This document has been made available in electronic format by the International Co-operative Alliance (ICA)

March, 1998
(Source: ICA Review, Vol. 91 No. 1, 1998, pp. 9-17)

Two Decades of Improvement of Spanish Worker Co-ops by Rafael Chaves


It is in the Mediterranean countries of Europe, particularly Italy, Spain and France, where they have a long history, that worker co-operatives are most widespread. Spain is nowadays, without doubt, after Italy, the European country with the greatest number of this type of co-op and co-op workers. Furthermore, other enterprises called Sociedades laborales ("Labour companies"), are considered by politicians and academics to be worker- owned firms, like worker co-ops. In these "Labour companies" more than 51% of the shares must belong to the workers and no one shareholder may possess more than 25% of the shares. Worker firms total 19,610 enterprises and employ 217,360 workersi.

Ciriec-Espana, in collaboration with the Federations of Valencian Co-operatives and the Regional Government of Valencia (Spain)1, has recently carried out a vast research project to analyse the Social Economy of this region, especially worker firms and agricultural co-operatives. This work focuses on some results obtained in the worker co-ops area. Firstly, a brief historical background is presented. Secondly, three aspects of these co-ops are analysed: 1) their demographic evolution, 2) their contribution to job creation and 3) their sector evolution. Finally, the article concludes with a reflection on the possible explanatory factors of this evolution.

A Co-operative Movement with a Long History -------------------------------------------------------- The first experiences of worker co-ops in Spain, previously known as industrial and/or production co-operatives, date from the middle of the last century. In spite of their long history, their highest growth has coincided with periods of democracy and of crisis.

These periods are, on the one hand, the Second Republic (1931-1939) and the recent period after the Constitution of 1978, when regulations favourable to co-operatives have been implemented and, on the other, the Spanish Civil War (1936-39) and the economic crisis of the late seventies and early eighties. In contrast, the periods of restrictions and/or dictatorship (such as the Franco regime of 1939-1975) reduced the co-operative phenomenon to a minimum.

Since the mid-seventies, Spanish worker co-operatives have shown strong growth. During the 1975-79 period an average of 411 worker co-ops were created annually in Spain, while in 1980-84 this number almost quadrupled, reaching an average of 1,503. A Ministry of Labour estimate for 1983 (Monzon, 1989) gave a figure of 6,651 active worker co-ops with 130,315 members. The sector distribution of the worker co-operatives created during that period, with a majority presence of the secondary sector (industry and building) and medium-sized businesses (10 to 25 workers), was a sign of the industrial crisis the Spanish economy was suffering. Forty-three per cent of worker co-operatives constituted between 1983 and 1984 were industrial while 20% were in the building industry.

During the second half of the eighties the Spanish economy experienced an expansive cycle with a reduction of the general level of unemployment. Additionally, the "Labour companies" Act was passed in 1986. This introduced a new form of worker-owned firm that proved popular in the following years, whereas worker co-ops grow slowly in this period.

The nineties are a new growth period for the Spanish co-operative movement. In 1995 there were about 14,197 worker co-operatives employing 164,352 people. This new co-operative expansion coincides with a context of economic recession (1991-1993) and subsequent recovery in economic activity and with growing unemployment and lack of job security.

Geographically, about two thirds of the Spanish worker co-op movement, in terms of the number both of companies and of workers, are concentrated in four regions (Andalusia, Catalonia, the Basque Country and Valencia). The Basque Country is where the famous co-operative group Mondragon Co-operative Corporation is located.

According to the data collected by Monzon and Morales (1996), the Region of Valencia is where co-operative employment has grown most in absolute terms during the nineties. This article focuses on these Valencian co-ops.

Demographic Evolution of the Worker Co-op ------------------------------------------------------ For the past decade there has been a marked trend towards a decrease in the average size of the newly constituted worker co-ops. The initial number of founding members has decreased from 8.5 in 1990 to 5.5 in 1995 and 4.6 in 1996. This evolution has been favoured by certain legal and fiscal factors, particularly: 1) only by setting up worker-owned firms (worker co-ops and "Labour companies"; Act n1/4 20 of 1992) can workers capitalise the payment of unemployment benefit as a lump sum; 2) the 1990 Act concerning the tax system for Co-operatives; 3) the new 1995 Valencian co-ops Act that allows worker co-ops to be created with only 4 members.

(Graph showing Worker Co-ops (CTA) and Labour companies (SAL) constituted in the Valencia region (1981-1996)

Currently (1995), the 982 economically active worker co-operatives of the Valencia region are largely young companies. 53.4% of them were set up during the five-year period 1991-1995 and 77.3% in the last ten years.

The oldest worker co-ops, founded in or before1980, constitute 6.4% of the total. The two most veteran worker co-operatives were created in 1931. The older worker co-operatives, created up to 1985, now make up 22.7% of these co-ops but 36.6% of all the co-operative employment. This means that they are of relatively greater size, in employment terms, than the younger worker co-operatives.

Finally, the Valencian worker co-ops are, barring exceptions, small and medium-sized companies, with fewer than 250 workers. The average is 13.47 workers per firm. They are largely micro-enterprises (1 to 10 workers): these represent 62.1% of the total.

Table No. 1. Distribution of Valencian worker co-ops by size (number of workers) (1995) ---------------------------------------------------------------------------------------- Workers W.Co-ops % Employment % W.Co-ops Employment ------------------------------------------------------------------------------------------ 1 to 5 281 28.6 1,279 9.7 6 to 10 329 33.5 2,440 18.5 11 to 25 295 30.0 4,807 36.3 26 to 50 58 5.9 2,294 17.3 51 to 500 20 2.0 2,409 18.2 ------------------------------------------------------------------------------------------ TOTAL 983 100.0 13,229 100.0

With respect to the origin of these companies, in 1995 half of them were of "new creation", 25.3% originated from a company in crisis and 23.8% proceeded from the legal transformation of already existing companies.

Worker Co-ops: create more and better jobs ----------------------------------------------------- Additionally, during the 1990-95 period, 18.600 jobs were destroyed in the Valencian economy, the proportion of jobs without security to total jobs grew from 32% to 44%, and 90% of new labour contracts provided no job security.

In the same period, labour firms (worker co-ops and labour companies) increased their levels of employment by 5,000, and the new jobs are largely steady (as members of these societies).

The major sectors where co-ops have been net employment creators are: social services and education; trade, hotel and catering and repairs; advanced tertiary industries (services to companies); and manufacturing industries.

From furniture to social services - the process of tertiarization of the Valencian worker co-operatives --------------------------------------------------------------------------------

The Valencian worker co-ops currently work largely in the tertiary sector, where 481 worker co-ops employ 7,314 people. This situation contrasts with that of the early and mid eighties.

Two studies (Monzon, 1989; Albors and Palacian, 1989) revealed the largely industrial character of these co-operatives in the last decade, although a movement toward the Service industries was already detectable.

Table No. 2. Sector evolution of Valencian worker co-operatives -----------------------------------------------------------------------------

1980 1988 1995

Agriculture 0% 3% 4% Building 24% 18% 17% Industry 56% 43% 31% Services 20% 36% 48% TOTAL 100% 100% 100%

(Sources: 1980: Monzon (1989); 1988: Albors y Palacian (1989); 1995: Ciriec-Espana)

This process of tertiarization, to the detriment of industry, has developed in a context of progressive reduction of the initial size of new co-operative projects. The weight of the service industry has grown significantly, pari passu with the internal diversification of this sector, since the end of the eighties and especially during the nineties. The very way in which most of the initiatives in these subsectors were set up, the ex novo or new creation modality, has facilitated sector diversification among Valencian worker co-ops.

In some service industries that are considered to be new and emerging activities, such as the provision of personal services (home-care services, child care, social and employment integration of young people), cultural and leisure industries, services to improve living conditions in urban areas, services related to the environment and services to companies, we find successful co-ops. This is the case of some assistance and social services co-ops which have experienced strong growth over the current decade. They currently represent more than 10% of co-operative employment and 3.5% of Valencian co-ops. Two of these co-ops now employ around 500 workers each.

In the trade, hotel and catering and repairs industries, workers co-ops have also grown. These activities are characterised by their local or proximity market orientation, by the relevance of distance as a barrier in cost terms and by their need for flexibility and adjustment to supply individual demands. All these require a small-sized organisation. Last but not least, these industries are typically labour-intensive, new-technology-intensive and small capital businesses.

There are 3,862 people working in industry. Manufacturing industries, that is, the textile and clothing, leather, shoe, wood and furniture industries, are the biggest employers. Less important in relative employment terms are metal - machinery (2.8%) and other industries (5.7%). The latter includes two industries with a long co-operative tradition, glass and graphic arts, the first of which comprises some of the largest Valencian worker co-operatives.

Table No. 3. Distribution of Valencian worker co-ops by industry (1995) --------------------------------------------------------------------------------------- Industry W.Co-ops % Employment % W.Co-ops Employment --------------------------------------------------------------------------------------- Agriculture 36 3.7 251 1.9 Building 164 16.7 1,800 13.6 Mfg industries (1)164 16.7 2,738 20.7 Metal - machinery 60 6.1 370 2.8 Other industries (2) 77 7.8 754 5.7 Trade, Tech. services, repairs 145 17.2 1,600 12.1 Hotel and catering trades 56 3.3 503 3.8 Services to Cos. 69 6.1 820 6.2 Education 76 7.8 1,362 10.3 Other service industries (3) 135 14.6 3,029 22.9 --------------------------------------------------------------------------------------- TOTAL 982 100.0 13,227 100.0 ---------------------------------------------------------------------------------------- Notes: (1) Includes: textile - clothing, leather - shoe and wood - furniture. (2) Includes: glass, graphic arts, toys and other industries. (3) Includes: assistance and social services, the transport industry and ther services

The Valencian data show that worker co-ops appear preferentially in those industries where the assets of the workers are more highly valued, specifically their skills and know-how or simply their manual work, and less in industries which are intensive on initial investment, technology and large facilities and projects.

Spanish Worker Co-ops ----------------------------- Some general transformations, such as the restructuring of the role and performance management of the public sector, the increasing impact of new technologies, the rise of economic globalisation, the deregulation and re- regulation in favour of the market, and the changing values and life-style of the population, have had a direct impact on economic structures, territories and society, activating new feedback processes.

In order to adapt themselves to this new context, firms have activated intra and inter-company organisational and technical changes and generated industry restructuring processes in pursuit of greater economic flexibility and performance and more efficient risk management.

One of these processes is the rise in contracting out certain economic functions of the company: services occasionally used by the company (consultancy, technical assistance and other specialised advice), services with little relation to the principal activity (cleaning, canteen, etc.), productive activities with very irregular demand (in the building and transport industries, for example) and the most volatile or variable part of the principal activity of the firm.

The need for flexibility, higher costs due to increased risks, volatile demand and uncertainty have been partially externalised to other economic units (firms) and to the labour factor. The latter has taken place thanks to the illegal economy and the new economic regulations of the eighties that have introduced numerous flexible forms of labour contract.

Two consequences can be identified. Firstly, the increased tertiarization of the economy, from the point of view of services to companies. Secondly, the growth of small and very small industries at the expense of those of medium and large size. This context offers opportunities for worker co-ops.

In the field of the Spanish public economy, because of the deficit and backwardness of the social infrastructure (residences, home-care social services, etc.) and the growing demand for new services (leisure, culture, etc.), which are considered merit goods and have to be provided (funding) by the public sector, social pressure has caused the Government to improve their provision, generally through the local and regional governments (Sajardo, 1998).

The trend in the supply of these services by the public sector is to manage them in a manner that is not strictly public, favouring social involvement, cost reduction and flexibility of supply (as opposed to bureaucracy).

The public sector maintains its financial, regulatory and controlling functions and, partially, the production and planning functions of these services, while contracting these two last functions out, totally or partially, to private organizations. These services provide new fields for the growth of worker co-ops and multisector co-ops (e.g. Spanish social co-ops) (Sajardo, 1998; Borzaga and Santuari, 1997).

The economic crisis and the high and persistent level of unemployment in Spain, together with and/or conditioned by additional factors, constitute the principal cause for the creation of this kind of co-operative. Ideological motives, such as the wish of a group of people to carry through a democratic industrial project, are in a minority compared to economic and employment motives.

The setting-up of worker co-ops is particularly sensitive to labour and co-operative regulations and to co-operative support mechanisms (Spear & Thomas, 1997), both public and co-operative. In effect, a high level of worker co-operative creation can be observed in countries with low social protection levels (especially unemployment compensation) and in those with regulations that are favourable towards co-operative societies, as in the case of Spain. The latter, public regulation, can be implemented in many forms.

Among the procedures used are certain fiscal advantages and subsidies for this type of company, positive discrimination criteria in Public Sector contracts for the supply of goods and services, and member employment procedures that benefit these firms as opposed to others. A case in point is the Spanish lump-sum capitalisation of unemployment benefits in order to join a labour company. Co-operative support structures created by the co-ops, such as the FVECTA Federation and the Caixa Popular credit co-op, and the setting up of co-operative groups such as GECV (Grup Empresarial Co-ope-ratiu Valencia) and REDEES (Red de empresas de economia social), have improved the worker co-operative movement in the region of Valencia.

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BAREA,J. y MONZON,J.L. (dir) (1992): Libro blanco de la Economia Social en Espana, Ministerio de Trabajo y Seguridad Social, Madrid.

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Footnotes ------------ 1 The region of Valencia is located in the east of Spain. It represents approximately 10% of the socio-economic indicators of this country (population, P.I.B., etc.), although it is noted for its exporting capacity, manufacturing industries, tourism and certain agricultural products (oranges, other fruits and vegetables). It has its own regional government, like other regions such as the Basque Country or Catalonia.

2 This work has been aided by the ANDA research project, financed by the European Union in the framework of the ADAPT initiative and by the Conselleria de Treball i Afers Socials of the Generalitat Valenciana (Valencian regional government)

i See Monzon and Morales, 1996. ii Tomas-Carpi,J.A. and Monzon,J.L., (dir) (1997) Dr. Chaves is an Assistant Lecturer in the Applied Economics Department of the University of Valencia. He is also Editorial Coordinator of the "Ciriec-Espana" and "Noticias de la economia publica, social y co-operativa" journals, published in Spain.

--------------------- Dr. Chaves is an Assistant Lecturer in the Applied Economics Department of the University of Valencia. He is also Editorial Coordinator of the `Ciriec-Espana' and `Noticias de la economia publica, social y cooperativa' journals, published in Spain.