New report argues worker ownership is solution to multiple economic challenges
by Karen Kahn
Ten Ohio nonprofits that support employee-owned businesses have formed the Ohio Worker Ownership Network (OWoN). Among them is the Ohio Employee Ownership Center, located at Kent State University, one of the oldest centers in the county. In part because of its efforts, Ohio has a robust number of employee-owned firms—about 320, according to Michael Palmieri, research and program assistant at OEOC. OEOC’s work tends to focus on ESOPs, but it is complemented across the state by multiple coop developers, including the CFAES Center for Cooperatives at Ohio State University, Evergreen Cooperatives Fund for Employee Ownership, Coop Cincy, and Coop Dayton, all partners in the new venture.
Our goal is to develop common resources, share lessons learned, and strategize together to take employee ownership to scale across the state.”–Michael Palmieri, research and program assistant at the Ohio Employee Ownership Center
OWoN amplifies the work of the individual members, says Palmieri. “Our goal is to develop common resources, share lessons learned, and strategize together to take employee ownership to scale across the state.” The network, Palmieri notes, “gives greater legitimacy to employee ownership as an economic development strategy, making it clear to policymakers and other stakeholders that there are communities working on this in every corner of the state.”
Employee Ownership: A Viable Solution to Interrelated Economic Challenges
In mid-September, OWoN launched its website and released a new report, Building Legacies: Retaining Jobs and Creating Wealth Through Worker Ownership. The report, which can be downloaded from the website, identifies three economic challenges facing Ohio’s communities:
- A dearth of good jobs that pay a living wage. Ohio has been badly hurt by deindustrialization. Low-wage jobs have become the norm: half of all workers between ages of 18 and 64 work at jobs that pay a median annual income of $17,950. People of color and women are over-represented in these low-wage jobs.
- Income and wealth inequality: With the top 1 percent holding 40 percent of all wealth in the United States, and 1 in 5 households with zero or negative wealth, our communities are increasingly divided. As the report points out, Ohio reflects the same trends as in the rest of the country. Since 1973, top earners have accounted for nearly 86 percent of all income gains, while 90 percent of earners have seen their incomes decline in value.
- Business succession crisis: In Ohio, 54 percent of private businesses are owned by baby boomers: i.e., 94,000 firms employing 2.6 million people, with $118 billion in payroll, are owned by people close to retirement age. Most small businesses never find a buyer, putting whole communities at risk when they close their doors.
As the report argues, “We can no longer view the retention of businesses, creation of good jobs, and the reduction of economic inequality as separate problems requiring separate solutions; a more integrated approach is needed.”
That approach is employee ownership. As noted in the report, decades of research and experience demonstrate that employee ownership effectively addresses all three of these crises by:
- Retaining and strengthening businesses
- Creating dignified family sustainable jobs
- Providing wealth-building opportunities for individual workers and communities.
State and Local Actions to Support Employee Ownership
Building Legacies offers up a number of actions that state and local governments as well as local economic development agencies could take to support employee ownership. On the top of that list, is for the state to direct federal SSBCI recovery funds to expanding the number of employee-owned businesses. The report also encourages the state to invest in in existing loan funds and CDFIs that are facilitating small business conversions and to establish a grant subsidy programs for businesses that want to engage in feasibility studies. Local policymakers and economic development agencies can learn more about the business closure crisis in their communities at the OWoN website, where an interactive map shows the number of local businesses owners in each county over the age of 55; the number of businesses they own; and the amount of revenue that could be lost if those businesses close.
Among the actions planned by the network is outreach to the state’s 90 Small Business Development Centers (SBDCs).
Among the actions planned by the network is outreach to the state’s 90 Small Business Development Centers (SBDCs), which are now mandated by federal law to support employee-owned startups and conversions. Recognizing that SBDCs are unfamiliar with employee ownership—and were not given funding or resources to carry out the mandate, Palmieri said, “OWoN isn’t going to ask SBDC to do more. What we would like to do is offer ourselves as partners, who could help to carry out the mandate, if the centers refer interested clients to us. Our organizations already provide the education, resources, and technical assistance needed to start or transition businesses to employee ownership structures.”
Coop Cincy, for example, recently launched the Business Legacy Fund and recruited five business acquisition managers to spur transitions. The five new recruiters, all entrepreneurs of color, will be reaching out to business owners to find those interested in selling to their employees. Co-op Cincy offers these owners the opportunity to learn more about employee ownership through its Business Legacy Fund succession planning program. Shine Nurture Center, a Cincinnati childcare center that serves more than 70 families, participated in the 2021 Business Legacy Fund cohort, and is now preparing to become a worker coop as its founding owner exits. Coop Cincy and the other members of OWoN hope that this on-the-ground work, which takes considerable time and resources, will be amplified and accelerated by joint efforts to educate and engage stakeholders throughout the state.
Members of the OWoN include: Co-op Cincy, the Ohio Employee Ownership Center at Kent State University, Co-op Dayton, The Fund for Employee Ownership, The Center for the Creation of Cooperation, Cleveland Owns, the CFAES Center for Cooperatives at Ohio State University, the Junction Economic Transformation Center, Co-op Columbus, and Co-op Nelsonville.
Karen Kahn is a communications consultant and the editor of Employee Ownership News.