Philly wants to teach retiring business owners how to sell — to their workers
How employee-owned businesses could keep wealth in communities of color and save the city's commercial corridors.
There's a crisis quietly unfolding on 52nd Street.
On this bustling business corridor and transportation hub in West Philadelphia, most of the shops that have endured for two decades or more, the ones that solidified 52nd Street's place as a neighborhood anchor, may soon disappear. Those owners, some of them well into their 70s and even 80s, don't know whether their shops will live on after they can no longer work.
Just north of the El stop, 69-year-old Gwendolyn Hosey, or "Ms. G," as everyone knows her, has run her boutique, Struttin' Lightly, for nearly 20 years. Her children aren't interested in taking over. Neither are her grandchildren.
"This has been my dream," she said, "not theirs."
Hosey owns the building, too, and although she'd like to fix it up and make it a self-sustaining rental property, she doesn't have the money and the taxes are high. She'll likely sell.
Tempest Carter, who manages the 52nd Street corridor through her role with the Enterprise Center, a West Philly community development corporation, says the possibility of losing so many legacy businesses is scary — not just for the families involved, but for what she describes as the power dynamics of the strip.
At least 20 percent of the stores on the corridor are owned and operated by black people who aren't immigrants. The only corridor that rivals it in terms of percentage of black ownership is Germantown Avenue, according to Carter. But the area around 52nd Street is gentrifying. With those changes comes the threat of losing strongholds of black wealth in the neighborhood, and it's even more likely if owners don't have a succession plan.
Imagining new solutions to the ‘silver tsunami’ — and the city’s deep-rooted poverty
It's not just 52nd Street. Around the country, stakeholders — from politicians to advocates to neighborhood development managers such as Carter — have raised the alarm about the "silver tsunami": the large number of baby boomer business owners approaching retirement. It's especially fraught in communities of color, as experts see business ownership as a way to narrow the racial wealth gap. Out of the 900,000 businesses owned by people of color in the country in 2012, the Democracy at Work Institute (DAWI) estimates that 284,000 of them are nearing retirement and more than three-quarters of them don't have a succession plan.
Now, a diverse team in Philly is working on a solution. It's gearing up to teach businesses to transform into worker coops.
Distinct from consumer coops, such as Philly's Mariposa Food Coop and Weaver's Way where consumers own the organization, or producer coops, where farmers and other agricultural organizations share resources, worker coops are businesses that are owned and governed by their employees. They are different from employee-stock ownership plans (ESOP), generally for companies with more than 20 employees where workers own the business but don't decide how it's run. (Worker coops are more conducive to businesses with fewer people.) There are many different ways a coop can be run, but the main philosophy is that each owner has the same amount of influence, regardless of tenure or money invested in the company, and that the bylaws that govern the company are decided democratically by the owners.
In the conversion program led by the city's Commerce Department, coop advocates such as the Philadelphia Area Cooperative Alliance (PACA), and politicians such as Council member Derek Green, no businesses are involved yet. Still, the cutting-edge concept of worker coops is growing here: There were six in Philadelphia in 2016, up from three in 2013, according to the U.S. Federation of Worker Cooperatives. But stakeholders say the city is at an opportune moment to begin a coop movement — and that it needs it more than ever.
The hopeful start of a worker coop movement in Philadelphia
Those working on the strategy say that worker coops could keep jobs and wealth in communities of color, empower workers by teaching them how to run a business, and help sustain important commercial corridors. In the poorest big city in the United States, imagining new solutions to lift people out of poverty is urgent and necessary, said Jamila Medley, executive director of PACA. She added that coops of all kinds, which have a long history in Philadelphia and the African American community, often emerge in times of political, economic, and social unrest.
"Are we in one of those times? I think a lot of people would say yes," Medley said.
This summer, PACA started working on a $75,000 city contract to assess local coop conversion opportunities and identify resources, such as accountants, lawyers, and lenders who could help with the process, as well as educate businesses about the practice.
Green, whose interest in collective entrepreneurship as a form of community empowerment dates to stories he heard about his grandfather buying a school bus to make sure all the children in his community could get to school, championed the worker coop concept in City Council and spearheaded the effort to get funding for the conversion program.
In September, the city was chosen as one of four cities to be part of a yearlong fellowship that's educating officials about worker coops. Here, three corridors are being targeted: Woodland Avenue, East Passyunk Avenue, and 52nd Street.
And there's a budding national movement backed by Congress: In August, federal lawmakers signed a bill that would make employee-owned businesses, which can struggle with financing, eligible for Small Business Administration loans. A Philadelphia team helped make the bill a reality: the U.S. Federation of Worker Cooperatives has three members of its staff based in the city.
The hurdles ahead
Still, Philly's efforts are in their infancy. Comparably, New York has been spending more than $1 million each year since 2015 to support worker coop development, and in the first year of the program, helped launch 21 new coops, according to a New York City report.
Here, outreach will initially focus on educating corridor managers, as most business owners don't know about worker coops. "We're starting from zero," said Frank Iannuzzi, legislative director for Green and one of the city's coop fellows.
You have to tread carefully, said Yvonne Boye, director for the Commerce Department's Office of Neighborhood Economic Development and another fellow in the program.
Often, Carter said, because business owners are running their stores until they're physically incapable of doing so, these conversations mean grappling with one's own mortality, the possibility that their storefronts — their names and legacies — won't live on in the neighborhood.
Over on 52nd Street, Hosey may not be the prime target for coop conversion, as she's the only one working at her store. Yet she said she's skeptical of those who come offering solutions. They haven't followed through in the past. She gestured to her ceiling and its missing tiles, the grates on her storefront that she can't afford to remove.
"But," she said, "I still have hope."
Philadelphia Media Network is one of 21 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and the city's push towards economic justice. See all of our reporting at https://brokeinphilly.org.