Worker Cooperative Productivity

(transcribed from After Capitalism, pp 60-61, by David Schweikart)

As to the efficiency effects of greater worker participation, the HEW study of 1973 concludes, “In no instance of which we have evidence has a major effort to increase employee participation resulted in a long-term decline in productivity.” Nine years later, surveying their empirical studies, Derek Jones and Jan Svenjnar report, “There is apparently consistent support for the view that worker participation in management causes higher productivity. This result is supported by a variety of methodological approaches, using diverse data and for disparate time periods.” In 1990, a collection of research papers edited by Princeton economist Alan Blinder extends the data set much further and reached the same conclusion: worker participation usually enhances productivity in the short run, sometimes in the long run, and rarely has a negative effect. Moreover, participation is most conducive to enhancing productivity when combined with profit sharing, guaranteed long-range employment, relatively narrow wage differentials , and guaranteed worker rights (such as protection from dismissal except for just cause)- precisely the conditions that will prevail under Economic Democracy. 8

As to the viability of complete workplace democracy, we note that workers in the plywood cooperatives in the Pacific Northwest have been electing their managers since the 1940s, workers in the Mondragon cooperatives in Spain since the 1950s. There are some twenty thousand producer-cooperatives in Italy, comprising one of the most vibrant sectors of the economy. The Swedish cooperative movement is also large and impressive. Needless to say, not all self-management ventures are successful, but I know of no empirical study that even purports to demonstrate that worker-elected managers are less competent than their capitalist counterparts. Most comparisons suggest the opposite; most find worker self-managed firms more productive than similarly situated capitalist firms. For Berman, on the plywood cooperatives, states:

“The major basis for cooperative success, and for survival of capitalistcally unprofitable plants, has been superior labor productivity. Studies comparing square-foot output have repeatedly shown higher physical volume of output per hour, and others…show higher quality of product and also economy of material use.” 9

And Thomas on Mondragon:

“Productivity and profitability are higher for cooperatives than for capitalist firms. It make little difference whether the Mondragon group is compared with the largest 500 companies, or with small- or medium-scale industries; in both comparison the Mondragon group is more productive and more profitable.” 10

There is also the example of Weirton Steel. In 1982, following a mediocre year and facing bleaker prospects, National Steel offered to sell its Weirton, West Virginia plant to its 7,000 workers. The deal was completed in 1984. Weirton proceeded to post eighteen consecutive profitable quarters- at a time when many steel firms suffered steep losses, including two of Weirton’s competitors, who were forced into bankruptcy. 11 United Airlines, now majority owned by its pilots and technicians, has survived the intense competition that has brought down so many conventionally owned carriers.

8. Citations in this paragraph are from US Dept of Health, Ed, and Welfare, Work in America(Cambridge, Mass: MIT Press, 1973), 112; and Derek Jones and Jan Svenjar, eds., Participatory and Self-Managed Firms: Evaluating Economic Performance (Lexington, Mass: Lexington Books, 1982), 11. See also Alan blinder, ed., Paying for Productivity: A Look at the Evidence (D.C.: Brookings, 1990), especially the contribution by David Levine and Laura Tyson.
9. Katrina Berman, “A Cooperative Model for Worker Management,” in the Performance of Labour-Managed Firms, ed. Frank Stephens (New York: St. Martin’s Press, 1982), 80.
10. Hendrik Thomas, “The Performance of the Mondragon Cooperatives in Spain,” in Participatory and Self-Managed Firms, ed. Jones and Svenjar, 149.
11. For more on Weirton, see James Lieber, Friendly Takeover: How an Employee Buyout Saved a Steel Town (New York: Viking, 1995).