As we’ve seen thus far, the income inequality in the United States (and really, worldwide) is an issue that is leading to stagnating and destructive economic results. One possible solution is to cap the ratio between CEO pay and worker pay. There is, however, another alternative.
Worker-owned and operated co-ops, where workers own actual equity in the company and vote on management and executives, have proven to be quite successful worldwide. The best example is the Mondragon Institute where workers vote on their wages, vote on who their managers are, vote on who gets to be CEO, vote on the pay of the CEO, and all worker-owners have a share in the profits generated by the co-op. There are, of course, other examples out there.
The overall point is that we need a system where workers benefit from their labor. Under our current system workers are merely parts to an overall machine. They are not individuals, they are not important, they do not matter; a factory worker quits one day and is replaced the next, much like if a cog were to break, it would be removed and replaced. There is a dehumanizing aspect to our labor, which is why we pay substandard wages for that labor. Corporations release a constant stream of emails to employees about the corporate success, about how much profit the corporation has earned, about how much the stock has increased, and expect the workers to actually care. But why should they care? The corporation has increased profits off the backs of the workers, profits the workers will not enjoy (though executives will). Why should the workers care?
To take the modern system further, even in a system where workers get a small share of the profits, they have no say in how the company functions. While corporations use empty terms like “team members” and tell workers that their feedback is important, the fact is that even if 98% of the workers thought something was a bad idea, the corporation would do it if they saw a chance for a profit. The ever increasing desire to impress stock owners and drive up stock value – sometimes by creating short term gains at the cost of long term consequences – has crashed many companies and continues to harm our economy.
So, if setting ratios isn’t your thing, perhaps this is: Worker Ownership. Worker ownership is exactly what it sounds like, where the workers own the corporation. The only equity holders in the firm are those who have not only invested their money into the company, but have also invested their labor into the company. In such an economy, there would be two types of worker-owned companies:
Family business/co-ops – small, family run businesses are without a doubt essential to any local economy. A local economy built on family-owned businesses typically has a sustainable economy. One can imagine what would happen in poorer communities, whether urban or rural, if there was more economic development for local businesses. Of course, some family-owned businesses need a support system. This is where co-ops would work in lieu of corporations. The co-op would be composed of different farmers, different distribution companies, and different grocers. They would all work together to provide produce throughout the region (or nation) and could even work with other co-ops around the country to exchange produce. In the co-op, the different businesses within the co-op would all have a vote and a voice on how the co-op would function. Rather than having someone in New York decide what works best for farmers and grocers in North Carolina (as might happen with a major corporation), the business owners and farmers in North Carolina would be able to give a stronger voice for what policies work best in their area.
Think of a co-op as a type of confederacy, where there is a union and all the different organizations work together, but all are also at the same time autonomous. All contribute to the profit of the co-op and receive profit dividends from the co-op, but can also act independent of the co-op when it comes to their own store policies.
Worker-owned corporations – the family-owned business can only go so far. While I’ll get my food from a mom and pop store, I wouldn’t want that same place making my car. When it comes to cars, major construction ventures, making commercial airliners, and the like, businesses are necessarily large. There are certain endeavors that simply require a large corporation. A small business or even a collection of businesses (co-op) isn’t sufficient or efficient for certain industries. In instances such as these, corporations would be massive, but owned by the workers. Rather than being abstract, let’s use Ford as an example:
Imagine tomorrow that Ford was sold entirely to its workers. This would mean that all management and executives would be voted on by the workers. All profits would be distributed to the workers. The company could never move jobs overseas because worker-owners aren’t going to move their own jobs. There’d be no need for unions because the workers couldn’t go on strike against themselves. They’d vote on what wages should be for each position, on their own wages, and so on. It’s a form of direct democracy in the workplace, or democracy on a small-scale (the only place where democracy works best).
How both of the above solve for income inequality is that for the majority of workers – not everyone could become a worker-owner, especially at a younger age – would have the right to vote on their own salary as well as the salary of the CEO. If the workers decided to let the CEO earn at a 200:1 ratio, then that’s their choice. It wasn’t forced on them. But more than likely, the CEO pay would be much closer to a manageable rate. Productivity would increase as well due to the simple fact that an increase in profits would be shared amongst the workers. Thus, if workers wanted a bigger bonus each quarter, they’d push harder to increase the profits for that quarter. By actually seeing the fruits of their labor they’d work harder to see bigger fruits.
The benefits of this system are as follows:
- Income inequality is no longer an issue. When most workers are also owners, they choose the income that occurs. For family-owned businesses the issue of a wage is no longer an issue.
- Their jobs would be secure. Worker-owners won’t outsource their own jobs, they won’t lay themselves off to increase profits, they won’t recruit cheaper labor from a foreign nation to drive down wages, and so on. They’ll continue to innovate and improve because when the company succeed, their checkbooks will feel it.
- They’ll be far more environmentally conscious. Part of the reason these companies have no issue polluting or destroying the environment in rural areas is because the executives and upper management don’t have to live in those rural areas. Worker-owned companies, however, would have owners who live in the local areas, who have to drink the water, who have to breath the air, and have to live with the consequences of their environmental impacts. While none of this promises complete environmental safety and we would still need regulations, environmental disasters or practices harmful to the local environment are less likely to occur because the workers don’t want to see their families harmed.
Of course, between the ratio system and the worker-owned system, there are some common themes.