The POWER Act and its Effects
Exploring the "High Road Worker Ownership Study" by Berkeley Haas and Rutgers
“Fissured workplaces” have increasingly become more common, leading to lower wages, cuts of benefits, and reduced worker rights. The Promote Ownership by Workers for Economic Recovery (POWER) Act passed in California in 2022 aims to explore the potential of worker cooperatives and employee ownership models to combat these challenges.
Research conducted by BerkeleyHaas and Rutgers University provides insights into how such ownership structures can impact job quality, wealth distribution, and business sustainability. The main question of the study was “How might worker ownership improve job quality and firm performance in historically low-wage sectors?” Let’s look!
What Does the Act Establish?
The POWER Act “establishes a panel to study the creation of an Association of Cooperative Labor Contractors, among other potential activities, to facilitate the growth of democratically-run high-road cooperative labor contractors.” It additionally provides financial support through loan guarantees and tax incentives to businesses that are transitioning to employee-owned models (like ESOPs and worker cooperatives). This is offered to reduce the financial barriers as businesses go through structural change. The act additionally supports employee-owned businesses by granting preferential treatment in federal contracting and providing advisory services for their employee ownership journey.
The Study
The BerkeleyHaas and Rutgers’ research highlights the broader economic benefits of employee ownership, particularly in “job quality and firm performance.” Its main findings include:
Benefits of Employee-Owned Models: The study found that employee ownership improved job quality through higher wages, better training, and democratic workplaces. They additionally found increased job security, lower turnover, and better productivity levels
Barriers: Although employee-owned companies are valuable (for the reasons listed above), market estimations often lead to undervaluing. They also explore how different regulatory barriers, like financing restrictions, hinder growth for these businesses. The POWER Act addresses these barriers by promoting Cooperative Labor Contractors (CLCs) to address weakened labor conditions in contract labor
Umbrella Groups: The study revealed that secondary cooperatives and nonprofit coalitions help overcome these barriers. The Power Act encourages similar usage of cooperative support (through Umbrella Groups) to enhance “economic viability”
Additionally, this study lays out approaches to promote worker ownership because of how economically prosperous businesses that adapt these models can be. These approaches include:
Improving Information: The study proposes the idea of a certification program to recognize these high-road worker-owned (HRWOs) companies (including worker-owned workplaces). This would help with the identification of workplaces to inform workers of the opportunities that are available to them
Programs for Operations: The study recommends a training curriculum for HRWOs to lower costs of maintaining a democratically run workplace. This can additionally be seen through training grants, or loan templates for cooperatives. The Umbrella Groups (listed above) cannot fully support worker-owned workplaces, so establishing programs (especially as HRWOs grow) is essential for continuing workplace operations
Creating Regulations: They suggest the clear definitions of HRWOs and removed requirements during the application process for loans. They want regulatory deference for HRWOs, to safeguard them from their practices (with the idea that these companies act differently than others because they are not inherently focused on producing profits for shareholders). An example of this includes a waiver for joint employer liability.
The POWER Act represents a strategic effort to explore and potentially implement worker ownership models in California. Research from BerkeleyHaas and Rutgers University provides evidence that employee-owned models can lead to improved job quality, enhanced performance, and broader wealth distribution in the long-run. Exciting stuff from California that we can look forward to seeing across the United States.