Here’s some laboratory evidence that workplace democracy raises productivity:
We report evidence from a real-effort experiment confirming that worker performance is sensitive to the process used to select the compensation contract. Groups of workers that voted to determine their compensation scheme provided significantly more effort than groups that had no say in how they would be compensated. This effect is robust to controls for the compensation scheme implemented and worker characteristics.
This is especially impressive because it focuses upon only one channel through which democracy raises productivity, and ignores others - for example that workplace democracy increases workers’ monitoring of co-workers, or increases motivation over longer periods than can be measured in laboratory experiments.
One message I take from this is that a government that was serious about wanting to increase the efficiency of the public sector would consider ways of empowering workers.
At this stage, glibertarians ask: if worker democracy is so productive, why is there so little of it? Why don’t efficient worker-owned firms expand and put inefficient capitalist ones out of business?
In one sense, the premise of the question is false. Only about one firm in 1000 separates ownership from control by being listed on the stock market; co-ops and partnerships are much more common. And they are almost ubiquitous in businesses where worker effort is the key to performance, such as law firms.
In another sense, the question ascribes too much efficiency to market forces. These don’t grind as finely as you might think. In his classic survey of firm growth, Alex Coad writes:
While there is ample evidence suggesting that low productivity helps to predict exit…productivity levels are not very helpful in predicting growth rates. Put differently, it appears that selection only operates via elimination of the least productive firms or establishments, while the mechanism of selection via differential growth does not appear to be functioning well. As a result, the mechanism of selection appears to be rather ‘suboptimal’ in the sense that its effectiveness is lower than it could conceivably be.
A second question is: why am I so keen on worker democracy but sceptical about political democracy?
Simple. The best forms of democracy don’t ask; “what do you think?” This just invites speak-your-branes drivel. Instead, it asks: what do you know? Workplace democracy does this.
In this sense, workplace democracy does what Hayek attributed to markets: it mobilizes dispersed, fragmented knowledge (this is a separate virtue from maximizing efficiency). My enthusiasm for worker democracy probably owes less to Marx’s influence than it does to Hayek’s.