Renowned Economist Believes Craft Beer Could Lead The Way To A Democratic Workplace

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Is the modern craft beer movement ripe for a third way to ensure worker equity?

The history of American beer and the history of American labor have existed in parallel throughout the 20th and 21st centuries. The post-Prohibition era saw a few resilient operationsmost of them the family businesses of German American immigrantsgrow and merge to become what we now know as the big three macrobrewers. With this consolidation came a push by workers to unionize. As always, this did not happen easily. Coors Brewing, the last macro to accept organized labor, only acquiesced after a decade-plus boycott during its clash with the AFL-CIO.

 

 

The rise of craft beer represented a challenge to macro’s hegemonic control over Americans’ drinking. What that meant for industry labor is complicated. For the most part, the movement is composed of thousands of lean, hyper-local businesses. Collectively, these businesses produce about 7% of US beer sales, but individually, they often rely on low-wage or even unpaid labor. In some cases, this has resulted in high profile cases of worker exploitation, but there are also brighter spots.

In March, the workers of Anchor Brewing Company, one of the vanguards of the American craft beer movement, voted overwhelmingly to join the International Longshore and Warehouse Union. Although Anchor is no longer fully independent (it was acquired by Sapporo Holdings Limited in 2017), many are hailing this as the first instance of a craft brewer unionizing.

Elsewhere, many breweries are shifting to an employee ownership arrangement. The first major craft brewer to convert to an Employee Stock Ownership Program (ESOP) was New Belgium Brewing Company in 2012 (it had been partially employee-owned since 2000). In the years that followed, other big names like Deschutes, Harpoon and Left Hand became ESOPs.

Workers across the country confront economic inequality of historic margins. American craft brewing is still an emerging sector, with individual companies determining what they owe the people who helped build the industry. While there have been some high profile examples of worker exploitation within craft, most brewers seem committed to do right by their workforce. This begs the question of how a beer-producer can remain competitive while still ensuring a living wage and appropriate benefits. Are unions and ESOPs the best way to ensure equitable outcomes for labor?

 

 

With this in mind, Brew Studs spoke to Richard D. Wolff, Professor of Economics Emeritus at the University of Massachusetts, Amherst. Wolff has written extensively on Marxian economic thought. He speaks around the country about economics and the state of capitalism in the modern era, and his weekly broadcast, Economic Update with Richard D. Wolff, is syndicated on 70 stations. As a fan and proponent of small and independent brewing himself, Wolff discussed the state of craft beer in America and how both individual brewers and the industry writ large can effectively democratize their workplaces.

Conventional May Be Too Conventional

While the Anchor employees’ vote to unionize is undeniably a step toward better worker equity, Prof. Wolff points out that American labor has been in decline for half a century. In 2018, only 7.2% of private sector workers in this country were represented by a union.

Nonetheless, Wolff foresees a resurgence in the American labor movement, and he believes this revived movement will have fundamentally different goals. The union model that proliferated in the mid-20th century was based on an adversarial relationship between worker collective and employer. The union negotiated a more favorable contracthigher wages, better working conditionsbut once the contract was signed, the employer looked for ways to weaken it. So this dueling between management and the workforce continued in perpetuity. Wolff believes that the unions of the future will demand a voice in management decisions.

“It won’t be because you got a bad salary or you don’t have a bathroom break twice a day,” he says. “It will be because of larger issues: that workers want a say in the business.”

Shifting to the subject of ESOPs, Wolff says that the driving force behind the shift to employee stock ownership is generally the employer. He specifically notes that this conversion is often preferable to company founders looking to retire. This was the case for New Belgium.

Wolff points out that selling employees equity is often more appealing than selling to another company or going public. It ensures that the company won’t be broken up or shut down, and employers act in good faith to the workers who were crucial in building their business. Wolff adds that many states have late 19th and early 20th century laws on the books passed with agriculture businesses in mind that significantly favor ESOPs. Consequently, an employer could reap a much larger payday by converting to employee ownership than by selling to another company.

 

 

The problem in Wolff’s view is that even though the workers now control the direction of the business and have intimate working knowledge of the business, they often hire professional managers to fill the role their erstwhile employer held.

“The fact that the workers have become the owners becomes secondary,” says Wolff. “for all practical purposes they run the company the way typical capitalist stock ownership companies do. All the owners of the shares want is their periodic dividend check.”

The ideal antidote to this dynamic, Wolff says, is the worker cooperative.

Toward a Co-Op Model

Wolff argues that Americans view the traditional employer/employee model far more skeptically than in the past. In his telling, the post-war boom years, which saw record prosperity and steady increases in worker pay, ended in the 1970s, and the elusiveness of the American Dream by way of the traditional work model became more apparent.

This harsh truth became starkest in the wake of 2008 financial collapse. Driven by ballooning consumer debt, the ensuing crisis showed how wages were never keeping pace with debt that workers accrued trying to maintain a middle class lifestyle. Wolff further contents that in more seemingly prosperous decades, criticism of capitalism was stymied in universities and the public sphere. So generations of workers came of age believing that there was no work model beyond the standard employer/employee dynamic. Today’s shift in public attitudes around capitalism, he says, has spurred a desire for a more democratic workplace.

As a result, the worker co-op is gaining in popularity. In a co-op, worker-members decide the direction a company takes, what it produces and by what methods. The workforce thereby functions like manager and board of directors. There are already several worker co-op breweries in America, the first of which was Black Star Co-Op in Austin. Established in 2010, this brewpub has several thousand members and a worker’s assembly where each team elects its own manager.

Black Star’s Board President Beth Beutel told The Daily Texan, “We’ve strived to have a living wage, we have a worker self-governance model, and those are things that, I think, lead to a world that is more just.”

 

 

For businesses like Black Star, the decision to democratize the workplace was inseparable from the company mission. But for the roughly 7,000 American craft breweries that started with a more traditional capitalist model, transitioning to a cooperative would not be without its challenges. Certainly, such a conversion would require management to relinquish their circumscribed role as decision maker and principal financial beneficiary. As such, the natural time for the conversion would probably be upon employer retirement, when a succession plan needs to be arranged.

Beyond the establishment of the cooperative, workers would need to contend with the question of whether and how to bring new members into the cooperative. Are new workers automatically established as members with voting rights and a share in the enterprise? Co-ops can choose a model that allows non-member employees or probation periods where new workers wait several years before a vote determines membership status.

“These are all ongoing tensions,” Wolff acknowledges, “in enterprises with more than one category of worker.”

An Alternative to Growth

The worker cooperative is not inherently compatible with a business plan that involves rapid expansion.

“These kinds of companies are not driven by growth.” Wolff says. “Part of what animates co-ops is that they want to get away from the imperative to grow. The notion that if you’re not growing, you’re dying, has led to bad interpersonal situations. One of the streams growing the interest in co-ops is the notion of, I’d like to work in a place where we make the decision of whether we want to grow or not.

While this might limit its viability in some spheres, the co-op has definite legs in the craft beer community. Many brewers grow quickly, then scramble to increase production space and set up a distribution footprint. But many more build locality into their business plan. Indeed, one of the virtues of the American craft beer movement is its multitudinous iterations all over the country.

Brewers and their partners are often driven as much by a desire to improve the drinking options in their county as by some fanciful notion of leading a massive conglomerate. This has led to countless beacons of zymurgical brilliance dotting the nation. How else could nondescript buildings in Decorah, Charlton or Capitola become virtual holy sites for beer tourists?

 

 

Consider the hallowed towns of northern Vermont, which contains some of the country’s most revered brewers. While these ales often top “best beers” lists, the average buyer is unlikely to find them on shelves. Most of these businesses made a decision long ago that they would focus on servicing the region and trust that anyone outside would make the journey. And did they ever.

The three most prominent of these brewers – Alchemist, Hill Farmstead, and Lawson’s Finest Liquids – have all recently opened new taprooms (in Lawson’s case, it’s the first taproom they have ever managed), but these expansions were largely driven by the need to control overwhelming beer tourist traffic. Their vision remains local, even as their product finds worldwide acclaim.

(Also worth noting: Management of both Lawson’s and Alchemist are vocal about the importance of providing a living wage and suitable leave and benefits to their employees.)

As Wolff puts it: “There are many ways to compete. Growing is one, but there are lots of others. And [co-ops] don’t mind being enterprises that specialize in other ways to survive competitively, because they do not like the side effects of growth.”

Worth the Price

What about the cost to the consumer? Craft beer is already significantly pricier than the light lagers produced by macro-brewers, a disparity baked in with the higher quality ingredients and additional time involved. Guaranteeing adequate pay, benefits and time off for all employees would essentially preclude any cost savings down the line. Wolff argues that this cost differential is something consumers will bear because the choice to drink craft is about more than just the liquid in the can. He likens craft beer to fair trade coffee.

“I buy fair trade,” he says, “because I want to know that I’m not part of the apparatus that screws over hard-working farmers in Latin America. That’s worth something to me; I will pay more for that sense.”

 

 

Wolff acknowledges that while consumers don’t know the exact conditions under which these coffee beans are grown and harvested, the designation of fair trade still means a lot to them. This is the case even if they aren’t roast connoisseurs. The same is true of independently brewed beer. In this regard, the Brewer’s Association’s #SeekTheSeal campaign is a brilliant marketing strategy. It provides a visual representation not unlike the fair trade certification, giving the beer drinker a sense that they aren’t just enjoying a tasty, well-crafted beverage. They are also standing up against Big Beer’s anti-competitive, exploitative and environmentally irresponsible practices.

“The truth of it is, the experience of drinking a beer is never only about what’s going down your throat,” Wolff says. “And if a craft beer is produced in an environment, locally, with people who give a damnnot anonymous people following some formulapeople will go for that. You will compete with Budweiser, because they can’t do what you are doing.”

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A New Yorker by way of Kentucky, Paul loves good beer, uncompromising art and dog videos. Check out his writing on the first two at TheCuriograph.com.

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