By the Workers, for the Workers: Building Economic Democracy

That idea has a long, forgotten history in this country. It wasn’t unusual, early in the last century, to hear references to “economic” or “industrial democracy” from major figures and politicians, including our presidents. In a 1909 message to Congress, Theodore Roosevelt warned against allowing major companies “to exercise unregulated control of the means of production and the necessaries of life,” as doing so would “deprive the Americans of today and of the future of industrial liberty, a right no less precious and vital than political freedom.”¹ 

In an address 10 years later, Woodrow Wilson invoked the same idea as he described the economic discontent that had contributed to World War I: “It is a conviction all over the world that there is no use talking about political democracy unless you have also industrial democracy,” he said.² “With the control of the few, of whatever kind or class, there can be no democracy of any sort. The world is finding that out in some portions of it in blood and terror.” And in a 1936 Fireside Chat, Franklin D. Roosevelt, this institute’s namesake, made a case for the programs of the New Deal along the same lines: “All American workers, brain workers and manual workers alike, and all the rest of us whose well-being depends on theirs,” he said, “know that our needs are one in building an orderly economic democracy in which all can profit and in which all can be secure.”³ 

While those who’ve made reference to “economic democracy” through the years haven’t all shared the same agendas, the goal of building democratic agency for ordinary Americans within our present economy does point us—with more clarity than “economic populism”—toward a set of policies we should prioritize. 

First and most obviously, our labor unions must be revived. The very act of forming a union is a democratic process—workers in a firm agree to organize either by majority assent or a formal election. Once they do, the union advocates for their interests and helps prevent executives and managers from running roughshod over the bulk of the people who constitute the company. Unions are also advocates for working Americans in our political process—a vital counterweight to the power of the wealthy and major corporations and their efforts to undemocratically skew policymaking in their favor. In that role, unions have used their resources to push for policies that strengthen economic agency, such as Medicare and other major components of the Great Society and New Deal agendas. 

As progressives already know, the growth of unions bolstered the economic security of American workers significantly during the mid-20th century. And their decline—from representing about a third of American workers at their peak in the 1950s to representing around 11 percent today⁴—has made America a more unequal society.⁵ According to one 2021 paper, increasing unionization likely accounted for nearly a quarter of the decline in American income inequality between 1936 and 1968.⁶ The erosion of unions explains about 10 percent of the rise in income inequality in the time since. According to another study, the impact of shrinking unions on nonunion wages can explain as much as a fifth of the rise in private-sector inequality among American women and a third of the rise among American men between 1973 and 2007.⁷ 

Clearly, rebuilding union power should be part of the progressive agenda for familiar material reasons. But we should remember that the material gains unions have been able to make for the American worker were the fruits of economic democracy—and recognize too that strengthening unions strengthens democratic politics.

Even on social issues, where labor’s record hasn’t been perfect, unions have played an instrumental role in advancing the democratic rights of minorities. Recent research suggests union activity helps mitigate the racial resentment that continues to corrode our politics.⁸ Unions also boost participation in political activity and elevate voter turnout not only among their own members, but the nonunion members they mobilize during elections. Finally, participation in unions helps build skills essential to democratic life. Public communication, working through differences, learning how to organize and compromise—between and beyond elections, unions are a training ground for democracy and help embed democratic values and practices in our lives. 

As such, policies that would help grow our unions should be understood as policies that would also fortify democracy. Federally, that includes the Public Service Freedom to Negotiate Act, which would guarantee bargaining rights for public-sector employees, and the Protecting the Right to Organize (PRO) Act, which would reinvigorate private-sector unions with reforms including an override to state right-to-work laws, a ban on captive audience meetings and permanently replacing striking workers, civil penalties for violations of the National Labor Relations Act, a repeal of the prohibition on secondary strike activity, and an enshrined presumption that workers are employees rather than independent contractors unless employers offer proof.

Still more could be done. Extending the right to organize to agricultural and domestic workers, implementing card check so that unions are automatically formed and recognized if a majority of workers sign cards in support, ensuring that unions have the right to negotiate on matters beyond wages and working conditions, establishing that workers can only be fired for just cause, and making federal law a floor rather than a ceiling for labor standards in states and localities —these and other ideas would re-empower unions and the American worker substantially. 

All of that said, progressives would do well to remember that even at peak, unions never represented the majority of American workers, thanks to a firm-based labor law regime that forces unions to organize workers piecemeal from workplace to workplace. Changing labor law to facilitate master contracts, which can cover multiple companies at once, might help. But progressives should also push for policies that would bring us closer to sectoral bargaining—forcing employers to sit together with labor representatives and even ordinary employees to set a floor for wages and working conditions for perhaps many thousands of workers across an entire sector at once. Since 2018, six states and three cities have set up industry standards boards that step in that direction, including California’s Fast Food Council, which can set minimum wage increases and draft proposals on working conditions that can be expedited into law, and Minnesota’s Nursing Home Workforce Standards Board, which has raised the minimum wage for nursing home workers, guaranteed paid holidays, and also has the power to make proposals that can be expedited into law.⁹ 

Progressives should both push for the creation of these boards across the country and consider making them more democratic allowing workers in a given sector to elect their representatives rather than having them appointed, for instance, or pairing boards with assemblies where workers can gather to discuss and suggest proposals. In bringing workers together, especially in sectors that have been deeply fissured or where unionization has proven structurally difficult, the latter idea could facilitate labor and other political organizing, in addition to offering venues for democratic practice. All told, industry standards boards can offer workers a rare seat at a table where major decisions about work may be made. 

Progressives should also work to build democratic agency into the very structure of firms. Workers obviously can’t intervene in every decision a company makes, but they could nonetheless have much more of a say in how the companies they work for operate. Here, policymakers should take a page from corporate governance structures in Europe. In many countries, labor laws allow workers to elect representatives to works councils⁠—bodies that are consulted and given a measure of authority on decisions affecting working conditions and other matters that could directly impact employees, including firings and layoffs.¹⁰ Contrary to what some might assume, research suggests these bodies have had no impact on firm profitability and may even increase productivity by giving workers venues to discuss problems in the workplace and consider solutions to them. 

We should also pass legislation giving workers seats on corporate boards—a governance reform called codetermination that garnered some attention during the 2020 Democratic primary.¹¹ Sen. Elizabeth Warren proposed requiring companies taking in at least $1 billion in revenue to let workers elect 40 percent of their boards, and Sen. Bernie Sanders also put forward a plan that would have required all companies on the stock market and companies with at least $100 million in assets or revenue to let their workers elect 45 percent of their boards. Each plan would have given a significant amount of voice and negotiating power to nearly 30 million workers—though executives would keep their majorities, worker representatives would be in a position to cast key votes on corporate decisions. Representatives could bolster the democratic power of workers even further by frustrating anti-union efforts and making it more difficult for companies to spend on anti-union and anti-worker political activity. 

Even with all of the above reforms, companies would still be less accountable to their workers than their owners⁠—shareholders who happen to own company stock and are fundamentally entitled to votes on key matters and dividends even if they’ve contributed nothing to a company’s success.¹² This could be redressed in part by making workers owners themselves: giving employees shares in the companies they work for. Many companies in America already have employee ownership plans, and a few thousand are fully worker owned—most of them through retirement vehicles called Employee Stock Ownership Plans (ESOPs).¹³ While there are a number of benefits to the ESOP model, it isn’t especially democratic—very few ESOPs allow workers to vote just as normal shareholders do. 

In 2020, Bernie Sanders proposed a different ownership model inspired by an idea from the UK’s Labor Party. Under his plan, all companies on the stock market and all companies with at least $100 million on their balance sheets or in revenue would be required to establish Democratic Employee Ownership Funds, into which they would gradually place 20 percent of their company’s shares.¹⁴ Those funds would be controlled by each company’s workers⁠—allowing them to vote as shareholders—and pay out substantial economic dividends. For example, an analysis of a similar proposal by Roosevelt Senior Fellow Lenore Palladino found that under such a plan, payouts from publicly traded companies could average more than $2,600 a year.¹⁵ As ambitious as Sanders’s proposal was, many Americans would be willing to take the concept even further—one 2019 survey found that 55 percent of Americans would support companies with more than 250 employees putting as much as half of their shares into employee funds, making them half employee owned and controlled.¹⁶ 

Finally, progressives should promote the growth of businesses that are fully worker-owned and controlled. In the US today, there are roughly 1,000 worker cooperatives, companies democratically managed by their own employees who share in the profits themselves.¹⁷ With support from policymakers, there could be many more—access to tax credits, loans, training, and other resources could make building companies based on democratic principles, which tend to be as profitable as other companies, more viable to the many Americans who dream of starting and growing a small business. The drive to innovate, succeed, and prosper in a competitive marketplace need not come at the expense of worker voice and agency, and progressive policymakers should say so. 

Taken together, these ideas would dramatically transform the American economy—empowering and materially improving the lives of workers, in many cases at little or no upfront cost to government. What’s more, the venues this agenda would create, inside and outside the workplace, for workers to come together and discuss work and their material lives could build solidarity in ways that help ease our divisions, fight social isolation, and build an infrastructure of support for other policy priorities. Perhaps most importantly of all, working to build democracy within our economy would deepen our connection with democratic values and strengthen the democratic project. Those ambivalent about democracy as an abstraction—an ideal a teacher might have impressed upon them in the distant past—may well be willing to stand up for democracy once they see it as the system of values that earned them their last raise or protected their job. That, at any rate, is what we ought to hope. We won’t know until we try.