A worker cooperative is a business owned and democratically controlled by the people who work in it. Each worker-owner has one vote in major decisions regardless of their position or how long they've worked there. Profits are distributed among the worker-owners rather than flowing primarily to outside investors or executives. The people doing the work and the people owning the business are the same people, which is what distinguishes it from a conventional business where owners hire workers and keep most of what those workers produce.

How They Work

Worker cooperatives are actual businesses operating in real markets: grocery stores, bakeries, law firms, manufacturing plants, home care agencies, taxi companies, tech firms. They sell goods and services, compete for customers, manage costs, and try to grow. The cooperative structure doesn't change what the business does. It changes who holds power and how decisions get made.

Governance in a worker cooperative typically runs through a board of directors elected by the worker-owners, a general manager hired by the board to handle day-to-day operations, and regular meetings where members vote on major decisions. One worker, one vote is the standard principle. A senior employee with twenty years at the cooperative has the same vote as someone who joined last year.

Surplus, the cooperative equivalent of profit, gets distributed based on hours worked or wages paid rather than how many shares an individual owns. This is called a patronage dividend. A worker who contributed more labor to generating that surplus receives a proportionally larger share of it, which aligns incentives differently than a corporation where a small number of shareholders capture most of the gains.

New workers typically go through a probationary period before becoming full members. The membership buy-in, the share they purchase to become an owner, is usually set at a level the worker can afford, often financed through payroll deductions over time rather than requiring a large upfront payment.

Why They Produce Different Outcomes

The ownership structure of a worker cooperative changes the incentives that drive decisions in ways that consistently produce better outcomes for the people doing the work.

Wages in worker cooperatives tend to be higher and more compressed than in comparable conventional businesses. High pay ratios between executives and frontline workers make no sense in a business owned by the frontline workers. The CEO-to-worker pay gap that has grown to 300-to-1 or more at large corporations doesn't exist in worker cooperatives, where the people setting pay are the people receiving it.

Job security is stronger. A conventional business facing an economic downturn fires workers to protect shareholder returns. A worker cooperative facing the same downturn is making decisions about its owners. Worker-owned firms are significantly more likely to reduce hours, cut management pay, or find other ways to preserve employment rather than laying off member-owners. The evidence from multiple economic downturns shows that cooperatives preserve jobs at higher rates than comparable conventional firms.

Benefits tend to be better. When workers control the business, they make the decisions about what the business provides to its employees, and they consistently choose more generous benefits than outside owners would choose for workers.

The workplace itself tends to be more democratic and less authoritarian. Workers in cooperatives report higher job satisfaction, more control over their working conditions, and a stronger sense of investment in the organization's success. That's partly the ownership stake and partly the governance structure that gives them actual voice in decisions that affect their work.

What Makes Them Different From Employee Stock Ownership Plans

Worker cooperatives are sometimes confused with Employee Stock Ownership Plans, or ESOPs, which are also a form of worker ownership but work differently. In an ESOP, a trust holds company stock on behalf of employees, and employees receive shares over time based on their tenure. The shares accumulate in retirement accounts and provide a financial stake in the company's performance.

ESOPs are valuable and significantly better for workers than conventional ownership structures. They don't produce the same governance outcomes as worker cooperatives because ESOP participants typically don't have voting rights on major company decisions in proportion to their shares, and management still operates more like a conventional business. The ownership is more financial than operational.

A worker cooperative makes workers the operational owners of the business in a more direct sense: they govern it, they hire and fire management, they set wages and benefits, and they decide how surplus gets distributed.

Examples That Already Exist

REI, the outdoor recreation retail company, is a consumer cooperative owned by its customers, which is a related but different model. The Organic Valley dairy cooperative is owned by the farmers who supply it. These examples show the breadth of cooperative structures.

On the worker cooperative side: Mondragon Corporation in Spain's Basque region is the most cited example, a federation of over 80 cooperatives employing around 80,000 people in manufacturing, retail, finance, and education. It's been operating since the 1950s. Equal Exchange, a fair trade coffee and food company based in Massachusetts, has operated as a worker cooperative for decades. Cooperative Home Care Associates in the Bronx is one of the largest worker cooperatives in the United States, employing over 2,000 home care workers as owners.

These are real businesses generating real revenue in competitive markets, and in several cases the cooperative structure has made them more resilient than comparable conventional competitors.

Why the Labor Party Supports Them

The Labor Party's platform includes expanding access to worker cooperatives and employee-owned businesses through federal grants, low-interest loans, tax incentives, and dedicated support infrastructure. The platform also calls for reforming bankruptcy law to allow workers to acquire failing businesses rather than watching them close, and for prioritizing worker cooperatives in federal contracting.

The argument is an extension of the same logic that drives the party's support for unions: workers produce the value and should have a meaningful share of it and a voice in decisions that affect their lives. Unions pursue that goal through collective bargaining within a conventional ownership structure. Worker cooperatives pursue it through ownership itself. Both are mechanisms for worker power, and both deserve political support.

Learn more at votelabor.org.