Testimony by Melissa Risser, CUNY Law Community and Economic Development Clinic (CEDC), before the New York City Council, Community Development Committee, February 24, 2014
Hearing: Worker Cooperatives – Is this A Model That Can Lift Families Out of Poverty?
Hon. Maria Del Carmen Arroyo, Chair
Good morning. My name is Melissa Risser and I am a public interest attorney working with CUNY Law School’s Community and Economic Development Clinic (CEDC). Thank you for this opportunity to submit testimony on how worker cooperatives can lift families out of poverty.
CUNY School of Law trains law students to become social justice lawyers that provide legal representation in the service of human needs. The centerpiece of CUNY School of Law’s curriculum is its clinical program, including the CEDC. Since its inception in 2008, the CEDC has served low-income and working class communities that are fighting for social and economic justice. The Clinic helps build the capacity of grassroots organizations to implement community development projects. These projects include creating neighborhood institutions that provide needed services and opportunities. To that end, the CEDC has provided legal services to form, sustain, and expand numerous NYC-based worker-owned cooperatives, where the businesses are owned and managed democratically by their workers. The CEDC also represents workers in a variety of labor and employment matters.
Additionally, in the spring of 2013 the CEDC partnered with Mondragon USA to develop the legal framework for a new union-cooperative model nationwide. Mondragon is the world’s largest group of worker cooperatives, and employs over 83,000 people in its more than 250 worker cooperatives, subsidiaries, and affiliates. In 2013 Mondragon was the winner of the Financial Times “Boldness in Business” award. Previous awardees have included Fiat, Apple, and Amazon. The CEDC’s partnership with Mondragon supports worker cooperative development as a means to overcome inequality of opportunity, mobility and income. The partnership aims to create a rising and expanding middle class through developing worker equity and equal share ownership. In so doing, the partnership intends to create competitive jobs with higher wages and better economic benefits, which support families and communities in local economies. The first worker cooperative to come of this partnership is a commercial laundry facility in Pittsburgh, Pennsylvania. That cooperative will employ over 100 low-income people, primarily people of color, who were laid off when another commercial laundry closed down. These workers will receive living wages, build equity through ownership, and help revive a distressed community where the laundry and many of its employees are located.
On a local, national, and global scale, the CEDC views worker cooperatives as a pathway out of poverty, where jobs and profits remain local and wealth-building occurs for both individuals and communities. Worker cooperatives create meaningful, long-term, safe, and stable jobs with increased job security and reduced workplace abuse. They produce an array of economic benefits to lower-income, socially and economically marginalized communities. In worker cooperatives, profit sharing limits income disparities within the business and provides skill and asset-building opportunities for workers of all income levels. Employees in typically low-wage work can earn more in a worker cooperative than in a traditional company, because of equitable pay structures between worker-owners. Furthermore, workers-owners have more control over their work, democratically managing the business by adhering to the principle of “one worker, one vote,” and are thus more engaged than in traditional workplaces. As institutions where real democracy is practiced on a daily basis, worker cooperatives serve as a model for building a meaningful movement for workplace democracy and transformative economic justice and social change.
The economic opportunities worker cooperatives offer are essential today given the increasing levels of poverty, outsourced jobs, unemployment, and wealth inequality in the United States. Workers today face uniquely difficult times. They confront not only a bleak economic climate in the wake of the “Great Recession,” but also structural problems that predate the downturn. After accounting for inflation, workers’ wages have stagnated over the past 30-40 years. Meanwhile, worker productivity has grown dramatically, indicating that those who have jobs today work longer for less pay. CEO pay, on the other hand, has grown 127 times faster than worker pay over the last 30 years. Today, the richest 85 people in the world have as much wealth as the poorest 3.5 billion, or half the world’s population. In America, 400 individuals own more wealth than the bottom 150 million. America ranks 65th globally in social mobility.
New York City is no exception. The income of the lowest fifth of New York’s population was $8,993, while the highest fifth made $222,871, and the top 5 percent made $436, 931, or about 49 times the amount of the lowest fifth. New York City’s unemployment rate is higher than the state and national average, at 8.9% as of October 2013, with 350,000 New York City residents counted as unemployed. In addition, New York City’s underemployment rate, which includes involuntary part-time workers, discouraged, and unemployed workers was 14.8% in 2013, with significantly higher rates for African Americans (at 22.9%) and Hispanics (at 17.9%). More than 1 in 5 New Yorkers live in poverty – many even though they are employed. Minimum and low-wage jobs have been the majority of jobs created in the economic recovery since 2008, and these jobs do not compensate workers enough to lift them out of poverty. With such decreased spending power, individuals, businesses, and New York City’s economy are suffering. As Mayor de Blasio acknowledges, living in New York has become a tale of two cities, with an economy that benefits fewer and fewer people. For many lower-income workers, long-term employment with a secure retirement seems unattainable.
It is critical that the City support the creation of jobs that combat poverty and empower workers to build businesses rooted in local communities. Worker cooperatives are natural vehicles for helping employ low-income communities, improve community infrastructure, and increase basic access to services. The development of worker cooperatives in New York City should be included as part of a long-term strategy to address income inequality and promote sustainable development within the New York City economy. The development of worker cooperatives would advance Mayor de Blasio’s campaign goals of using a broad range of policies to help raise wage and labor standards and bring jobs to neighborhoods in all five boroughs. Governments around the world have developed policies to support thriving cooperative economies including: Mondragon in Spain, Bologna in Italy, and Quebec in Canada. New York City should support the development of worker cooperatives by: 1) dedicating funding from the NYC Economic Development Corporation (NYCEDC) and the Department of Small Business Services (SBS) to support and grow worker cooperatives in the City; 2) providing capital and/or incubator funding to worker cooperative businesses; 3) making worker cooperatives a preferred contractor for city agencies; 4) providing funding to worker cooperative developers; and 5) connecting workforce funding to worker cooperatives.
Worker cooperatives are an economic development tool that can create quality jobs that will stay in New York City and cultivate local entrepreneurship, and that can assist marginalized populations, such as women and immigrants, in not only gaining employment, but employment that is fair and with a living wage. New York City should support the development of cooperatives because they embody the principles of social and economic justice and community development, by creating institutions that provide life-sustaining jobs that alter traditional power and wealth dynamics, through empowering workers to exercise democratic control over their workplaces, make living wages, and shape their communities.
The CEDC applauds the Council’s Committee on Community Development for recognizing the potential of worker cooperatives to lift families out of poverty and for understanding the importance of public input on this issue, by inviting our testimony at today’s hearing. We are grateful for the opportunity to submit this testimony, and would be pleased to provide whatever additional information you may require.