Co-Op Economic Footprint: Multi-Sector Analysis Estimates Total Co-Op Economic Impact at $653 Billion
Pitman, Lynn, Rural Cooperatives
Cooperatives 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 in-kind 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 categorized 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-to-business) 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 co-op 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 input-output 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.
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 co-ops 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.
Editor's note: for the full report on which this article is based, visit: http://reic.uwcc. wise. edu/.
By Lynn Pitman,
University of Wisconsin
Center for Cooperatives
ECONOMIC IMPACT OF U.S. COOPERATIVES: Aggregate Impact by Sector * Sector Revenue Income ($Millions) ($Millions) Commercial Sales & Marketing 201,207 37,737 Social & Public Services 7,523 2,213 Financial Services 394,364 100,660 Utilities 49,808 13,392 Total 652,902 154,002 Wages Firms ($Millions) Commercial Sales & Marketing 13,810 3,463 Social & Public Services 1,690 11,311 Financial Services 51,177 9,978 Utilities 8,292 4,536 Total 74,969 29,288 Employment (No. Full-time jobs) Commercial Sales & Marketing 422,505 Social & Public Services 424,505 Financial Services 1,133,353 Utilities 162,873 Total 2,143,236 * Analysis does not include housing cooperatives. AGGREGATE IMPACTS: Revenue ($Millions) Commercial Sales & Marketing Total Farm Supply/Mktg 201,207 128,339 Social & Public Services Total Healthcare 7,523 5,212 Financial Services Total Credit Unions 394,364 74,882 Utilities Total Electric 49,808 43,347 Commercial Sales & Marketing Consumer Arts&Crafts 2,124 237 Social & Public Services Childcare Housing 421 0 Financial Services Farm Credit Mutual Insurance 15,382 226,572 Utilities Water Telephone 2,582 3,879 Commercial Sales & Marketing Biofuels Other 10,302 60,205 Social & Public Services Transport Education 567 1,323 Financial Services Co-op Finance -- 77,528 Utilities -- --…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Co-Op Economic Footprint: Multi-Sector Analysis Estimates Total Co-Op Economic Impact at $653 Billion. Contributors: Pitman, Lynn - Author. Magazine title: Rural Cooperatives. Volume: 76. Issue: 3 Publication date: May-June 2009. Page number: 4+. © 2009 U.S. Department of Agriculture, Rural Business - Cooperative Service. COPYRIGHT 2009 Gale Group.
This material is protected by copyright and, with the exception of fair use, may not be further copied, distributed or transmitted in any form or by any means.