Membership Heterogeneity and Workplace democracy

Membership heterogeneity, via collective decision costs, is considered one of the primary factors explaining the limited presence of Worker-managed firms (WMFs) in contemporary economies. According to this hypothesis, compared to WMF members, capitalist owners generally exhibit more uniform preferences. In contrast, the preferences of WMF workers may vary on a range of issues, such as wages, amenities, labor conditions, investment projects, and more, depending on individual characteristics like age, gender, wealth, and education. The process of aggregating these diverse preferences can be complex and resolving conflicts of interest can be costly, with these costs increasing as member heterogeneity grows. Promoting greater homogeneity among worker-members might be one of the endogenous measures that WMFs implement to reduce the costs associated with collective decision-making. To examine this subject, I employ a linked employee-employer dataset from Uruguayan social security records spanning the years 1996 to 2013. I approach the analysis in two ways. First, I use Mincer equation estimates to assess how heterogeneity among WMF members across different dimensions, such as age, gender, and education, impacts the earnings of WMF workers. Additionally, I employ duration analysis techniques to investigate whether deviations in the characteristics of workers from those prevailing among WMF members affect their likelihood of leaving the firm in the case of members or becoming a member in the case of WMF's employees.