The Promise of Employee-Owned Businesses

by Leigh Graham

categories: Cities, Corporations, Jobs & Unemployment, The Economy

Published October 21, 2009 @ 05:41AM PT

In a former life, I worked for years on the issue of increasing minority entrepreneurship and strengthening small businesses in low-income communities.  Small business is routinely embraced as a fundamental economic development tool, as it shifts cash, risk and autonomy directly onto an individual business owner; suggests a rejuvenated street life if its an attractive storefront business; and theoretically creates a community stakeholder who cares about the health of the local economy and customers in which the business operates.

To that end, Cleveland has launched an employee-owned cooperative laundry in an effort to revitalize the low-income neighborhoods around University Circle; it's a grand gesture, featuring state-of-the-art, energy-efficient equipment and the goal of employing up to 50 workers, incl. ex-offenders.  The laundry will serve local institutions in the area, incl. the universities and hospitals that abound there.

There are certainly realistic drawbacks to the theory of small business development as an anti-poverty strategy - business associations' most important political cause is more often keeping taxes and wages low, or they don't get involved in local development issues unless their locations are directly threatened.  But entrepreneurship is prevalent and latent in all communities, and local governments and non-profits continue to try to foster small business development as a way to stimulus local economies.

My experience suggests laundries or dry cleaners are popular new small businesses in economic development strategies.  People need clean clothes, lower-income households often lack laundry equipment, and the work is relatively low-skilled.  Nonetheless, especially with dry cleaning, the price points are key, the demand must be there, and there's a big capital investment in equipment required up front.  And will it be a safe place for households to wash clothes?  Are there larger institutional customers that can also support it? This is just some of the due diligence that must be done here.

The employee-owned model is exciting; after a period of employment, workers earn a share in the company and a share of the profits.  This potential payoff goes much further than $10/hour wages ever can, and creates a critical but intangible sense of ownership.  Will the university and hospital clients come through for this new co-op?  How well funded is the training and mentorship for workers?  Are the additional goals of green business practices too much to take on right now?

The Evergreen Cooperative Laundry, and employee-owned businesses, are worth considering as an economic development, anti-poverty model.

("Laundromat" by coda)