Together for good: why Japan is backing worker co-operatives

The social economy is a major force for economic and social progress. It contributes about 7% of the world’s GDP, and co-operatives alone — entities owned and controlled by members who benefit from their services and goods or who work for them rather than founders or shareholders — account for almost 10% of the world’s employed population.

Japan is one among many countries that is now turning to worker co-operatives to secure better quality employment for their citizens. 

Worker co-operatives – the basics 

Worker co-operatives are democratically owned by the employed workers themselves. The member-owner principle allows their members to make collective decisions about how their co-operatives operate, including their working conditions, pay, training, working hours, and investment to support their activity.  

Worker co-operatives can be big business. The 300 largest co-operatives or mutual organisations, including Spain’s Mondragon, generate a total of USD 2.4 trillion in turnover. Mondragon is a great example of a worker co-operative operating at scale – employing more than 70 000 people across sectors such as finance and retail, it is the largest employer in the Basque Autonomous Community and the seventh largest Spanish company in terms of asset turnover.  

Worker co-operatives can not only create sustainable jobs but also help solve some of our most pressing social and environmental challenges, while supporting marginalised people and places. The involvement of workers in the managerial decision-making process helps ensure equitable terms of employment that result in higher employee satisfaction and retention rates, as well as new opportunities including for underserved individuals in high-quality, long-lasting jobs.  

Solving Japan’s big challenges 

Japan already boasts around 205,000 social economy organisations, including non-profit entities, co-operatives, and organisations registered as private enterprises, employing close to 6 million people, adding 16 trillion yen to the economy, and accounting for 3.3% of GDP –more than three times the value of the country’s agricultural sector. 

But Japan is dialling up its ambition, given the support worker co-operatives can provide to an ageing population. Japan has the world’s highest share of older adults at 28.2% of the total population. When it comes to legal and various other restrictions (e.g., health, retirement age, physical conditions, etc.) that come with ageing, worker cooperatives are capable of providing senior citizens with the necessary flexibility and freedom to choose their own terms and working conditions.  

Co-operatives can also help tackle Japan’s widening gender gap, where the country ranks 125^th out of 149 countries in the Global Gender Gap Index: the member-owner principle of worker cooperatives can help empower women to set their own equal pay and flexible working hours that help accommodate other personal and family obligations. 

A need for new incentives 

Japan has therefore made worker co-operatives a central part to its push for better jobs. In 2020, the Worker Co-operative Act was passed for the first time to provide a centralised legal framework which will help level the playing field for worker co-operatives.  

Yet despite the big push, nearly two years after the law was put into effect in October 2022, Japan has only 74 entities registered explicitly as a worker co-operative. To explore how policy action can support and promote worker co-operatives, the OECD hosted an international knowledge-sharing webinar in partnership with the Japan Institute for Labour Policy and Training (JILPT).  

One clear lesson from the experiences from France, Spain and the United Kingdom (UK) is the need for strong incentives. Spain’s special tax regimes for co-operatives, for example, provides favourable tax incentives such as 95% reduction on local property tax and tax on business activities. Furthermore, worker co-operatives that meet certain requirements can receive a discount of 90% on gross taxes payable over five years.

On the other hand, although the UK’s tax benefits are only targeted at capital gains for the seller of a business, John Atherton, Executive Director of workers.coop UK, still emphasised that even such a narrow tax scheme channels an important signalling and trigger effect for the broader co-operative community.

In addition to tax measures, worker co-operatives can also be made eligible for the benefits and incentives usually reserved for small and medium-sized enterprises (SMEs), including grants, training, and access to finance and public procurement. As most countries regard co-operatives as its own distinct legal entity, ensuring that co-operatives, too, qualify for SME support schemes and policies can be a quick and easy solution to boost the sector. 

Better work for Japan 

Worker co-operatives can deliver Japan’s ambition for better quality jobs. But the new policy framework needs time to bed down and the right incentives to flourish. Policy makers must empower and work together with existing co-operatives to design these and learn from international experience to unleash their potential to drive change – and more inclusive economic growth. 

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The OECD has adopted the 2022 Council Recommendation on the Social and Solidarity Economy and Social Innovation—alongside the EU Social Economy Action Plan, the ILO Resolution on decent work and the social and solidarity economy, and the UN resolution on promoting the social and solidarity economy for sustainable development. Through our latest research on platform co-operatives, the OECD has also begun exploring some of their more specific contributions to employment and local development.