By Kenzie Love
Inflation is top of mind for many Canadian small and medium-sized businesses (SMEs) these days. A recent survey of Canadian SMEs found 90 percent of them had been impacted by inflation, and another survey of 500 Canadian accountants revealed inflation as the most significant financial threat to Canadian SMEs. With the vast majority of Canadian worker co-ops being SMEs, it’s reasonable to assume that they’re also feeling these pressures. But delving deeper into the issue suggests that while worker co-ops face some of the same challenges as conventional businesses regarding inflation, how they respond is likely to be different.
When faced with inflationary pressures, conventional businesses have to decide whether to pass the costs on to customers or cut expenses such as staffing costs. Simon Berge of Dalhousie University believes that if a conventional small business decides to go the latter route, the process will be easier than for a worker co-op, given that members have control over their labour and are thus less inclined to cut wages or engage in layoffs.
“Whereas traditional firms can simply lay off or decrease the hours of workers, those sorts of options aren’t really available for a lot of worker co-ops,” he says. “Most worker co-ops have a mandate to provide a livable, workable arrangement for people.”
In order to keep its prices competitive, a worker co-op that decides to cut costs in the face of inflation might thus take an approach similar to that of La Siembra in 2008. The Co-op responded to that year’s recession by reducing the work hours of some members, and the salary of others, and leaving those who couldn’t afford any cuts untouched, allowing all the members to remain employed. It’s an approach a conventional business likely wouldn’t have taken. Of course, there are times when even a worker co-op must lay off workers or reduce their own salaries for their co-op to survive, but this is usually done with transparency and member involvement.
Like a conventional business, a worker co-op might also decide to respond to inflation by increasing its prices. In contrast to such businesses, however, worker co-ops can generally be more transparent with customers about why their costs are going up when this occurs. Evan Proven of Winnipeg’s Sun Certified Builders notes that this transparency is a key feature of the worker co-op model.
“We share all of our overhead calculations with customers so that people know exactly where their money’s going,” he says. “And they can see what our input costs are. So this is what we’re paying for material. So they can see directly what overhead and markups are being added.”
Customers may also be willing to pay higher prices at a worker co-op because they know that they will be getting value for their money. Owen Ardal of Toronto’s Urbane Cyclist notes that this is the case for many of their customers.
“We have a lot of devoted customers that come to us because they look for that expertise and they’re not really worried about the bottom line,” he says, “and they’re happy to be supporting a local business with people who are actually engaged and in their community.”
Some customers, of course, are inevitably going to gravitate towards the lowest prices available, which they’re more likely to find at Amazon or Walmart than the typical worker co-op. But Berge believes worker co-ops could still persuade some customers to favour them over the big retailers if they made a better pitch. People will be more willing to pay for higher prices at a worker co-op, he argues, if they recognize it as a purchase that benefits the surrounding community rather than merely enriching shareholders. By buying from worker co-ops, as Berge notes, customers don’t just purchase a good or service, they also help provide people with meaningful employment.