Equilibrium unemployment as a worker insurance device: wage setting in worker owned enterprises

Abstract

Worker cooperatives are shown to provide higher level of employment, higher employment stability and often greater wage volatility than similar investor-owned firms. A stylized fact that is nevertheless largely unexplained by the literature is the frequent evidence of lower wages in worker managed firms. To engage in the explanation of this fact, we use the Shapiro and Stiglitz (1984) model on efficiency wages and unemployment as a discipline device. Given more efficient monitoring and the absence of wage premiums compensating the expected costs of contract failures, we show that efficiency wages in cooperatives are lower than in investor owned firms while employment is confirmed to be always higher. Our result is due to the informational advantage enjoyed by the firm's owners, which imply a compensation requested by workers for employer opportunism, and to the role of horizontal control among workers, which reduces the equilibrium level of wages. We conclude that the S-S (1984) result, as applied to worker cooperatives, is a special case of a wider class of equilibria in the presence of contractual imperfections in the agency relation and that different ownership forms can differently impact the unemployment level.

Social capital in cooperatives: an evolutionary Luhmannian perspective

“…Paradoxically, however, this incorporation requires that cooperatives are given full opportunity to practice distinct behaviors that are uniquely different from those of investor-owned firms because this difference gives a boost to the adjustment processes in the economic function system. For example, worker cooperatives tend to offer higher employment stability and to generate higher worker satisfaction than comparable investor-owned firms (Albanese et al 2019;Borzaga and Tortia 2006). Cooperatives have proven to be more resilient in times of economic crises than investor-owned firms (Birchall and Ketilson 2009); this is especially true for cooperative banks (Henselmann et al 2016).…”

Finance, Property Rights and Productivity in Italian Cooperatives

“…Correspondingly, also members of worker-run enterprises can partially differentiate their financial investments by saving and investing in low-risk or riskless financial activities what is left after investments in their own co-operative have been carried out. Third, even if capitalist enterprises stabilize workers' income stream and workers bear no relevant financial risk, the total amount of economic risk borne by workers should include also the expected costs of layoff, and other negative events related to the employment relation, for example the danger of exploitation and unfair treatment (Navarra and Tortia, 2014;Albanese et al, 2015Albanese et al, , 2019. Indeed, several contributions show that worker cooperatives are characterized by more fluctuating wages and more stable employment patterns when compared to capitalist enterprises.…”

Calidad del empleo creado en las cooperativas y sociedades laborales en la recuperación económica 2013-2016. Análisis del caso de España

“…La literatura que analiza el comportamiento de las cooperativas en los ciclos económicos argumenta que la mayor estabilidad laboral de las empresas propiedad de sus trabajadores, como son las cooperativas y sociedades laborales, se combina con un mayor ajuste vía salarial frente al empleo. Así pues, en los periodos de crisis, se observaría una mayor resiliencia en combinación con salarios con mayores fluctuaciones que en el caso de las empresas capitalistas (Albanese, Navarra y Tortia, 2017;Kurtulus y Kruse, 2018). La flexibilidad y seguridad laboral, analizadas a través del tipo de jornada laboral y la forma contractual para cooperativas y sociedades laborales (Calderón y Calderón, 2012), muestran que, la jornada a tiempo parcial tiene un mayor peso en las entidades de la economía social, lo que confiere una mayor flexibilidad en el empleo, y una mayor estabilidad en el empleo del sector que en el promedio nacional, en cuanto a presencia de contratos indefinidos (superior en las sociedades laborales que en las cooperativas).…”

“…Esto introduce una serie de comportamientos diferentes entre las cooperativas y las empresas mercantiles que afectan tanto a las diferencias en estabilidad del empleo como en términos de niveles salariales. La literatura señala posibles diferencias en el rol de los sindicatos u otros actores del dialogo social, así como diferencias en términos del problema del agente-principal (derivado de posibles conflictos de intereses entre propietarios -principal-y directivos/gestores -agentes-de una empresa, donde los primeros utilizan el salario para inducir al agente a actuar conforme a sus intereses) y en la estimación de los salarios de eficiencia (Bailly, et al, 2017;Albanese et al, 2017). Por último, un aspecto específico que resulta interesante es el efecto a lo largo de la escala salarial.…”