"Employee Ownership is good for your health."

People thrive in a social environment characterised by employee ownership

by Dr David Erdal, Executive Director, Job Ownership Ltd 1413 words.


In 1992 I changed from full time Executive Chairman of Tullis Russell, a Scottish papermaking company now owned by its employees, to part time Non-executive Chairman, mainly so that I could look after my 14 year old son following the departure of his mother. The board feared that with time on my hands, I would continue to interfere, undermining the newly promoted Chief Executive.

'All right,' I said, 'I'll do a part time PhD. That'll keep me busy and out of your hair'.

It did achieve that, though it also had me tearing out my hair frequently.

In 1997 I had completed two thirds of my thesis, 'The psychology of sharing: an evolutionary approach'. For the final part I was inspired by Robert Oakeshott to look at the wider social effects of owning the company where you work. Robert was then the director of Job Ownership Ltd, and his 1978 book The case for workers' co-ops had been published in a second edition in 1990, He pointed me towards the thesis of the nineteenth century philosopher John Stewart Mill who had predicted that employee ownership would bring about what he called a moral revolution - in modern terms meaning that people would be profoundly happier working in associations of employee-owners than working for a boss, and that this effect would spread to the whole community.

To test this thesis, I had to find towns which were different in their levels of employee ownership, but were close enough and similar enough in all other ways to be comparable. Three towns in an area of northern Italy near Bologna met these criteria: one town, Imola, had 26% employed in co-ops (since this was Italy employee ownership took the form of worker co-ops), one town had none, and one town was between the others, at 13%. They were all prosperous, with successful businesses and low unemployment; they were all within at most 50 miles of each other and in the same valley, so their physical and cultural environments were similar; they were about the same size, with their populations in the range 40,000 to 80,000. In fact they were ideal: about the only measure on which they were clearly different was in their level of employee ownership.

So, were the people happier living in the town with the most employee ownership? To test the thesis I compared them using a random-sample survey, covering health, education, crime, social participation and perception of the social environment. I also collected some whole-population statistics e.g. on mortality, blood donation and voting.

The response to the survey was just good enough: there were just enough replies to give firm statistics. (I was interrogated at length on the statistics by the professors who tested whether to grant my PhD - it was no fun, but they agreed that the statistics were good.) The respondents were matched up by age and sex, and the towns were checked for things like age distribution and distribution of family size, to ensure that as far a possible I was comparing like with like.

The results were clearly consistent with the hypothesis - in other words the answer was Yes! If you want to be happy, live in a town with lots of employee ownership. Imola, with 26% employee owners, was better on 17 out of 19 measures than the one without any employee ownership. It was better in all five areas (health, education, crime, social participation and perception of the social environment). That is statistically significant: if these differences had happened by chance, you would have expected about half better, half worse. In fact if before the study started you'd bet $1 that the result would come out like this, you'd have won over $1000.

And the town with an intermediate level of co-ops was also in the middle on these measures of social health.

The most striking result was that the people in the town with high employee-ownership lived longer. Due to a huge difference in the rates of cardiovascular mortality, the people who live in Imola live significantly longer than those in the non-employee-ownership town. They just don't get so many heart attacks and strokes.

What does this mean? It means that one in four of the Imolese work in a company wholly owned by its employees, and the whole population in the town experiences:

1. better mental and physical health, and longer lives, with much less cardiovascular disease

2. better education - staying longer at school after the legal leaving age, playing less truant, getting better training after leaving school etc.

3. less crime, including less domestic violence

4. higher social participation (joining clubs and charities; giving blood; voting)

5. and not surprisingly they perceive their social environment as more attractive: when they need help their personal networks are more supportive; they see the political authorities as more on their side; and (hugely) they see less difference between rich and poor in their town.

The graph shows the differences between Imola and the town without employee ownership on the measures in the survey. In addition to these measures Imola was significantly better on mortality, voting and blood donation.

For me one of the most interesting results was the clear odd one out: the one where there is a big difference in the opposite direction. This was the response to the question: how important is education if you want a successful and happy life? (E6 in the graph). The people in the non-employee-ownership town rated education more highly. But when it came to actually going to school, the children played truant more and got out of school as soon as they were legally allowed to do so. Why? It seems to me possible that if you live in a social environment that is highly competitive, then you will want to get all the personal weapons - such as a good education - that you can. But you will also feel that the social institutions - like the schools - are less on your side. So even though you are desperate to get a good education, you will feel alienated from the school you go to. On the other hand, if you live in a social environment where co-operation is the norm, and the social institutions - like schools - are on your side, then you may not feel so desperate to get personal resources, but you will feel at home in school. So you will stay on, and do better.

Unpublished work on the 'spillover' effects of employee ownership carried out by Linda Gordon in Algoma in Canada, where the employees organised a rescue-buyout of the large steel manufacturing company, are consistent with the results of my study. Her work shows that with the move to employee ownership employees tend to gain in skill and confidence and as a result tend to play a more constructive role in their community.

In addition, work by Richard Wilkinson on the relationship between health and equality supports that section of this study. See for example his book Mind the gap: hierarchies, health, and human evolution published in 2000 by Weidenfeld and Nicholson.

This study does not prove anything - it only establishes an association, and there may be unidentified other factors at work. But it places firmly on the table the hypothesis that a significant presence of employee ownership in a town helps to create a social environment where people thrive. Employee ownership really does make you healthier and happier, as well as wealthier.

Caption: the graph shows the differences on the following measures:

Crime: victimisation (C1), policing (C2), confidence (C3), feeling of security (C4), domestic violence (C5)

Education: level attained (E1), age leaving school (E2), truancy (E3), expected truancy (E4), post-school training (E5), perceived importance of education (E6)

Health: physical health (H1), emotional health (H2) (also measured: mortality)

Social Environment: perceived gap between rich and poor (SE1), helpfulness of authorities (SE2), supportiveness of social networks (SE3)

Social Participation: membership of clubs (SP) (also measured: voting, blood donation)

Caption: Imola's biggest cooperative is called SACMI, which makes equipment for factory automation. About 80% of its sales are exported. The picture shows a bottling plant built by the co-operative. Owing to SACMI's generous commitment to the local community, Imola is probably the only town of its size in the world with an MRI scanner in its local hospital.

The wider social effects of worker co-operatives.

1. Prediction. My 1999 PhD thesis at St Andrews, titled "The psychology of sharing: an evolutionary approach" includes a test of the prediction that people will flourish in more egalitarian communities, such as those with widespread worker co-operatives.

2. Test. This was carried out by comparing statistics and survey data from three Italian towns, which had levels of employment in worker co-operatives as follows: 26%, 13% and none. The sizes of the towns were approx. 60,000, 80,000 and 40,000 people respectively. They were within 90 km. of each other, in the same political, geographical and cultural area, with no other significant difference identifiable.

3. Measures. The following factors were measured:

Crime: victimisation (labelled in the chart below: "C1"), policing (C2), confidence (C3), feeling of security (C4), domestic violence (C5)

Education: level attained (E1), age leaving school (E2), truancy (E3), expected truancy (E4), post-school training (E5), perceived importance of education (E6)

Health: physical health (H1), emotional health (H2), mortality

Social Environment: perceived gap between rich and poor (SE1), helpfulness of authorities (SE2), supportiveness of social networks (SE3)

Social Participation: membership of clubs (SP), voting rates, blood donation

4. Results. The results were in line with the prediction: the greater the proportion of people employed in co-operatives, the more positive were these measures. The town with the most co-operatives was very significantly better than the town with no co-operatives, and the town with an intermediate level of co-operatives was intermediate.

5. Replication. Since this is the first study of its kind, and since it was carried out with few resources, the result must be treated as "subject to replication".

Chart. The chart shows the differences in the scores (after standardisation) between the top town and the town with no co-operatives. A column above the line indicates that the co-operative town was better. Mortality, blood donation and voting - not in the graph - were each similarly significantly better with co-ops.

1. Conclusion. The conclusion is that an economy with a moderate to high level of worker co-operatives produces significant beneficial effects in the wider community - better health, education, crime, social participation and social environment.

David Erdal. May 2000