BOSTON—It’s debate watch party night at Democracy Brewing in February, and as presidential candidates take the stage to sports-star hype introductions, the politics fans at this European-style beer hall are getting rowdy, like Patriots fans when Tom Brady takes the field. The biggest cheers come from two waiters when they see Bernie Sanders—the candidate who would most approve of the way their workplace is organized.
Democracy isn’t just a clever theme at this 2-year-old brewpub. The beer names hint at the business’ mission: the Worker’s Pint blonde ale and the 1919 Strike stout. The beer coasters explain it. “Democracy Brewing is all about two American ideals,” they read: “Democracy, and owning your own business.” The brewpub, which opened on Independence Day 2018, is a worker-owned cooperative—and an innovative program at Boston’s City Hall, the Worker Cooperative Initiative, helped it get started.
James Rasza, the brewery’s co-founder and CEO, says Democracy Brewing was created as a “public house” in the British tradition, “one that could really build community, because Boston has become more and more transient.” A former labor organizer, Rasza says he also wanted to “showcase solutions to people’s work life”—to give workers a stake in the company, a say in how their workplace is run, and at least $15 per hour. “It seemed like being a public house that brewed our own beer and made great food was a good way to showcase that to the public, while also really creating good value for the public,” he says—“not just in food and beverage, but also hopefully something deeper.”
The city of Boston’s Worker Cooperative Initiative helped Democracy Brewing launch by lending it $150,000, and by paying a contractor to create a credit memo about the business’ prospects. “It’s a huge chunk of what made it possible for us to open our doors,” Rasza says. He credits the credit memo with helping the brewery raise much of its $1.8 million startup capital.
Boston launched the co-op initiative in late 2017 through its Economic Mobility Lab. The goal, says Jason Ewas, who was head of the Worker Cooperative Initiative and the Economic Mobility Lab until last month, is to help workers build wealth. That’s important as a response to gentrification in Boston, which often ranks as the nation’s third- or fourth-most expensive city for housing and has a huge wealth gap between black and white residents.
“One of the main drivers of wealth is business ownership,” says Ewas. “What this does is it multiplies radically, if it’s at scale, the number of business owners.” Research suggests that employee-owned companies, from co-ops to companies with employee stock ownership plans, tend to be more resilient during an economic downturn, Ewas notes, laying off fewer people and going out of business less often than traditional companies.
About 23 million Americans, or about one-fifth of all private-sector employees, own a small share of the companies that employ them. Worker cooperatives go much further, giving workers actual control of their employers. The typical worker co-op is 100-percent employee-owned, and its worker-owners have equal voting power, instead of votes weighted by share. Perhaps because they’re sometimes associated with socialism, worker co-ops are rarer in the United States than in other countries, such as Spain and Argentina; there are 465 verified worker co-ops nationwide, employing about 6,400 workers, according to the U.S. Federation of Worker Cooperatives. But they’re numbers are growing: About 100 new worker co-ops form in the U.S. every year, says Esteban Kelly, the federation’s director. Worker ownership has even become an issue in the 2020 presidential race. Sanders’ employee ownership proposals, slammed by Mike Bloomberg in the February 19 Democratic debate, include a $500 million U.S. Employee Ownership Bank that would make loans to worker co-ops and employee stock ownership plans.
With 19 worker co-ops, Greater Boston has the third-largest number among the nation’s metro areas, behind only New York and the Bay Area, according to the federation. Kelly says Boston stands out for the growth of its worker co-op sector, the help available to co-ops, and the wide range of industries that co-ops represent—from Red Sun Press, a printing co-op founded in 1974, to Tanam, a new, co-op-owned Filipino restaurant in nearby Somerville. “It’s an incredible cross-section,” says Kelly.
Co-ops are getting new attention from political leaders in booming cities like Boston, who are looking for new ways to counter growing income inequality and help more residents share the prosperity brought on by a resurgence of urban living. New York City’s government has spent $3.6 million on developing worker cooperatives since 2015. Atlanta has put up $400,000 in federal block grants to fund potential conversions of existing businesses to co-ops, and Miami has awarded $150,000 in grants to give technical assistance to minority-owned businesses considering worker ownership.
Worker co-ops like Democracy Brewing can be a small-scale way to resist gentrification in Boston and other cities, says Rasza. “If we’re profitable and successful, they’ll be able to bring that home to their communities and stay in their homes longer, even if the rents go up,” he says. “You don’t have a tiny minority of people taking all the extra money and going off to the suburbs and living a cozy life.”
So far, 14 of Democracy Brewing’s 32 employees are worker-owners, with more preparing to join. After a year on the job, and some training in business finances, employees can buy a stake for $1,000 and choose to pay for it gradually from their paychecks. They can join the board of directors to take part in major decisions and attend smaller-scale problem-solver meetings every two weeks. If the brewery turns a profit — it’s breaking even so far — it’ll pay the worker-owners a dividend.
Emmanuel Gonzalez, 28, a server at the brewery since September, calls Democracy a more caring environment than other restaurants where he’s worked. He has more freedom to choose when he works, and doesn’t have to fear a sudden firing, since the worker-run board of directors has to agree to let a worker go. “I’m generally a more positive and relaxed person, because I feel I’m working toward something. I feel I’m not just being a wage slave.” Gonzalez, whose parents came to the U.S. as refugees from Cuba, intends to become a worker-owner once he hits the one-year mark. “No one’s ever owned anything in my family,” he says. “To be able to say I own something means a lot to me.”
People used to found co-ops when the economy was bad or when there was a gap in the market that the private sector wasn’t filling. That’s how the rural electrical co-operatives of the 1930s started. In the 1970s, during the recession, workers formed co-ops to buy and salvage their ailing employers.
Lately, though, the worker co-op movement has grown with the economy, as a response to rising inequality, says Stacey Cordeiro, a co-op organizer at the Boston Center for Community Ownership, which has contracted with the city to help several co-ops. “They want more control over their working lives, more control over their schedules,” Cordeiro says. “They want more control over what clients to serve and how. A lot of times, they want better wages. They’re hoping to make more money, and they do that by keeping the profits from the business.”
That’s what inspired Josefina Luna to co-found CERO Cooperative.
Every week, four waste-hauling trucks set out from a warehouse in Boston’s Roxbury neighborhood and head for 85 businesses across Eastern Massachusetts—hospitals, schools, colleges, nursing homes and large restaurants. CERO, an 80 percent minority-owned worker co-op, owns the trucks, which pick up food waste and transport it to farms around Massachusetts for composting.
Luna, a former human services worker, co-founded CERO in 2012 after growing frustrated at seeing laborers, including immigrants, struggle in the wake of the Great Recession. “We started thinking about what we can do to create jobs for the people that don’t have any opportunity,” she says. A former educator from the Dominican Republic who has lived in Boston since 1993, Luna had been a member of Dominican teachers’ consumer cooperative, and she saw co-ops as a way to build wealth and avoid economic exploitation.
At first, Luna and her co-founders searched for a place in the recycling market, but their research suggested, presciently, that the market might decline. Then they learned about a forthcoming Massachusetts environmental regulation that would require all companies generating more than a ton of food waste per week to compost it. They realized businesses needed a smart solution for rerouting it.
CERO launched its business in October 2014, the day the waste ban took effect. It’s grown from five clients in 2014 and revenues under $50,000 up to $700,000 in revenues this year. A $100,000 loan from the city of Boston helped them expand. The five worker-owners expect to turn their first profit this year. It’s a bilingual business: The name means zero in Spanish, as in zero waste, and it’s also an acronym for cooperative energy, recycling and organics.
The business pays its drivers a minimum of $20 an hour, or $25 if they have a commercial trucking license. CERO also invites all its workers to start the process of buying into the company as a worker-owner after six months working there. Potential new owners take lessons in cooperative finance, management, leadership and governance, in either English or Spanish. Neither immigration status, a criminal record, nor lack of English skills bar anyone from joining, the owners say. It costs $4,000 to join, with a payment plan as gradual as $25 per biweekly paycheck. At that pace, it takes six years for a worker to fully vest, but they can vote as owners in the meantime if they’re signed up and participating in the co-op training.
Employees need a lot of dedication to participate in co-op governance, Luna says. So far, the general manager and sales manager have become worker-owners, joining the three founders. Other workers have expressed interest, but turnover and busy lives have kept them from joining. To put in the sweat equity for cooperative ownership, Luna says, “people need a lot of political and social and economic education and a strong ideology.”
With other environmentally oriented businesses, CERO has formed the Neponset Cooperative Trust, which has placed a bid on a 10-acre parcel of state-owned land in Boston’s Mattapan neighborhood. They hope to build a green-business campus there. Owning a location will help keep CERO in the city, says general manager Lor Holmes. “We are at risk of being gentrified out of town,” Holmes says. “The same gentrification that’s being experienced by low-income or working-class households, who used to be able to pay rent in Boston—the same thing is happening with small businesses. We’re getting priced out.”
CERO and Democracy Brewing are among six worker co-ops or potential co-ops that have received help from the city of Boston’s Worker Cooperative Initiative since late 2017. CERO and Democracy received loans; all but CERO received technical assistance from city-funded consultants. The Boston Cleaning Collective, founded in 2018, is owned by four Latina residents of the city’s East Boston neighborhood who quit their jobs at a house-cleaning company to go into business for themselves. The founders (who declined to be interviewed) learned about the initiative and reached out to the city, which hired a consultant to help them form a legal entity, says Emily Patrick, a neighborhood business manager with the city’s economic development office. The city is also aiding a business owner who’s looking into converting his company into a worker co-op as a strategy to reduce employee turnover.
Another of the city’s Mobility Lab programs will encourage child-care providers to form small co-ops. The Child Care Pilot Fund is providing two months of business training to 22 day-care providers, mostly women immigrants who work in their homes. The training will include a talk on how to organize a co-op.
Boston’s City Hall program is part of a growing support system for worker co-ops in Boston. The Local Enterprise Assistance Fund, based in the city’s Allston neighborhood, was hired by the city to create the credit memo that helped Democracy Brewing raise capital. LEAF, founded in 1983, has a technical assistance arm and a lending arm; both help co-ops and other socially conscious ventures in and beyond Massachusetts. “Co-ops have had a tough time getting traditional loans from traditional lenders,” says Amine Benali, LEAF’s managing director for strategy and development. “Most of them are looking for collateral guarantees. It’s easier to get that collateral when there are two or three owners.” The U.S. Small Business Administration rarely lent to co-ops until 2018, when Congress directed it to lend to companies converting to employee ownership.
When co-ops look for funding, one key ally is Equal Exchange, the fair-trade coffee company founded in Cambridge, Massachusetts, in 1986 and now headquartered in West Bridgewater, a southern exurb of Boston. One of the nation’s largest worker cooperatives, it brings in $75 million in annual revenue and has about 160 employees nationwide, about 130 of whom are worker-owners.
“One of the basic principles of co-operativism is to help other co-ops,” says Daniel Fireside, Equal Exchange’s capital coordinator. Fireside helps startup co-ops by offering Equal Exchange’s legal documents as templates, introducing co-op founders to Equal Exchange’s funders, and offering advice for how to pitch potential funders who’ve never invested in a co-op before. Venture capitalists, says Fireside, tend to ask startup founders for a seat on a company board of directors and an exit strategy, a plan to eventually sell the company for several multiples of its starting capital. That doesn’t work for co-op businesses.
“That’s not why we’re here. We don’t want an exit. We want to stick around,” says Fireside. “What if you have a different set of expectations—that you’re going to get a lower return, but more of your investments are going to succeed, and they’re going to stick around and do really good things?”
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How Boston Is Creating Wealth for Its Low-Wage Workers - POLITICO
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