78th ICA International Co-operative Day 6th UN International Day of Cooperatives "Cooperatives and Employment Promotion"

Message from the ILO Cooperative Branch "Cooperatives and Employment Promotion"

What are the advantages of cooperatives? -- Conducive environment for cooperative development -- ILO´s role in cooperative development and employment promotion

Cooperatives create jobs and improve the living conditions of millions of people across the globe. Yet due to the social dimension of cooperatives, they are sometimes viewed more as social or political organizations rather than job-creating business enterprises. The social dimension certainly differentiates cooperatives from other types of business enterprises, but what makes the cooperative approach to business development different and what are the different ways in which employment is created through cooperatives?

Cooperatives can function as a common workplace where cooperative members work together in a joint production unit. In this way the established cooperative society creates ´organized self-employment´. Typical examples are agricultural cooperatives and small industrial cooperatives.

Cooperatives can also be employers. These are client-owned cooperatives which employ salaried staff who are not necessarily cooperative members. An example is a consumer cooperative that employs storekeepers, cashiers and shop attendants.

Many cooperatives promote or enable self-employment. This occurs when client-owned cooperatives strengthen their members´ businesses. A typical example is an agricultural marketing and supply cooperative that provides smallholder farmers with essential pre- and post production services.

Cooperatives also induce wage employment. In this case, jobs are created by the very existence of cooperatives themselves, such as governmental cooperative departments, cooperative training institutions and cooperative audit companies. Lastly, like other businesses, cooperatives create jobs in those enterprises with which they maintain commercial relations. A housing cooperative, for example, is likely to create jobs in the building material industry.

What are the advantages of cooperatives as opposed to individual enterprises, capital based companies and public sector enterprises?

• Economies of scale Through cooperative organization, independent entrepreneurs and workers in the informal sector can carry out joint purchasing and marketing operations and thus realize economies of scale.
  
  
• Synergies can also be obtained through cooperative organization. This refers to the fact that joint production facilitates division of labour and specialization and therefore enhances productivity.
• Through cooperatives increased bargaining power can be obtained as cooperatives combine the offer and demand of their members and thus increase their bargaining power.
  
  
• The motivation of cooperative members and their active participation is another important element as the active participation of members in the management of cooperatives is likely to reduce costs and thus to enhance cost-effectiveness, and to facilitate capital mobilization.
  
  
• Membership value (as compared to shareholder value): the overriding objective of any cooperative-type organization is to provide services to members, not to remunerate capital. A cooperative aims at preserving the self-employment of its members and therefore favours a more labour intensive production process than capital-based companies.
  
  
• Representation of interests through the (officially registered) cooperative, members can much better defend their interests than individually, in particular when the business is part of a vertical structure.
  
  
• Stability: Because of risk sharing between members, cooperatives are generally more stable than individual enterprises.
  
  
• Innovation: One important reason for members to join a cooperative-type organization is to learn from others and to innovate together.
  
  
• Legal protection: By entering a cooperative company, small-scale producers obtain legal protection which restrict their economic liability to the amount fixed in the by-laws.

Conducive environment for cooperative development

To be able to create jobs a favourable climate for cooperative development must exist. There are five main areas which the ILO considers imperative for the existence of a favourable climate. These are when a country (i) guarantees freedom of association, (ii) provides the legal instruments allowing cooperatives and similar organizations to obtain official, recognized status, (iii) clearly draws a line between the management autonomy of cooperatives and the supervisory role of the state, (iv) puts cooperatives on an equal footing with other types of private enterprises and (v) makes technical support services available to cooperatives.

In order to create and sustain jobs, it is also essential that cooperatives are economically viable and competitive enterprises. If they are not competitive, they will not survive in the long run, let alone be able to provide services to their members. Member's commitment to their cooperative is regarded as a prerequisite for success - the stronger the members' commitment towards a common goal, the more they will strive to obtain it.

A final but equally important factor is that cooperatives must have access to working and investment capital like any other business enterprises.

ILO´s role in cooperative development and employment promotion

The ILO recognizes the importance of cooperatives in article 12 of its Constitution which, in addition to consultations with employers and workers, provides for the consultation with cooperatives through their recognized international organizations. As early as in 1920, a cooperative technical service was established in the ILO which has promoted the development of cooperatives and has advised governments, workers´ and employers´ organizations on their role in this area.

Over the years, the activities of the ILO cooperative programme have ranged from information and policy advisory services to standard setting, research, documentation and technical cooperation programmes in developing countries. Today, several new programmes geared towards the creation of decent work for women and men through cooperative approaches are in the pipeline. These programmes aim to provide new impetus to the job-creating potential of cooperatives whilst underscoring their social dimension which sets cooperatives apart from other types of business enterprises.

The refocused attention of the ILO cooperative programme on employment promotion can be seen in the light of the ILO-Director General's thrust to promote opportunities for women and men to obtain decent and productive work, in conditions of freedom, equality, security and human dignity. The Director General of the ILO, Mr. Juan Somavia, has declared the following 4 strategic objectives for the ILO's work:

• promoting fundamental principles and rights at work;
• creating greater employment and income opportunities for women and men;
• enhancing the coverage and effectiveness of social protection;
• strengthening social dialogue and tripartism.

In the new ILO organizational structure, the ILO cooperative programme is part of the Job Creation and Enterprise Department of the Employment Sector.

An important event for the ILO in the year 2000 will also take place on 28 June when it will host a COPAC Open Forum on "Decent Jobs: Can Cooperatives Make a Difference". This Open Forum is being held on the occasion of the Copenhagen +5 Social Summit and will highlight the contribution of cooperatives in creating, retaining and expanding job opportunities and creating decent work in both industrialized and developing countries.

ILO Coop Branch, International Labour Office ILO, 1211 Geneva 22, Switzerland
Tel: + +41 22 799 7442 -- Fax: +41 21 799 8572 -- E-mail: nippierd@ilo.org
Web site: http://www.ilo.org/public/english/employment/ent/coop/

This information has been made available on the Internet by
the Committee for the Promotion and Advancement of Cooperatives COPAC.

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Updated: 9 June 2000