Co-op Economic Footprint
By Lynn Pitman,
University of Wisconsin
Center for Cooperatives
Editor’s note: for the full report on which
this article is based, visit:
http://reic.uwcc.wisc.edu/.
ooperatives occupy a
unique niche in the
economy of the United
States. Co-ops are
engaged in a broad
range of businesses: electricity
distribution to rural farms and
homeowners, bargaining and marketing
services for agricultural producers, and
delivery of home healthcare services for
the elderly, among many others.
Cooperative businesses have provided
an effective “bottom-up” solution for
meeting needs imperfectly addressed by
the market and have been responsible
for many market innovations.
Nonetheless, no comprehensive
national statistics about U.S.
cooperative businesses exist to quantify
and describe their impact on the U.S.
economy and on the lives and
businesses of Americans. To address this
lack of basic information, the U.S.
Department of Agriculture funded the
Research on the Economic Impact of
Cooperatives (REIC) study, which is
being conducted by the University of
Wisconsin Center for Cooperatives
(UWCC). The project received
matching support from the National
Cooperative Business Association and
the Wisconsin Department of
Agriculture, Trade and Consumer
Protection. UWCC and the University
of Wisconsin-Madison also provided inkind
support.
The first phase of the study,
completed in April, provides an initial
snapshot of the size and scope of
cooperative activity.
How big a footprint?
UWCC collected data summarizing
four aggregate economic sectors and 17
subsectors that were defined by USDA
at the outset of the project. The study
identified more than 29,000 U.S.
cooperative firms operating at 73,000
locations and owning more than $3
trillion in assets.
These co-ops directly accounted for
more than $500 billion in revenue.
Wages and benefits topped $25 billion
and supported 853,000 jobs.
There are an estimated 118 million
U.S. cooperative memberships, with
individuals often being members in
more than one co-op. When mutual
insurance policy holders are included,
that number rises to more than 351
million.
There are additional impacts from
the direct business activity of
cooperatives that ripple through the
broader economy. A cooperative’s costs
include outlays that become revenue for
other businesses. Wages, dividends and
patronage refunds paid out by the
cooperative become the personal
income of individuals whose spending is
the source of revenue for other
businesses.
To gauge the true size of the
economic “footprint” of cooperatives,
these secondary economic impacts also
need to be part of the analysis. The
study estimates that total cooperative
economic activity, including secondary
impacts, account for nearly $653 billion
in revenue, in excess of 2 million jobs,
almost $75 billion in wages and benefits
paid, and $154 billion in income.
The commercial sales and marketing
sector encompasses cooperatives that
provide agricultural marketing,
processing and supply services, biofuel
refining companies, consumer
cooperatives that buy wholesale on
behalf of consumers, arts and crafts
cooperatives that supply and sell the
work of artist members, and other
cooperatives that operate across a wide
variety of economic subsectors. Across
all economic-impact measurements,
farmer cooperatives account for the
substantially largest share of this sector.
Social and public service
cooperatives include firms that provide
a diverse array of healthcare, housing,
transportation and education services.
Housing cooperatives dominate this
aggregate economic sector in terms of
the number of entities, but economic
impacts of housing co-ops were not
reported. Assessment and tax practices
for co-ops vary significantly by
municipality, making it impossible to
achieve data consistency. The
healthcare subsector accounts for the
largest share of employees and
members within this aggregate sector.
While this sector accounts for a tiny
fraction of the economic impacts that
were measured, the largest share of
identified cooperatives — more than 38
percent — fell within this category.
The financial service cooperative
sector encompasses credit unions, banks
within the farm credit system, mutual
insurance companies and a cooperative
finance group comprised of a variety of
financing organizations that lend to
cooperative firms and banks. Credit
unions and mutual insurance companies
account for the largest number of firms,
establishments, memberships and
employees, but the cooperative finance
subsector accounts for the largest share
of assets within the financial services
economic sector. This subsector
includes NCB (formerly the National
Cooperative Bank), the Association of
Corporate Credit Unions, the
Cooperative Finance Corporation and
the Federal Home Loan Bank System,
and accounts for a significant portion of
cooperative economic activity. These
institutions are owned by their
members, are controlled by a board
elected by member institutions and are
operated to provide benefits to their
member banking institutions.
Utilities cooperatives provide
electric, telephone, and water and waste
services. Cooperatives that provide
electric utility services, including
generation and transmission, dominate
this aggregate sector in terms of total
economic activity. Many of these
entities resulted from federal enabling
legislation in the 1930s for rural
infrastructure development. Water and
waste cooperatives often perform a
quasi-public function and provide
valued services to their communities.
Consumer co-ops account for
92 percent of identified firms
Most cooperatives can be catagorized
as either “producer” or “consumer”
cooperatives. A producer cooperative
serves its members by bringing their
products to market, while a consumer
cooperative purchases goods or services
to sell to its members. Producer co-ops
are found almost exclusively within the
agricultural and arts and crafts
categories within the commercial sales
and marketing category. Consumer
cooperatives can be found within all
four of the economic sector groups.
“Purchasing” (or business-tobusiness)
and “worker” cooperatives are
variations on the producer/consumer
split. Purchasing cooperatives are
similar to consumer cooperatives in that
they collectively purchase goods or
services to sell to members, but the
membership is comprised of businesses
and other organizations instead of
individuals. A worker cooperative is a
type of producer cooperative where the
“product” provided by members is
labor.
About 80 percent of all worker
cooperatives are found in the
commercial sales and marketing sector;
the remainder is found in the social and
public services sector. While about 19
percent of purchasing cooperatives are
found in the commercial sales and
marketing sector, 66 percent are in the
social and public services sector, 4
percent in the financial services sector
and 11 percent in the utilities sector.
Where the numbers came from
Unlike data-reporting agencies of
many other countries, the U.S. Census
Bureau does not identify cooperatives in
any of its census or business reporting
surveys. UWCC used a variety of
resources to conduct its own census of
cooperatives in the commercial, social
services, financial and utilities sectors
that were specified in the USDA grant.
Some sectors of cooperative activity
are well-documented, and
comprehensive listings were available
from government or trade associations.
For other sectors, a more laborious
primary population discovery process
was necessary to identify and build coop
lists.
Once a census was complete,
economic data were collected using a
variety of methods. Some sources were
able to provide aggregated business
activity data as well as lists of
cooperatives, and about 85 percent of
the data on direct cooperative economic
activity were collected in this manner.
Standardized surveys and uniform
sampling methodology were used to
collect key business indicators from
individual cooperatives on the
remaining lists.
To estimate the secondary economic
impacts of cooperative business activity,
the study used IMPLAN, an inputoutput
modeling system. Steps were
taken with the analysis to ensure that
the impacts were conservatively
projected. The results of this study
represent the lower bounds of
cooperative activity in the United
States.
Defining “cooperative”
In many cases, it was unclear
whether an identified organization
should be considered a cooperative. As
baseline criteria, the study used the
USDA definition of a cooperative: an
organization that is owned and
controlled by patron members and
operates for their benefit, distributing
earnings proportional to use. These
defining characteristics were identified
through incorporation, tax filing and
member activity information obtained
through surveys.
However, there were sectors or
situations in which organizations met
some, but not all, of these criteria. For
example, co-ops that provide services
such as childcare or healthcare may be
democratically controlled by their user
members, who benefit from the services
provided. But as nonprofit educational
or charitable organizations, these coops
legally do not have owners and
cannot make any earnings distributions.
Other cooperatives, especially within
regulated industries, might include
nonmembers on the board who could
exercise voting privileges.
This study identified and documented
these “boundary” issues in the
census; it also delineated boundaries
within sectors that could be supported
by data-collection methods.
Additional research results
Cooperative firms are fundamentally
different from other forms of business
organization. Simply looking at the
magnitude of cooperative business
activity provides an incomplete analysis
of the wider economic and social
influences of cooperatives.
To lay the groundwork for research
on more complex impacts, the project
also funded eight discussion papers.
The papers address methodological and
empirical approaches for exploring
deeper issues on the economic and
social significance of cooperatives, and,
in part, will form the basis for subsequent
phases of this research project.
