The Rate of Exploitation of Workers at ScotiaBank (Bank of Nova Scotia)

Introduction

In two others posts I presented the twenty largest employers in Toronto according to level of employment (see A Short List of the Largest Employers in Toronto, Ontario, Canada) and the twenty largest employers in Canada according to profit (see A Short List of the Largest Private Employers in Canada, According to Profit). The largest employer, in terms of employment, is the Canadian Imperial Bank of Commerce.

I have tried to calculate the rate of exploitation of workers of Magna International in an earlier post (see The Rate of Exploitation of Workers at Magna International Inc., One of the Largest Private Employers in Toronto, Part One); Magna International is one of the largest employers in Toronto.

The Nature of the Rate of Exploitation

But what is the rate of exploitation? And why not use the usual rate of profit or the rate of return? The rate of profit is calculated as profit divided by investment. Since employers purchase both the means for work–buildings, computers, office supplies, raw material–and hire workers–we can classify investment into two categories: c, meaning constant capital, or the capital invested in commodities other than workers; and v, or variable capital, the capital invested in the hiring of workers for a certain period of time (wages, salaries and benefits).

The purpose of investment in a capitalist economy is to obtain more money (see The Money Circuit of Capital), and the additional money is surplus value when it is related to its source: workers working for more time than what they cost to produce themselves. The relation between surplus value and variable capital (or wages and salaries) is the rate of surplus value or the rate of exploitation, expressed as a ratio: s/v.

When the surplus is related to both c and v and expressed as a ratio, it is the rate of profit: s/(c+v).

In Marxian economics, you cannot simply use the economic classifications provided by employers and governments since such classifications often hide the nature of the social world in which we live. The rate of profit underestimates the rate of exploitation since the surplus value is related to total investment and not just to the workers. Furthermore, it makes the surplus value appear to derive from both constant capital and variable capital.

I decided to look at the annual report of some of the largest private companies in Toronto and Canada if they are available in order to calculate the rate of exploitation at a more micro level than aggregate rates of surplus value at the national or international level. Politically, this is necessary since social democrats here in Toronto (and undoubtedly elsewhere) vaguely may refer to exploitation–while simultaneously and contradictorily referring to “decent work” and “fair contracts.” Calculating even approximately the rate of exploitation at a more micro level thus has political relevance.

Conclusions First

As usual, I start with the conclusion in order to make readily accessible the results of the calculations for those who are more interested in the results than in how to obtain them.

We have the following:

Adjusted Income before income taxes $11,724=s
Adjusted Total salaries and total benefits $7,989=v

The rate of exploitation or the rate of surplus value is s/v; therefore, s/v is 11,724/7,989=147 percent.

This means that, in terms of money, $1 of wage or salary of a regular bank worker results in $1.47 Canadian dollars surplus value or profit for free. Alternatively, for every hour worked, a Scotiabank worker works 88 minutes (or 1 hour 28 minutes) for Scotiabank for free.

I will calculate the rate of exploitation or the rate of surplus value for each approximate variation of the length of the working day (a more detailed explanation of how to calculate the rate of exploitation is provided in the post  The Rate of Exploitation of the Workers of the Canadian Imperial Bank of Commerce (CIBC), One of the Largest Private Employers in Toronto and in Canada).

  1. 7-hour work day: Scotiabank workers spend  170 minutes (2 hours 50 minutes)  to obtain their wage for the day, and they spend 250 minutes (4 hours 10 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  2. 7.5-hour work day: Scotiabank workers spend 182 minutes (3 hours 2 minutes) to obtain their wage for the day, and they spend 268 minutes (4 hours 28 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  3. 8-hour work day: Scotiabank workers spend 194 minutes (3 hours 14 minutes) to obtain their wage for the day, and they spend 286 minutes (4 hours 46 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  4. 9-hour work day: Scotiabank workers spend 219 minutes (3 hours 39 minutes) to obtain their wage for the day, and they spend 321 minutes (5 hours 21 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  5. 9.5 hour work day (to cover a 47.5 hour work week spread out in five days): Scotiabank workers spend 231 minutes (3 hours 51 minutes0 to obtain their wage for the day, and they spend 339 minutes (5 hours 39 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  6. 12-hour work day: Scotiabank workers spend 291 minutes (4 hours 51 minutes) to obtain their wage for the day, and they spend 429 minutes (7 hours 9 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  7. 15-hour work day: Scotiabank workers spend 364 minutes (6 hours 4 minutes) to obtain their wage for the day, and they spend 536 minutes (8 hours 56 minutes( in obtaining a surplus value or profit for free for Scotiabank.

Scotiabank workers do not belong to a union. Would their becoming unionized turn their situation into one where they had a “fair contract” and “decent work?” I think not. Unions can limit exploitation and can control some aspects of their working lives, but in principle workers are things to be used by employers even with unions. This does not mean that a non-unionized environment is the same as a unionized environment. With unions that are independent of particular employers, that is to say, are real unions, there is an opportunity for workers to develop organizations of resistance against the power of particular employers.

The ideology of unions–that somehow they can produce a “fair contract” and “decent work”–needs, though, to be constantly criticized. Workers deserve better than the acceptance of such ideology by the left.

Data on Which the Calculation Is Based

Now, the calculation:

In millions of Canadian dollars:

2019

Revenue

Interest income

Loans $ 29,116
Securities 2,238
Securities purchased under resale agreements and securities borrowed 502
Deposits with financial institutions 928

Total interest income: 32,784

Expenses

Interest expense

Deposits $13,871
Subordinated debentures  294
Other 1,442

Total interest expense: 15,607

Net interest income 17,177

Non–interest income 

Card revenues 977
Banking services fees 1,812
Credit fees 1,316
Mutual funds 1,849
Brokerage fees 876
Investment management and trust 1,050
Underwriting and other advisory 497
Non-trading foreign exchange 667
Trading revenues 1,488
Net gain on sale of investment securities  351
Net income from investments in associated corporations 650
Insurance underwriting income, net of claims 676
Other fees and commissions 949
Other 699

Total non-interest income: 13,857
Total revenue 31,034

Provision for credit losses 3,027
[Net Revenue]: 28,007

Non-interest expenses

Salaries and employee benefits 8,443
Premises and technology 2,807
Depreciation and amortization 1,053
Communications 459
Advertising and business development 625
Professional 861
Business and capital taxes 515
Other 1,974

Total non-interest expenses: 16,737

Income before taxes 11,270

Adjustments

In Marxian theory, it is necessary to question whether some expenses are expenses for both the individual employer and for the class of employers (and fractions of their class, such as those who live on interest); in such a case, the expense is deducted from total revenue. On the other hand, there are expenses that are expenses for the individual employer but are not expenses when looked at from the point of view of the class of employers; in such an instance, they are paid out from the surplus value produced or obtained by workers and are to be included in income before taxes.

In the category “Salaries and employee benefits,” there are the subcategories “Performance-based compensation” and “Share-based payments.”

Salaries and employee benefits
Salaries $ 4,939
Performance-based compensation 1,761
Share-based payments 278
Other employee benefits 1,465
$ 8,443

There is a table titled “Compensation of key management personnel” in the annual report that is relevant. This category covers the following employees:

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Bank, directly or indirectly, and comprise the directors of the Bank, the President and Chief Executive Officer, certain direct reports of the President and
Chief Executive Officer and Group Heads.

The table is as follows:

Compensation of the Bank key management personnel

For the year ended October 31 ($ millions) 2019
Salaries and cash incentives  $17
Equity-based payment  $25
Pension and other benefits 5
Total $47

It should be noted that this table refers only to the end of October 31 as does all the information above since the fiscal year for Scotiabank ends on October 31.

This more detailed information does not influence my decision to include the whole category of “Share-based payments” to the category of surplus value rather than to “Salaries.”  The CEO of Scotiabank, Brain Porter, plus five other senior executives, received a total compensation of over $29 million. It is likely that “Share-based payments” are allocated according to the level of pressure on subordinates to perform (including organizational  and policy decisions to ensure such pressure is effective); such payments likely are received by senior and middle (and, perhaps, lower management) based on performance targets that they either set or force subordinates to achieve.

This situation is somewhat similar to the calculations I made for the Royal Bank of Canada workers.

This means that “Salaries and benefits” is reduced by $278 million and the category “Income before income taxes” is increased by $278 million.

I also assume that 10 percent of the amount of the category “Performance-based compensation” is actually surplus value and not salaries that are due to actual work. In other words, some of “performance-based compensation” is due to management obliging workers to work at a certain level (and some of it is due to the workers themselves working at a certain level of intensity in order to receive some form of performance compensation).

My logic is the same as my calculation in some other banks (such as the CIBC), where I wrote:

However, the gap between executive pay and the pay of regular employees has widened over the years, so it is reasonable to infer that the category “Performance-based compensation” is divided into two parts: one part is a function of the number of hours worked by regular employees as well as the intensity of that work; the other is based on the extent to which bank managers and senior executives are successful in exploiting those regular employees. …

it is probably reasonable to assume that a minimum of 10 percent of the “Performance-based compensation” comes from the exploitation of senior bank executives of regular workers.
It would be necessary to have more detailed information to determine whether more or less of the money obtained in this category were distributed between regular bank workers and management executives. If regular bank workers received more, then the rate of exploitation would be less than the rate calculated below. If management executives received more, then the rate of exploitation would be more than the rate calculated below.

On the assumption of 10 percent, though, this means that 10 percent of the total of “Performance-based compensation, ” is reduced by 10 percent.

It also means that this 10 percent ($176 million) is allocated to the category “Income before taxes.”

Adjusted Results

Adjusted Income before income taxes $11,724=s
Adjusted Total salaries and total benefits $7,989=v

The Rate of Exploitation of Scotiabank Workers

The rate of exploitation or the rate of surplus value is s/v; therefore, s/v is 11,724/7,989=147 percent.

This means that, in terms of money, $1 of wage or salary of a regular bank worker results in $1.47 Canadian dollars surplus value or profit for free. Alternatively, for every hour worked, a Scotiabank worker works 88 minutes (or 1 hour 28 minutes) for Scotiabank for free.

The length of the working day varies. To the question: “On average, how many hours do you work a day at Scotiabank?,” the answers were:

  1. 8 to 9 hrs per day.
  2. 8 hours and 30 mins
  3. 8 hours a day from Monday to Friday with 1 hour for lunch
  4. 48 hours a week
  5. 9 Am to 6 pm
  6. Depends on department , some are typical 8:30-5 while others such require much longer hours,up to 12-15 hours per day
  7. 37.5 hrs per week

I will calculate the rate of exploitation or the rate of surplus value for each approximate variation of the length of the working day (a more detailed explanation of how to calculate the rate of exploitation is provided in the post The Rate of Exploitation of the Workers of the Canadian Imperial Bank of Commerce (CIBC), One of the Largest Private Employers in Toronto and in Canada).

  1. 7-hour work day: Scotiabank workers spend  170 minutes (2 hours 50 minutes)  to obtain their wage for the day, and they spend 250 minutes (4 hours 10 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  2. 7.5-hour work day: Scotiabank workers spend 182 minutes (3 hours 2 minutes) to obtain their wage for the day, and they spend 268 minutes (4 hours 28 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  3. 8-hour work day: Scotiabank workers spend 194 minutes (3 hours 14 minutes) to obtain their wage for the day, and they spend 286 minutes (4 hours 46 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  4. 9-hour work day: Scotiabank workers spend 219 minutes (3 hours 39 minutes) to obtain their wage for the day, and they spend 321 minutes (5 hours 21 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  5. 9.5 hour work day (to cover a 47.5 hour work week spread out in five days): Scotiabank workers spend 231 minutes (3 hours 51 minutes0 to obtain their wage for the day, and they spend 339 minutes (5 hours 39 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  6. 12-hour work day: Scotiabank workers spend 291 minutes (4 hours 51 minutes) to obtain their wage for the day, and they spend 429 minutes (7 hours 9 minutes) in obtaining a surplus value or profit for free for Scotiabank.
  7. 15-hour work day: Scotiabank workers spend 364 minutes (6 hours 4 minutes) to obtain their wage for the day, and they spend 536 minutes (8 hours 56 minutes( in obtaining a surplus value or profit for free for Scotiabank.

It should be noted that I have used the verb “obtain” rather than “produce.” In Marxian economics, bank workers, as well as sales workers do not produce surplus value but rather transfer the surplus value already produced. This does not mean that these workers are not exploited capitalistically; they are used impersonally by the employer to obtain surplus value and a profit. Furthermore, things produced by others are used by employers such as Scotiabank to control their working lives in order to obtain surplus value or profit.

Scotiabank workers do not belong to a union. Would their becoming unionized turn their situation into one where they had a “fair contract” and “decent work?” I think not. Unions can limit exploitation and can control some aspects of their working lives, but in principle workers are things to be used by employers even with unions. This does not mean that a non-unionized environment is the same as a unionized environment. With unions that are independent of particular employers, that is to say, are real unions, there is an opportunity for workers to develop organizations of resistance against the power of particular employers.

The ideology of unions–that somehow they can produce a “fair contract” and “decent work”–needs, though, to be constantly criticized. Workers deserve better than the acceptance of such ideology by the left.

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