On May 18, 2022

Vermont leads in worker co-ops

By Brett Yates

Every two years, the United States Federation of Worker Cooperatives (USFWC) conducts an “economic census” to identify and study worker-owned and worker-managed businesses across the country. The organization’s latest State of the Sector report reveals, perhaps unsurprisingly, that, in raw numbers, New York and California lead the U.S. in “democratic workplaces,” with 110 and 99, respectively, out of 612 counted nationwide.

Sixth on the list of states — but first (by a large margin) on a per capita basis — is Vermont with 21. That gives Vermont 3.26 worker cooperatives per 100,000 residents. Maine comes in second at just 1.26. But other small states, like Wyoming, Alaska, and South Dakota, appear to have no worker co-ops at all.

What accounts for this disparity?

Cooperatives are enterprises owned and governed by their members, who have an equal stake and say in their operations. In consumer cooperatives (like REI, the nation’s largest), the members are the customers, but in a worker cooperative, the members are the employees, who elect their own managers — if they choose to have managers at all — and split among themselves the profits that would typically go to a proprietor or to investors.

Vermont’s worker co-ops span nearly every industry, from dining (Montpelier’s Woodbelly Pizza) to computer repair (Randolph’s Vermont Computing Cooperative), healthcare (PT360, a physical therapy clinic in Williston), and construction (Montpelier Construction, and Burlington’s Red House, TimberHomes Vermont, and New FrameWorks). The largest, by headcount, is the New School of Montpelier, whose staff of more than 60 serves students with disabilities, referred by public schools. The newest, the Marshfield Village Store, became a worker co-op in February, 154 years after its opening.

From Franklin County to Windham County, worker co-ops tell stories of experimentation, dedication, and solidarity among Vermonters who manage to combine idealism and business savvy. Eschewing the capitalist relations of production within a capitalist economy may not be easy, but something in the Green Mountains seems to have inspired an unusual number of people to try.

Historical influencers

The state’s high level of worker ownership may have grown partly out of a broader cooperative movement that began in the 1970s, when back-to-the-landers arrived in Vermont and started communes and buying clubs, the latter of which evolved into community-owned natural food markets. At least 15 food co-ops, like the Rutland Area Food Co-op, operate in Vermont today.

One of the state’s oldest extant worker co-ops, the Putney-based Green Mountain Spinnery (circa 1981), emerged from the same cultural milieu, with its four founders drawing inspiration from E. F. Schumacher’s 1973 book “Small Is Beautiful: A Study of Economics As If People Mattered.” Today, it has 10 workers.

“The Spinnery was never created to be a huge moneymaking business,” Production Manager Lauren VonKrusenstiern noted. She pointed to its official mission statement: “To create yarns of the highest quality, to help sustain regional sheep farming, and to develop environmentally sound ways to process natural fibers.”

“And all while providing employment for our community,” she added. “Fortunately, the Spinnery has always seemed to attract and hold folks that are interested in the co-op model, agriculture, fiber arts, and like to work and feel productive, using very old machinery.”

In the telling of Zen Trenholm, a policy director at USFWC’s Democracy at Work Institute (DAWI), the next major wave of worker co-ops came after the Great Recession’s layoffs in 2008 and 2009.

“We saw a huge explosion of interest in worker ownership that has not abated since then,” he said. “You now saw people looking toward the form as a way to enter the economy, but under their own terms.”

Trenholm emphasized worker co-ops’ connection to the labor movement — distinct from the hippie counterculture, which had also prized shared ownership in various forms. “We probably have more in common with unions [than with consumer cooperatives],” he ventured, “where we’re trying to address this question about the quality of work, about the fact there’s deep inequality in incomes and wealth creation in America. And consumer co-ops aren’t really doing that.”

In fact, one of Vermont’s earliest worker co-ops, the Cooperative Granite Works of South Ryegate, began in 1885 when a group of blacklisted stonecutters, having lost their jobs for organizing a branch of the Granite Cutters’ National Union, struck out on their own. According to a history written by the company’s secretary, the owners of the other local granite firms subsequently persuaded the police to arrest the cooperators for “conspiracy,” reducing their available capital by $200 per person, the cost of bail.

Vermont aid today

Today, Vermont’s cooperative entrepreneurs encounter a more hospitable climate. In particular, they can count on guidance from the Vermont Employee Ownership Center (VEOC), the second-oldest organization of its kind in the country. VEOC employs a staff of three with the help of an annual grant from the Vermont Agency of Commerce and Community Development and sponsors in the business community.

“Having an organization that’s been doing this for 20 years means there’s a lot of pipeline that’s been built, so to speak,” Executive Director Matt Cropp remarked. By its count, VEOC has participated in the establishment, through startup or conversion, of more than 20 worker-owned companies, either as co-ops or as ESOPs (employee stock ownership plans).

ESOPs, a form favored by larger firms, hold some or all of a company’s stock in a trust on behalf of the employees, who accrue shares as a retirement benefit, based on their salary and years of service. Unlike co-ops, most don’t practice democratic governance. VEOC asserts that Vermont ranks “among the top states for ESOPs per capita.”

Business owners nearing retirement frequently approach VEOC to learn about the possibility of selling their companies to their workers. “It can be a way to exit ownership that preserves their legacy, and on a timetable that works for them,” Cropp explained. “Employees who know the business can be the stewards of it going forward.”

Not every company may be a good fit. “If it’s an owner-operator with a bunch of 20-hour-a-week college students who turn over every 6-12 months, it’s probably going to be challenging to do a worker co-op in that context,” Cropp confessed.

For new endeavors, Cropp looks for “a trusting relationship between the members of the group, some relevant experience, and commitment to the project in a serious way.” The “initial sniff test” gives way to a financial feasibility analysis. Will they qualify for a loan?

Collectives with diverse, fluid memberships generally can’t secure debt with a personal guarantee, as an individual entrepreneur with assets, like a house, would. Shunned by banks, many cooperators rely instead on a small group of specialized lenders, such as the Massachusetts-based Cooperative Fund of the Northeast (until recently, the Cooperative Fund of New England), that dedicate themselves specifically to funding co-ops, using low-cost capital from “social investors.”

Operating the enterprise is the next problem.

The uncommon ownership structure can bring new wrinkles to mundane matters like hiring, payroll, and taxes. For instance, each worker co-op structures the onboarding of a new member — who typically receives a share of the business after a trial period of employment and a small capital contribution — a bit differently.

“A lot of these things feel quite daunting, not only because of the day-to-day activities of running a business but because, in general, the processes and procedures to implement these things are not as simple as forming an LLC,” related Erich Kruger, founder of West Dummerston’s Deconstruction Works, a co-op that salvages building materials during demolitions. “There’s a learning curve.”

Both Kruger and Daniel Shearer, a project manager at the Burlington-based Tamarack Media Cooperative, stressed the value of technical assistance. Tamarack, which designs websites, videos, and printed materials for environmental organizations, shifted to worker ownership when, seeking to ratify the informal egalitarianism of its work culture, its two owners sold the business to a new cooperative entity consisting of themselves and their two employees.

“When we reached out to VEOC, it was free and knowledgeable consultation, and they were also able to connect us with a law firm to help do the transition that had done these things before,” Shearer recounted. “It could be the case that in other states, that infrastructure isn’t as developed.”

Vermont isn’t the only rural state, however, that works to develop cooperatives. At DAWI, Trenholm spends much of his time helping big cities implement co-op-friendly policies, but he’s also seen support for worker ownership in less populous areas, particularly in Maine and western North Carolina.

“Worker cooperatives are talked about as a way to preserve rural jobs, rural businesses, rural services,” Trenholm said. “If you lose a business there, those jobs don’t go next door. They’re gone. And then you lose your hardware store, your grocery.”

Last year, following a successful Kickstarter campaign, three women in Bellows Falls reopened a coffeehouse that had shut down in 2020. The Flat Iron Cooperative, which Larisa Demos, Bri Johnson, and Jana Bryan jointly operate, takes a hybrid form: its worker-owners constitute three quarters of the corporate board, which also reserves a single seat for a consumer-owner, representing the customers who’ve helped the baristas raise additional capital by purchasing $100 memberships.

“You hear stories all the time through the pandemic where a business owner is like, ‘This is too much work. I’m losing money. I’m just going to close the business.’ And then you have a lot of people out of work. Co-ops tended to band together,” commented Demos, previously a worker-owner at the Green Mountain Spinnery. “I don’t know of any, or very few, that actually closed, because the people who are working in the business are also the owners, so you want to make sure that your business survives whatever comes.”

Johnson observed that consumers in Vermont also value the cooperative form, making it a selling point for a new business. “People who are familiar with co-ops were so excited to see that we were going to be a co-op. They would walk by, and we’d be inside working on stuff, and they’d go, ‘Oh my god, they’re making it a co-op!’ We put it on our sign intentionally,” she said.

The Flat Iron Cooperative belongs to the Valley Alliance of Worker Cooperatives (VAWC), a business association that calls itself a “co-op of co-ops.” VAWC offers mutual support for its seven members and promotes worker ownership in western Massachusetts and southern Vermont.

Adam Trott, VAWC’s executive director, attributed the success of western New England’s cooperative economy to the region’s “high amount of educational infrastructure, which helps to raise awareness” of the model; to state statutes that allow businesses to incorporate specifically as worker cooperatives (though, due to the restrictive definition under 11 V.S.A. § 1086, some of Vermont’s worker co-ops operate legally as C corporations instead); and, above all, to cooperation among its cooperatives. “They work together,” he said.

Perspective: How does Vermont, the U.S. compare to other regions worldwide?

A hotbed of worker ownership by U.S. standards, Vermont nevertheless lags far behind places like Italy’s Emilia-Romagna region and Spain’s Basque Country, headquarters of the world’s largest worker co-op, the Mondragon Corporation, which boasts a workforce of more than 81,000. (America’s biggest, the Bronx-based Cooperative Homecare Associates, has about 2,000 worker-owners.)

In Trott’s view, the growth of the cooperative economy at home will depend on worker co-ops’ ability to find a collective voice to advocate for their model. “[Worker-owners] get better pay, more benefits, vacation for retail jobs, and overall security,” he said, citing VAWC’s survey data. “But we have to get out there and make that argument.”

VAWC, Trott noted, has worked to dispel some of the myths around worker ownership, including the notion that, in business, democratic governance leads inevitably to inefficiency and dysfunction. “[Assumptions like] ‘They’re going to argue about what kind of toilet paper to buy.’ That never happens,” he declared. “How can we live a democratic society when we go to work and we have to put our values aside?”

In Burlington, five farmers jointly own and operate the 15-acre Diggers’ Mirth Collective Farm. Here, they have, in the words of Hilary Martin, “autonomy and control over our work experience, which has evolved over years of decisions with equity and quality of life as priorities.”

“Because the ownership is shared, so also are the financial risks and stresses of running the farm,” Martin acknowledged. “But we believe that when we work together, the best ideas rise to the top, and the business is better for it.”

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