably, as well as to reducing discrimination:

First, it will provide employment opportunities for up to thirty primarily minority construction workers currently either unemployed or underemployed in the southern California masonry construction marketplace.

Second, it will provide entrepreneurial ownership opportunities, at maturity, for between 10-15 workers prepared to make stock ownership investments in the enterprise.

Third, by virtue of its entry into a marketplace presently without African-American ownership, the pilot enterprise, APR Masonry Arts, will help to create a much needed diversity of employers in the Los Angeles marketplace, helping to fulfill widely agreed upon affirmative action objectives.

Fourth, it will open up opportunities for younger minority construction workers, exposing them to all facets of the construction business, therefore encouraging the next generation of minority entrepreneurs. This project also presents minority youth considering a construction career with a new rung on their construction career ladder. They can now potentially move from apprentice, to journeyman/woman, to employee-owner of their own enterprise.

Fifth, this pilot enterprise can serve as an example of self-reliance and empowerment for minorities in other industries and areas. The enterprise will not just benefit the Los Angeles community, but will also have a wider impact as a model for development of future enterprises in other cities and other crafts throughout the country.

At this point, area employers and African-American construction workers throughout southern California have taken note of this novel approach to combating employment discrimination. Further replication of this project in other trades and in other cities is under consideration.

Curtis Haynes Jr. is an Associate Professor, Department of Economics and Finance, Buffalo State College, Buffalo, NY, USA.

Case 2: Transcending political and financial constraints is important for the growth and development of democratic enterprises: The case of “Our Market.”

Community-level support for the “Our Market” project in the economically depressed East Side neighborhood of Buffalo, NY was readily evident. People liked the idea of owning a local supermarket. The direct action of community members and supporters through block clubs and various other community-based and community service organizations both identified and galvanized support. The major mobilization and information dissemination came during the yearly Juneteenth Festivals, the Harvest Festival, door to door canvassing, and weekly open meetings of the Steering Committee, which eventually became the Board of Directors of “Our Market.” All labor was volunteered, with various professionals providing services at below market value.

Community members signed 3,000-4,000 support certificates, and 10% of these paid a membership fee of $25. Operating expenses were covered by in-kind donations and cash support of about $15,000, including a philanthropic donation of $10,000. A business plan was written, a supplier was identified, and “Our Market” was incorporated as a cooperative corporation. Financing through municipal bonds was proposed as the major method of capital support for the $4.5 million turnkey project.

The necessary local political support was lacking, however. The municipal political structure dropped the ball. Additionally, professional financial support was lacking, largely because the project did not have an obvious, or familiar, management structure. The Board of Directors and their supporters did the work; there were no paid professional managers. Even though the level of grass roots volunteer labor was significant, an effective management team was not created from within. The greatest opposition to “Our Market” came from a local city council member who wanted to move up in the ranks of state-wide politics, and did not want to get behind a project like this where failure would probably mean the end of his political career. His opposition to the community-owned version of “Our Market” was built on his publicly stated opinion that a supermarket could not be run by community members or activists.

Also, venture capitalists and banks passed the buck with regard to their support. Their attitude typically was that the group needs to prove itself, and that they would join the project if there was some other institutional level of major financial support (public or private).

Eventually, the anemic support by politicians and financiers (and in some cases, direct opposition) combined with the lack of a professional management team led to the apparent demise of the project. Community concern is again being raised about the lack of a supermarket in the area. However, there is little interaction with the original “Our Market” leadership, who suffered the strain of the political battle and are “burnt out.”

Responses to some questions concerning this case.

• What sort of educational campaign would help meet the constraints faced by “Our Market”? An educational support mechanism needs to be developed for such a project. Some of us are considering a private educational/consulting corporation that could help identify a professional staff and management team and educate and organize around cooperative principles. The team would need to pursue funding to sustain itself and its educational project.

• What alternative funding sources can promote a democratic economy, and how might we educate potential funders about the benefits of cooperative workplaces? There are many potential such sources, although both traditional and alternative funders tend to be risk averse. Their main concern is a track record. The best way to respond to these concerns is a training program for practitioners. As far as educating potential funders, there are many democratic work sites through out the U.S. and the world. Funders need to be directed to the web sites of these companies. Maybe an extensive directory would be a good idea. (See here GEO’s new annotated national directory, An Economy of Hopeeds.)

• How can cooperatives and democratic corporations access these funds? Such firms have to continue to prove their ability to survive and be competitive, while providing at least a minimal financial return to investors. For investors, the betterment of community and quality of life must be stressed in addition to a financial return. Another essential factor absent from “Our Market” was the lack of full-time staff with the skills to galvanize second tier support or convince “city hall” that the project was doable.

• How can economic empowerment gained through local democratic ownership and community control help build political empowerment and change policies and financial allocations? Democratic community based ownership of an enterprise is political. When such enterprises become successful, a portion of their revenues can be used for educational and financial support of spin-offs. Eventually, networks can emerge with the credibility to draw in new sources of funds and thecapacity to influence policy.

Christina A. Clamp is Professor of Community Economic Development, Graduate School of Business, New Hampshire College, Manchester, NH, USA.

Case 3: The ICA Group

The ICA Group operates nationally as a provider of technical assistance to worker cooperatives and also as a developer of new firms. It has developed a successful model for democratic stock ownership. This has typically involved focusing on sectoral interventions and working with a local project partner such as a community development corporation, a labor union or a church. A sectoral strategy seeks to impact the quality of employment and the compensation of workers in low wage, entry-level occupations. These efforts have been targeted to three service sectors: staffing companies; health care; and childcare.

Intervention in the staffing services (so-called temp, part-time, or contingent workers) sector has sought to develop worker-owned and community-based companies that will provide pathways to full employment for welfare recipients and others in need. The ICA Group has sought to demonstrate a model for socially responsible firms to operate in this sector by helping develop three companies: WorkSource Staffing Partnership in Boston; FirstSource Staffing in Brooklyn, NY; and Enterprising Staffing Services in Washington, DC. In the development of these firms, the plan has been to create a supportive environment where those employees who do not transition to full employment can still increase their skills and their share in ownership and control of the company. Given the current job market, the firms have served more as a contracted provider of workforce development and a placement agency.

Case 4: The Paraprofessional Training Institute

The Paraprofessional Training Institute is the devel-opment arm of a successful worker cooperative, Cooperative Health Care Associates (CHCA) in the Bronx borough of New York City. The cooperative health care companies modeled on, and assisted by, CHCA have sought to provide entry-level workers and skilled nurses better paid and better quality jobs. Worker-owned health care companies have sought to provide above average pay and benefits; opportunities for career ladder; and better quality nursing care. Changes in the federal reimbursement rates have forced closure of some of these firms. The remaining firms have focused on skilled nursing, and on private pay clients. Two such successful ventures are: I Am Unique in Raleigh, NC and Quality Care Partners in Manchester, NH.


Case 5: ChildSpace Development Training Institute

Childcare in the United States is one of the worst compensated fields. Turnover in employment is very high. This affects the quality of care provided to children. Wealthier communities fare better because people have the means to pay more for childcare services. ChildSpace Development Training Institute, located in Philadelphia, was created to replicate a successful worker cooperative in the day care field.

ChildSpace Development Training Institute has a national replication initiative to create new enterprises modeled on one in Philadelphia. They have developed other day care centers in Richmond, California, Denver, Colorado, and a second center in Philadelphia. Two other centers, one in Chicago and the other in Santa Rosa, California, are in the development stage in partnership with the ICA Group.

ChildSpace has used a multi-pronged strategy for addressing the problems of the childcare sector: enterprise development; job redesign; advocacy; and asset building. Starting with the first of these, enterprise development: worker cooperative companies employing low-income women partner with a local non-profit or governmental agency. The cooperative serves as a management company and is contracted by a local partner to provide high quality, developmental learning programs. The centers are demonstration sites and learning labs for further replication in a region and for creating a broader base of leaders in the field. In addition, they serve as a hub for collaborative relationships with unions, advocates and others in the child care field.

Their job transformation strategy seeks to redesign the jobs; provide above average wages and benefits; and create a career ladder for workers. It also seeks to create a work culture that promotes empowerment through training and participation in work groups and corporate decision-making. ChildSpace’s advocacy activities are targeted at efforts to maintain and/or improve standards of care, level of funding, and regulations impacting disbursal of funds, and the quality of life for child care workers.

The final element of their strategy is asset building for day care workers. They have developed an individual development account program for all childcare workers in Philadelphia whose incomes are 200% of federal poverty levels or less. Successful participants will receive financial management training and through a 3:1 match leverage of their savings to build towards a goal of home ownership, or funds for schooling or to improve their business.

What’s To Be Learned From These Cases?

First, all three utilize a novel and common approach to the development of new enterprises by support groups targeted to entry-level workers. This involves the creation of worker cooperatives that provide better quality and better paid jobs and give workers stable employment and an equal share in their enterprises. In addition, these responsible and democratic companies in turn create assets for workers. They seek to build in workforce training to strengthen job readiness skills of entry-level workers, while helping them to transition to full-time permanent employment.

Secondly, however, the issue of job ladders, as well as those of job redesign, asset building, etc., cannot be separated from other fundamental problems facing cooperatives such as gaining the necessary financing and managerial skills. If these two ingredients are missing, then virtually everything else suffers. As is well known, financing is a serious challenge in the development of worker co-ops. Sources of funding for equity financing are limited and money needs to be raised without compromising the ability of the co-op to grow the business. Start up finance for these firms depends on a combination of grant, debt, and equity financing from social investors.

Equal Exchange, a fair-trade coffee company based in Canton, MA, uses preferred stock to raise outside capital. It makes it clear to its social investors that there is no easy exit strategy for them. The Local Enterprise Assistance Fund (LEAF), an affiliated loan fund of the ICA Group, has had successful experiences both as a lender and equity investor (whose funds are at risk) in ICA projects. They structure the financing to convert from an investment to a loan when the firm reaches a certain level of profitability. This also gives the ICA Group a seat on the board during the period when LEAF has equity in the firm.

Another strategic challenge is to recruit qualified professional management to run the firms. The ICA Group has seen projects stalled due to a lack of qualified management willing to work for a worker cooperative.

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©2001 GEO, P.O. Box 115, Riverdale, MD 20738-0115