Surdna Foundation Has a Plan To Build Strong Local Economies

You don't need a political scientist to tell you something is amiss in America. It's there, lurking, in the presidential primary campaigns of Donald Trump and Bernie Sanders, in our social media feeds, in between the lines of recent reports detailing falling mortality rates and rising rates of opioid addiction among working-class Americans.

It's part frustration, part anger, but mostly anxiety about the economy and our economic future. Where have good jobs for average Americans gone? Are technology and globalization benefiting or hurting the economy? And where will new good jobs — the kind that make it possible for young Americans to pay off their student loans, buy a home, raise a family — come from?

Mitch Nauffts of the Foundation Center's Philanthropy News Digest recently spoke with Surdna Foundation's José García about philanthropy's role in building a stronger economy.

Through its Strong Local Economies program, the New York City-based Surdna Foundation supports the development of a robust and sustainable economy in three ways: encouraging business development and acceleration, fostering equitable economic development, and working to improve job quality and career pathways. Recently, PND spoke with program officer José García about Ours to Share: How Worker Ownership Can Change the American Economy (50 pages, PDF), a new report published by the foundation that examines the potential of worker-owned firms and employee stock ownership plans (ESOPs) to create a more productive, stable, and equitable economy.

 Philanthropy News Digest: What big macro trends is the Ours to Share report responding to? And how does it fit into the broader Strong Local Economies portfolio at Surdna?

José García: Our interest in fostering a strong local economy is one of the reasons we released the report. It responds in part to the growing number of low-quality jobs generated by the U.S. economy. We recognize that it's important for the economy, for workers, and for our shared prosperity to increase the number of well-paying jobs. These are good jobs, jobs that give people a chance to move into the middle class and a chance at a better future.

We're in a period in which wages have stagnated while at the same time debt levels, for most Americans, have increased. Meanwhile, the top fraction of a percent has seen its wealth soar, resulting in a significant increase in inequality. Of course, growing inequality has an impact on economic growth, in that it leads to a decline in the number of people with discretionary income to spend. Here at Surdna, we believe the creation of good jobs is a critical factor in wealth creation and a key component of any agenda aimed at strengthening local economies. It's not a panacea, but we do see it as essential.

PND: It's a coincidence that the report is being released in the middle of a presidential primary season that has seen a self-proclaimed democratic socialist on the Democratic side make a serious run at his party's nomination. But the timing is kind of perfect, isn't it?

JG: I would love to say we planned to release the report during primary season, because you're right, the timing couldn't be better. And one of the reasons is because worker co-ops are a bipartisan idea. From the bipartisan passage of the Employment Retirement Income Security Act of 1974 (ERISA), legislation that created employee stock ownership options for workers, to the more recent creation of a bipartisan Congressional Cooperative Business Caucus, both sides of the aisle have favored and continue to support actions to increase the levels of ownership in society. And that is what worker co-ops and employee stock ownership plans (ESOPs) do — they create good jobs for workers and, at the same time, they give workers a piece of the ownership pie.

PND: How does the report define worker ownership? And how often do we see it in the United States?

JG: At the most basic level, worker co-ops enable working people to be part owners of an enterprise that employs them. It's a very simple concept; you're not only a worker, you're an owner, which in theory gives you the opportunity to build wealth. The U.S. has an interesting relationship with worker ownership, in that it seems to be one of those ideas that bubbles up when growing inequality becomes a bigger part of the economic picture. Today, for example, there are two to three hundred worker co-ops around the nation and about seven thousand ESOPs — of which maybe a thousand are majority worker-owned. ESOPs are more popular in the utilities, manufacturing, and finance and insurance sectors, and in some states — Iowa, Hawaii, Minnesota, and North Dakota, while we tend to see lower density, in terms of both sectors and geography, with worker co-ops.

PND: It seems as if the people most likely to benefit from ESOPs and worker co-ops are low income and historically disadvantaged — some of the same groups, in other words, that have been left behind by the global economy. Is that an accurate characterization?

JG: It's true that inequality has been felt keenly in low-income communities, but, as you know, the incomes of those in the middle class also have stagnated over the last ten or twenty years, while the middle class’s share of the national wealth has fallen. The report, and our Strong Local Economies efforts in general, are focused on low-income communities and communities of color, in part because we believe that if we can help raise incomes among those segments of the population, it will have a ripple effect in terms of reducing inequality for other groups. At the end of the day, though, worker co-ops and ESOPs should be considered by any type of enterprise that wants to succeed in the marketplace and, at the same time, share ownership more broadly with its workers.

PND: The report closes with a handful of recommendations aimed at growing worker-owned coops and ESOPs in the U.S. Which of those, in your view, has the most promise? And what two or three things would you like to have other social justice funders take away from the report?

JG: We think the imminent retirement of tens of thousands of boomer business owners provides a great opportunity to scale this model. Everyone has been talking about how the retirement of the boomers will affect health care spending and entitlement costs, but we think boomers could be the catalyst for an equally powerful trend as they exit the many small businesses they've created. It's a great opportunity for boomers to pass along wealth to others and ensure that low-income individuals and people of color have an opportunity to build wealth of their own, just as the boomers themselves did when they were younger.

As for social justice funders, they need to keep working on the issues they've been working on, issues like the minimum wage, equal pay for equal work, paid sick leave, and so on. At the same time, they should look at the promotion of worker co-ops and ESOPs as a real opportunity for reducing wealth inequality in their communities and the country more broadly. Philanthropy can play an important role in the conversation by prototyping and disseminating best practices and tool kits, by demonstrating that it's efficient and scalable to convert small businesses into worker co-ops and ESOPs, and by supporting the infrastructure needed to enable a wave of conversions, should that happen. These worker-owned enterprises also will need capital, which is another way philanthropy can get involved. And, hopefully, some foundations will step up to support broader policy and advocacy efforts, at both the state and federal levels, with the goal of making worker co-ops and ESOPs an affirmative part of the broader community development agenda.

This post first appeared on the Foundation Center's Philanthropy News Digest.