Reporting

September 27, 2017 by Elizabeth Sholes

Elevate CA: More empowered workers needed to grow California’s middle class


Milling machine worker at Lampin Corporation which has a Employee Stock Ownership Plan (Photo Credit: Wikimedia Commons)

Elizabeth Sholes is director of special projects for the California Council of Churches. Since 2012, her work has focused on helping build congregational support for a different strategy tackling income inequality in California. We are pleased to add her voice to the Elevate CA conversation.  

David Reagan’s Elevate CA essay on the critical need for expanding union presence rests on the moral imperative we have to diminish inequality in California. As people within the justice traditions of faith who also support the promises of democracy and its commitment to greater equality, we at the Council of Churches support this assertion wholeheartedly.

The tendency to drive down labor to its “cost” to business is a shortsighted and ultimately self-defeating policy. Labor has a two-fold contribution to the economy: it creates and buys the goods and services produced. Yet, we currently have stagnant consumption as wage-poor working people withdraw from markets for lack of purchasing power. Businesses teeter on “paper profits” of finance and stock prices rather than on reliable income from actual sales. This causes fragility in our economy.

But there is another loss to our economy, and that is knowledge of the business itself. An old (and sexist) saying remains true: that the brains of the firm lie "under the workman’s cap.” Skills and production knowledge, regardless of the business, most powerfully operate at the point of production. Owners rely on that, however much unacknowledged; creative problem solving, insights into opportunities, adaptation and improvements in process, cost savings in materials come from those who do the work far more reliably than from distant management or absentee owners.

Labor law forbids working people or unions to bargain on investment decisions. The exception comes when, through pension plans or profit sharing, employees own stock and thus may vote on issues as owners not as labor. In only this way can labor brings its useful knowledge to the table, sharing their understanding of efficient and profitable methods and practices to the benefit of the entire going concern.

Statistically we know that worker-owned and managed businesses are more profitable, endure longer, and are more stable than other forms of business. Where unions exercise their strength in decision-making, from Employee Stock Option Plans, to worker and union-worker cooperatives, such businesses flourish. Even in low-skill businesses such as house cleaning, landscaping, etc., direct participation of employees in decision-making and especially in ownership raises even unskilled labor to middle class status while the business itself grows and expands profits.

It is to California’s benefit to expand both union voices in management decisions through employee ownership. Societally, the strongest method is by creating stand-alone, worker-owned businesses. For small businesses, such as family firms lacking willing successors, or faltering businesses with too many non-productive absentee owners, selling the firm to employees outright is a powerful answer to shutdowns.

For communities with large populations of unskilled workers, converting or starting new businesses as worker coops lifts the wages and status of such people as new entrepreneurs. For unions looking at business closings, having their members buy out the firm both preserves the union and the jobs.

This is also an answer to an economy that is divided between high-skill and low-skill jobs. The former sector will always have need for more employees, but the low-skill sector threatens the state’s economic stability by perpetuating a permanent underclass unable to support itself.

Worker ownership helps especially with a union presence to help offer training and skills. It offers new strategies for developing management and entrepreneurial competence that can help lift low-skill workers’ competence while sharing the profits of their own work.

These strategies take wise technical support, business knowledge, useful laws, and capital resources that are open to innovative investing. It also requires willingness to look at unions as partners not adversaries in conventional relationships or as part of coops, and to see communities of color lacking quality educations as still having real potential rather than being seen as impediment to our state’s economic vitality.

The framework for such innovative businesses exists, the skills exist, and the capital is beginning to come online. What California needs is a commitment to its whole population, not just the elites. We now have means for that to come to fruition. What we need is the will to do so.

To see what other Californians have to say about improving upward mobility, read our Elevate CA blog. The California Economic Summit on Nov 2-3 in San Diego will develop a policy strategy for 2018 and beyond to lift 18 million Californians who live or near poverty into the middle class. To get more info and register for the Summit, click here.

Categories: Elevate CA, Workforce

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