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Sunday, June 20, 2010

Worker-owned cooperatives help restore the American dream

A recent report by the New America Foundation calls attention to worker-owned cooperatives and employee ownership of corporations as a means of expanding economic prosperity.

Heath McCulloch writes:

Economic downturns typically galvanize interest in alternative economic models, and this one is no exception. Employee ownership is one such alternative that has, in recent months, captured the attention of the mainstream media including CNN Money, The New York Times, Time Magazine, Christian Science Monitor, The Economist, and Business Week. Employee ownership leaders and asset-building practitioners share a common goal of broadening access to ownership opportunities, but these strategies are still off the radar screen of the asset-building movement. It’s time to give them the attention they deserve.

Asset-building advocates have long included investment strategies – home and business ownership, in particular – as critical steps along a path to financial security for low-income working families, but we have typically focused on individual ownership strategies. Notable exceptions include recent Ford Foundation investment in the exploration of shared equity homeownership as a way to enable low-income families to build home equity while preserving public subsidies and keeping housing affordable over time and the Annie E. Casey Foundation has supported a national work group focused on the asset-building value of shared business ownership.

Today, there are new windows of opportunity to bring funders, investors, advocates and practitioners of shared business ownership strategies into the broader asset-building movement. Two common employee ownership strategies are a logical place to start—
Employee Stock Ownership Plans (ESOPs) and worker-owned cooperatives. These strategies have long supported U.S. workers – across the wage spectrum – to build financial assets through ownership of an equity stake in the businesses where they work. ESOPs are one type of employee benefit plan that buys and holds company stock on behalf of workers. Worker-owned cooperatives are companies that are owned and democratically managed by their employees.

The National Center for Employee Ownership reports that more than 10,500 ESOP plans cover almost 13 million workers and over $900 billion in U.S. company assets. ESOPs hold great potential as asset-building vehicles for U.S. workers, at all wage levels: the average ESOP participant has $47,000 of savings in the ESOP alone (the majority of ESOP companies offer additional, direct contribution retirement plans, typically 401(k)s).

Worker cooperatives represent a small segment of the U.S. economy: According to a recent federally-funded study, 223 worker coops in the U.S. employ 2,380 full-time worker-owners. But they are particularly relevant to asset-building advocates because they are increasingly being established in low-income communities, targeting low-skilled and/or immigrant workers. For example, the Cleveland Foundation, City of Cleveland, business and university leaders have established the Evergreen Cooperative Development Fund to create a network of coops targeting low-income community residents. In the San Francisco Bay Area, two nonprofits – WAGES and Teamworks – are supporting networks of worker-owned cleaning cooperatives owned by immigrant workers.

Senator Bernie Sanders of Vermont introduced legislation last year to expand employee ownership and worker-owned cooperatives. The text of the bill introduced by Senator Sanders reads as follows:

United States Employee Ownership Bank Act - Directs the Secretary of the Treasury to establish the United States Employee Ownership Bank to foster increased employee ownership and greater employee participation in company decision making throughout the United States. Authorizes the Bank to make loans, on a direct or guaranteed basis, and which may be subordinated to the interests of all other creditors, to employees to purchase a company through an employee stock ownership plan or eligible worker-owned cooperative which is at least 51% employee owned, or will become so as a result of Bank assistance. Authorizes the bank also to allow:

(1) a company that is less than 51% employee owned to become at least 51% employee owned; and

(2) allow a company that is already at least 51% employee owned to increase the level of employee ownership, expand operations, and increase or preserve employment.Amends the Worker Adjustment and Retraining Notification Act to require the employer, if it orders a plant or facility closing in connection with the termination of its operations there, to offer its employees an opportunity to purchase such plant or facility through an employee stock ownership plan or an eligible worker-owned cooperative that is at least 51% employee owned. Exempts from such requirement an employer that orders a plant closing:

(1) but will retain the plant assets to continue or begin a business within the United States; or

(2) intends to continue the business conducted at such plant at another plant within the United States. Amends the Community Reinvestment Act of 1977 to authorize the appropriate federal financial supervisory agency, in assessing and taking into account the record of a financial institution during an examination, to consider capital investments, loans, loan participation, technical assistance, financial advice, grants, and other ventures undertaken by the institution to support or enable employees to establish employee stock ownership plans or eligible worker-owned cooperatives that are at least 51% employee-owned.

A very interesting history of the role of labor unions in creating worker cooperatives is provided by the Worker-Ownership Institute:

The concept of employee ownership in North America dates back to the settlement of the continent by men and women breaking the land to establish their farms and building their own stores and workshops. Unlike Europe, where peasants were bound to the land and ownership of productive property was concentrated in the hands of the few, in North America a society of relative equals who owned their own productive assets was built: farms, tools, workshops, stores, etc.

The independent farmers, shopkeepers and artisans who populated revolutionary North America yielded in the latter part of the 19th century to the rapid growth of the large corporations and increasing concentration of ownership. The farmers set about establishing cooperatives to buy their supplies…seed, fertilizer, etc….and to process and market their products jointly. The co-ops were owned by the farmers who bought from them and supplied them. Today family farming in the United States and Canada is sustained by an elaborate network of purchasing, processing and marketing cooperatives that provide the economics of large scale production within family ownership of land. Even electricity in large parts of rural America is provided by co-ops.

Consumer co-ops took hold in town and country. Credit unions, mutual savings banks and mutual insurance companies are owned by their depositors or policy holders, not by large companies, and provide lower rates and patronage dividends to their owners.

The early unions, such as the Knights of Labor in the 1870s and 1880s, and the craft unions in the 1880s and 1890s, sought to do the same by sponsoring worker cooperatives in which workers pooled their tools and resources to compete with the growing corporations.

For the better part of a century, the growth of worker co-ops was stymied by a structural problem. Those co-ops that failed in the market disappeared for the obvious reasons. But those that succeeded disappeared also. The problem lay in the design of ownership: each member owned one equal share. If the co-op did well, all shares appreciated in value. When founding members wanted to retire, new workers could not afford to buy the retiring members’ shares. So success was as fatal as failure because retiring members sold to outside buyers, and the cooperatives were converted into conventional corporations.

Despite this difficulty, the concept of co-ops was revived regularly in crises as a means to put the unemployed back to work. The Depression generated hundreds of co-ops; the oldest surviving worker-owned businesses of any size in the United States, the plywood co-ops in the Pacific Northwest, were purchased by their employees to avert shutdowns beginning in the 1930s.

But cooperatives gradually disappeared from labor’s agenda as industrialization advanced. While setting up co-ops was realistic in the traditional crafts, it was hard to see how it could work in mass production. How do you start up a cooperative steel mill or auto plant? After the turn of the century, radicals in the labor movement, like the Industrial Workers of the World before the First World War, or the CIO unions in the 1930s, focused on fighting the bosses instead of replacing them. The real economic gains from collective bargaining so far outweighed the hypothetical benefits from production cooperatives that, by the 1950s, the concept had virtually disappeared as a subject of union interest.

Unions have once again embraced the concept of worker co-ops. In October 2009, The United Steel Workers Union, North America's largest industrial trade union, announced a new collaboration with the world's largest worker-owned cooperative, Mondragon International, based in the Basque region of Spain.

Worker co-ops and employee owned companies contribute to restoring opportunity and security for the American middle class. For one thing, employee owned enterprises in the USA are going to be far less likely to outsource, lay off workers and move to China.

Thursday, June 17, 2010

Schauer pushes for fair trade with China at House hearing

Congressman Mark Schauer (D-MI) was invited yesterday to testify before the House Ways and Means Committee about current trade policies with China. During his testimony, Schauer pushed for action on his bipartisan legislation (HR 5312) to stop wasting U.S. taxpayer dollars on goods that are made in China, while it continues to block American goods from its own government contracts.

“When will we play tough? When will we get it?” asked Schauer. “At the very least, we need to show China that we are willing to be strong until they open their procurement markets to us. American workers can build anything if they’re given half a chance to do it. We can’t afford to continue to let China eat the lunches of American workers.”

Currently, goods that are produced in China are being used for government contracts in the United States across multiple industries – such as manufacturing, construction and renewable energy – instead of goods produced by American workers and businesses. Since China has blocked American goods from its own government contracts, Schauer’s bill would level the playing field and make sure taxpayer-funded projects create jobs for U.S. workers.

According to a recent report from the Economic Policy Institute, 2.4 million American jobs have been lost or displaced as a result of the growing trade deficit with China since it joined the World Trade Organization (WTO) in 2001. During that time, the State of Michigan lost 67,800 jobs, including 4,700 in the 7th district alone, due to unfair trade with China.

A copy of Schauer’s testimony is available below:

Mr. Chairman, Ranking Member Camp, members of the Committee - it’s a pleasure to come here to discuss our trade issues with China. I appreciate the invitation and look forward to working with the Committee on these issues.

I’m pleased that the committee is examining the indigenous innovation issue, because it is perhaps the best example we have of China overtly favoring its captive industries. Because China is not an open society, there is little we can do except count the missing jobs, unless we are willing to take a strong stand against favoritism as evidenced in China’s indigenous innovation initiative. My legislation is one tool that can be used to discourage China from continuing to go down this path.

Although the committee is examining a number of issues today, I’d like to focus on the patent unfairness of China’s government procurement policy, as contrasted with the U.S.’s open procurement policy.

Although I represent a manufacturing state that has longstanding concerns with China, my most recent involvement in this issue started rather innocently. This year, I was provided a bag of Census promotional materials. As is my custom, I inspect the labels of the product to determine the country of origin.

The first article was this hat. Now, we all get hats from every group in our district, and I proudly display a number of hats in my Congressional office.

Of all the hats I’ve ever received, I’ve never seen one of as poor quality as this. I can’t imagine anyone wearing this hat. I was shocked to see that this hat was made in China. I wasn’t shocked because the quality was poor; I was shocked because I couldn’t believe that our Census was procuring promotional goods from China.

In the same package of goods, there was a Census 2010 keychain – you guessed, “Made in China.”

I was outraged that our taxpayer dollars were going to our competitors, and I really hit the ceiling when I realized that China shut out US firms from its $580 billion stimulus plan. Something is fundamentally wrong here when a trading relationship is a one-way street that drives jobs out of the US.

When I began talking about my concerns with this procurement publicly, I received an email from the Census. To the extent I understand it – and I’m not certain that I do - the Census seems to believe that these articles were “substantially transformed” by an American company adding the words “Census 2010” to these Chinese goods. The email also contained an explanation stating that “it is extremely difficult to find vendors that sell entirely U.S. made products.”

That answer is unacceptable – if U.S. vendors exist AT ALL, there needs to be a damn good reason why they didn’t get this work.

The Census’s reasoning here is circular: they can’t find a U.S. firm to make the hats, because they don’t give contracts to U.S. firms to make the hats. Well, as I am inclined to do, I looked into this: in my own office I found this, and this, and this (showing U.S.-made hats). All of these are U.S.-made hats of recent vintage.

I also spent about 3 minutes on the internet and came up with a number of options to have these goods made in the U.S. There is no question but that there is sufficient U.S. manufacturing capacity to make these goods, so what went wrong and how did this money find its way to China? We’re still looking into this issue, but it’s clear that something went wrong, especially when the American Chamber of Commerce in China is reporting that U.S. companies – even U.S. companies that have operations in China – are being shut out of that market.

China is playing us for fools regarding the Government Procurement Agreement – the GPA. Upon joining WTO in 2001, China said it would sign the GPA as soon as possible. [noted in USCBC July 2009 “PRC Government Procurement Policy, page 4]. Nine years later, that still hasn’t happened. The U.S.-China Business Council notes in its 2010 White Paper that there has been zero progress on China submitting a commercially-meaningful accession offer to the GPA. It would be interesting to know how many billions of taxpayer dollars have gone to China during this 9-year waiting period.

When they do submit an offer, you can bet that it will be full of exceptions that will end up costing American jobs.

So, when will we play tough? When will we get it? At the very least – the very least - we need to show China that we are willing to be strong until they open their procurement markets to us.

I’ve offered one way of addressing this issue, and that is to cap the amount of US government procurement of Chinese goods to the amount of American goods purchased by the Chinese government.

My bill, H.R. 5312, includes a provision that requires the Secretary of Commerce to perform both a legal and factual analysis of whether China has opened its procurement practice to U.S. goods. Since China isn’t a transparent society, we need more than China’s signature to be assured that they, in fact, are buying U.S. goods.

Under H.R. 5312, the International Trade Administration would report the total value of American goods procured by the Chinese government. The Secretary of Commerce would then certify the amount of that year’s cap for US procurement of Chinese goods – in short, a dollar out, a dollar in. We need this type of basic fairness to bring jobs back to America.

The Economic Policy Institute estimates that we’ve lost 2.4 million American jobs since China joined the WTO in 2001, and that doesn’t include 2009, which was probably a very good year for the Chinese. Will this program be easy to administer? Perhaps it presents challenges, but there are 2.4 million American families that want us to face those challenges.

To a casual observer, it might look as if there are sufficient laws on the books to favor U.S. goods, but it is apparent that the current laws have not been sufficient to stem the flow of jobs heading out. I suspect that the exceptions and waivers have swallowed the rule, and it’s time to reexamine this relationship. At the very least, if we take some positive action, China may understand that it needs to put forth a meaningful accession offer to the GPA, and they’ll stop this “indigenous innovation” program.

There’s a right way to do this. Secretary LaHood travelled to China to tell them that rolling stock for our new railroad investments needs to be made in the U.S., and that waivers won’t be granted. That’s the right message.

American workers can build anything if they’re given half a chance to do it. Earlier I showed you the worst ballcap I’ve ever seen – here is the best one … made right here in the U.S.A. in Newark, New Jersey. Anyone involved in this industry knows that there is sufficient U.S. capacity to make these hats and keep these jobs in the United States.

We can’t afford to continue to let China eat the lunches of American workers through currency manipulation, “indigenous innovation,” and other means.

Monday, June 14, 2010

Kathy Dahlkemper on the benefits of health care reform

New Health Care Rule Delivers on Promise to Keep Existing Plans
by Congresswoman Kathy Dahlkemper (D-PA)
Monday, 14 June 2010

WASHINGTON—Western Pennsylvanians who like and want to keep their health care plans can be reassured that the Affordable Care Act will protect their existing coverage and provide them new consumer protections that will make their health insurance better. The U.S. Departments of Health and Human Services, Labor and Treasury today issued a new regulation under the Affordable Care Act on “grandfathered” (or existing) health plans that will protect the rights of those who want to keep their insurance.

“During the health care debate, I told concerned citizens that if they liked their health insurance, they could keep it under the new reform. Today, we are delivering on that promise,” Rep. Dahlkemper said. “The new regulation protects your ability to keep your insurance and provides new benefits and consumer protections to make your coverage even better. Consumers want more choice and more control when it comes to their health insurance, and we’re giving that to them through the new health care reform.”

The rule announced today ensures that consumers can keep their current plan if they like it. It also gives these consumers new benefits, including:

No lifetime limits on coverage for all plans,
Ending the insurance company practice of rescinding coverage when people get sick and have previously made an unintentional mistake on their application; and
Rep. Dahlkemper’s Young Adult Healthcare provision which offers parents the option to keep their adult children up to age 26 on their insurance plan.
“Grandfathered” plans include those that existed on March 23, 2010. Plans will lose their “grandfather” status if they choose to significantly cut benefits or increase out-of-pocket spending for consumers. Those in plans that make such changes will gain new consumer protections under the Affordable Care Act.

Most of the 133 million Americans with employer-sponsored health insurance through large employers will maintain the coverage they have today. Large employer-based plans already offer most of the comprehensive benefits and consumer protections that the Affordable Care Act will provide to all Americans this year and in the future, such as preventing lifetime limits on coverage.

People who work in smaller firms and those who purchase their own insurance—both of whom change insurers more often than those covered through large employers—will enjoy all of the benefits of the Affordable Care Act when they choose a new plan. These Americans also will benefit from the new competitive Exchanges that will be established in 2014 to offer individuals and workers in small businesses with greater choice of plans at more affordable rates—the same choice of plans as members of Congress.

For the vast majority of Americans who get their health insurance through employers, additional benefits will be offered, irrespective of whether their plan is grandfathered, including:

No coverage exclusions for children with pre-existing conditions; and
No “restricted” annual limits (e.g., annual dollar-amount limits on coverage below standards to be set in future regulations).

For a comprehensive fact sheet, check out the link below.