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 by various employers, such as 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.
I also calculated the rate of exploitation of Air Canada workers (see The Rate of Exploitation of Workers at Air Canada, One of the Largest Private Employers in Canada). This time I calculated the rate of exploitation of another airline: WestJet.
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.
I took the data from the 2018 annual report–the most accessible annual report.
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:
The rate of exploitation or the rate of surplus value=s/v=232,658.7/997,313.3=23%.
That means that for every hour worked that produces her/his wage, a worker at WestJet works around an additional 14 minutes for free for WestJet.
In a 5.2 hour work day, the worker produces her/his wage in 4 hours 14 minutes (254 minutes) and works 58 minutes for free for WestJet.
Of course, during the time that the worker produces her/his own wage, s/he is subject to the power of management and hence is unfree (see, for instance, Management Rights, Part Four: Private Sector Collective Agreement, Ontario and Employers as Dictators, Part One). The same applies to the following.
In an 8-hour work day, the worker produces her/his wage in 6.5 hours and works for 1.5 hours free for WestJet.
In an 8.5-hour day, the worker produces her/his wage in 6 hours 55 minutes and works for free for 1 hour 35 minutes for WestJet.
In a 10-hour day, the worker produces her/his wage in 8 hours 8 minutes and works for free for 1 hour 42 minutes for WestJet.
Given this rate of exploitation and oppression, what are we to make of the following management rights clause in the collective agreement between WestJet and the Canadian Union of Public Employees (CUPE) Local 4070 (or, in French, Syndicat canadien de la fonction publique (SCFP))?
ARTICLE 3 – MANAGEMENT RIGHTS
3-1.01 Except to the extent expressly limited or modified by a specific provision of this Agreement, the Company reserves and retains, solely and exclusively, all of the inherent rights, powers and authority to manage the business and direct its workforce and all the matters relating thereto. These rights, powers and authority include, but are not limited to hiring, assigning, promoting, demoting, classifying, transferring, lay-off, recall, suspending, discharging or otherwise disciplining Cabin Personnel; establishing and enforcing rules of conduct; maintaining order and efficiency; requiring Cabin Personnel to observe reasonable rules and regulations which may be promulgated by the Company, introducing new equipment; determining the location(s) of the workforce, operations, and facilities; planning, scheduling, directing and controlling operations.
3-1.02 The Union shall be advised of any changes to policies governing Cabin Personnel at least five (5) Days before such policies become effective unless the Parties mutually agree to a shorter advance notification period. This five (5) Day requirement will not apply when the Company is required by law to make immediate changes or in the event of emergency circumstances that reasonably require immediate change.
Is this management rights clause an example of the nature of “fair contracts” according to the major Canadian unions (such as CUPE, Unifor and NUPGE)? See Fair Contracts (or Fair Collective Agreements): The Ideological Rhetoric of Canadian Unions, Part One: The Canadian Union of Public Employees (CUPE), Fair Contracts or Collective Agreements: The Ideological Rhetoric of Canadian Unions, Part Three: Unifor (Largest Private Union in Canada) and Fair Contracts or Collective Agreements: The Ideological Rhetoric of Canadian Unions, Part Four: The National Union of Public and General Employees (NUPGE)(The Second Largest Union in Canada).
Should not unions, even in the public sector, be teaching the limitations of collective agreements and collective bargaining? In the private sector, should they not also be teaching the workers that no collective agreement and no collective-bargaining process can abolish the exploitation of the workers–without driving the company out of business?
Or are unions silent on such limitations? Moreover, do they try to sell the idea to their members that the collective agreement is fair?
What do you think? Given what you think, what should you be doing? Are you doing it? Why or why not?
Data on Which the Calculation Is Based
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).
(in thousands of Canadian dollars)
Revenue 4,733,462
Operating expenses 4,578,235
Earnings from operations 155,227
Earnings before income taxes (EBT) 135,882
There is a difference of 19,345 between the category “Earnings from operations” and “Earnings before income taxes” (155,227-135,882=19345).
This difference can be accounted for on the basis of the category “Non-operating income (expense)”.
Non-operating income (expense):
Finance income 29,421
Finance cost (57,027)
Gain (loss) on foreign exchange 2,966
Gain on disposal of property and equipment 4,049
Gain (loss) on derivatives 1,246
When you add the numbers that are without parentheses (that is to say, considered to be income) and subtract the numbers that are in parentheses (that is to say, considered to be an expense), then the net result is an expense of (19,345).
Operating expenses need to be broken down further since expenses for maintaining workers as wage workers form one of the two considerations for the calculation of the rate of exploitation.
Expenses ($ in thousands)
Aircraft fuel 1,231,632
Salaries and benefits 999,381
Rates and fees 691,293
Sales and marketing 440,292
Depreciation and amortization 429,906
Maintenance 232,053
Aircraft leasing 139,703
Other 398,038
Employee profit share 15,937
Total operating expenses 4,578,235
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); where there is a coincidence of expenses for individual employers and the class of employers, 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. For example, interest is such a category.
As I wrote in another post:
As explained in another post, interest in many instances can be treated as part of the surplus value produced and therefore added to net income since, although from the point of view of the individual capitalist it is an expense, from the capitalist economy as a whole it is derived from the production of surplus value.
In addition, there are some so-called expenses that are allegedly salaries and other forms of income that are likely derived from surplus value; they have the form or appearance of wages or salaries but are really surplus value in disguise (such as the “salary” of CEOs). They need to be subtracted from expenses and added to “Earnings before taxes.”
Adjustments of Non-operating income (expense) and Surplus Value (s)
I will treat this subcategory and its amount “Finance cost (57,027)” as part of the surplus value produced by WestJet workers but paid out as interest to loan capitalists (banks, for example). The same applies to the other amounts within this category. The result is an additional $94,709 thousands (29,421+57,027+2,966+4,049+1,246=94,709). This amount needs to be added to “Earnings before income taxes (EBT),” 135,882, with the result:
Temporarily adjusted Earnings before income taxes (surplus value (s) $230,591 thousands.
Adjustments of Salaries and Benefits: Variable Capital (v)
Salaries and benefit plans can be further broken down:
Salaries and benefits plans 880,701
Employee share purchase plan 102,692
Share-based payment plans 15,988
Total salaries and benefits 999,381
The category “Employee share purchase plan” does not need any adjustment since it does indeed form part of the benefits of WestJet workers.
A note provides additional information:
Employee share purchase plan (ESPP)
The ESPP encourages employees to become owners of WestJet and provides employees with the opportunity to significantly enhance their earnings. Under the terms of the ESPP, employees may, dependent on their employment agreement, contribute up to a maximum of 10 per cent, 15 per cent or 20 per cent of their gross salary to acquire voting shares of WestJet at the current fair market value. The contributions are matched by WestJet and are required to be held within the ESPP for a period of one year. For the year ended December 31, 2018, our matching expense was $102.7 million.
The above $102,692 million is thus WestJet’s contribution to the purchase of WestJet stock.
I will assume that the employee share purchase plan forms part of the total income of WestJet workers. This assumption is justified since such a plan is designed, apparently, to replace a pension plan (and I have treated pension plans when calculating the rate of exploitation as part of salaries and benefits). From The Globe and Mail (May 14, 2019):
The questions from employee groups on the call quickly focused on the employee share-purchase plan. Instead of a pension plan, workers can invest as much as 20 per cent of their pay in WestJet stock and the company will match it.
The employee share purchase plan amount does not change the calculation of v, but it does clarify why it should be included in the category “Total salaries and benefits.”
If the $102,692 is added to the amount of salaries and benefits, we obtain $983,393.
Adjustments for Share Based Payment Plans
The same could only partially be said of the other category “Share based payment plans.”
The following note elaborates on the nature of “Share-based payment plans”:
Share-based payment plans
We have three equity-settled share-based payment plans whereby either stock options, restricted share units (RSUs) or performance share units (PSUs) may be awarded to pilots, senior executives and certain non-executive employees. For the year ended December 31, 2018, share-based payment expense totaled $16.0 million.
“Share-based payment plans” is further broken down as follows:
Stock option plan 10,428
Key employee plan 5,039
Executive share unit plan 521
Total share-based payment expense 15,988
With no further detailed information about “Stock option plan,” and since pilots undoubtedly produce surplus value (they are exploited), I will assume that only ten percent of 10,428 is surplus value appropriated by senior management; this is also justified since pilots are likely to form most of the personnel in this category (although it is impossible to determine this with precision). Consequently, 10 percent of 10,428 is 1042.8 and is subtracted from “Total share-based payment expense” and added to “Earnings before income taxes (EBT).” The remaining 9,385.2 million is added to the category “Salaries and benefits plans” and the added amount from “Employee Share
Adjustments for Stock Option Plan
Temporarily adjusted Earnings before income taxes (surplus value (s): $231,633.8 thousands.
Temporarily adjusted salaries and benefits: variable capital (v): $992,778.2
Adjustments for Key Employee Plan
A note indicates the nature of the “Key employee plan”:
(d) Key employee plan
The Corporation has a key employee plan (KEP), whereby restricted share units (RSU) are issued to senior management and pilots of the Corporation.
Since pilots form part of this group, I will follow the same logic as for the group who receive stock options–10 percent of 5,039 is 503.9 and is subtracted from “Total share-based payment expense” and added to “Earnings before income taxes (EBT).” The remaining $4535.1 ] is added to the category “Salaries and benefits plans.
Accordingly:
Temporarily adjusted Earnings before income taxes (surplus value (s): $232,137.7 thousands.
Temporarily adjusted salaries and benefits: variable capital (v): $997,313.3
Final Adjustments: Executive Share Unit Plan
The category “Executive share unit plan” is different from the other two share-based payment plans.
A note indicates the nature of “Executive share unit plan”:
(e) Executive share unit plan
The Corporation has an equity-based executive share unit (ESU) plan, whereby RSUs [restricted share units] and performance share units (PSU) may be issued to senior executive officers.
“Executive share unit plan” is probably compensation, not mainly for the coordination of the work of others but for the exploitation of others–it is pure surplus value. Accordingly, 521 is therefore completely subtracted from “Total share-based payment expense” and added to “Earnings before income taxes (EBT).”
With this, final adjustments are possible and the rate of surplus value or the rate of exploitation can be calculated.
Final Calculation (Based on Adjustments) of Surplus Value, Variable Capital (Salaries or Wages and Benefits) and the Rate of Surplus Value
The result of all of these adjustments is:
Adjusted earnings before income taxes (surplus value (s): $232,658.7 thousands.
Adjusted total salaries and benefits: variable capital (v): $997,313.3
To calculate the rate of surplus value, we need to divide “Adjusted earnings before income taxes” (s) by “Adjusted total salaries and benefits” (v).
So, with the adjustments in place, the rate of exploitation or the rate of surplus value=s/v=232,658.7/997313.3=23%.
That means that for every hour worked that produces her/his wage, a worker at WestJet works around an additional 14 minutes for free for WestJet.
In a 5.2 hour work day, the worker produces her/his wage in 4 hours 14 minutes (254 minutes) and works 58 minutes for free for WestJet. Of course, during the time that the worker produces her/his own wage, s/he is subject to the power of management and hence is unfree (see, for instance, Management Rights, Part Four: Private Sector Collective Agreement, Ontario and Employers as Dictators, Part One).
In an 8-hour work day, the worker produces her/his wage in 6.5 hours and works for 1.5 hours free for WestJet.
In an 8.5-hour day, the worker produces her/his wage in 6 hours 55 minutes and works for free for 1 hour 35 minutes for WestJet.
In a 10-hour day, the worker produces her/his wage in 8 hours 8 minutes and works for free for 1 hour 42 minutes for WestJet.
I have used the lengths of the working day as 5.2, 8 8.5 and 10 because the length of the working day varies. According to one source:
They have a flexible schedule for part time. Full time is required 40 hours. They do permit shift trading.
In my last role 8.5hrs, in prior roles it depended on my shifts etc.
8 to 10 hours per day
26 hours a week. Everyone starts out a part time.
The above lengths of the working day, translated into hours per day (assuming a five-day work week) are:
- 5.2 hours per day or 312 minutes
- 8 hours per day or 480 minutes
- 8.5 hours per day or 510 minutes
- 10 hours per day or 600 minutes
Comparison of the Rate of Exploitation of WestJet Workers with Other Workers
The rate of exploitation of WestJet workers is quite low relative to other workers. Below I organize the rates of exploitation that I have calculated so far, from lowest to highest:
- WestJet workers: 23%
- Telus workers: 58%
- Air Canada workers: 70%
- Magna International workers: 79% (2019); 43% (2020)
- Bank of Montreal (BMO): 92%
- Bell Canada Enterprises (BCE): 100%
- Canadian Imperial Bank of Commerce (CIBC): 120%
- Toronto-Dominion Bank (TD Bank): 123%
- Royal Bank of Canada (RBC): 124%
- ScotiaBank (Bank of Nova Scotia): 147%
- Suncor Energy workers: 148%
- Rogers Communication: 209%
The divergences in the rate of exploitation are substantial: the absolute percentage difference between the rate of exploitation of WestJet workers and the rate of exploitation of Rogers Communications workers is 186%.
Factors That Determine the Rate of Exploitation in Relation to Divergences in the Rates of Exploitation
The rate of surplus value has three main factors which determine its level:
1. The real wage (basket of commodities consumed by workers at non-changing prices). In the short term, the real wage is undoubtedly influenced by the class struggle–the level of organization of workers, the aims of such organization, the extent of the elimination of competition among workers and so forth. Even in the long run, it may be influenced through the incorporation of more and qualitatively more diverse commodities (historical and moral influence)–but this should not be exaggerated since real wages ultimately are limited by the rate of accumulation.
2. The absolute level of the production of surplus value, determined by such factors as
a. the length of the working day. For example, if workers work 7 hours a day, with a rate of exploitation of 100%, then the worker produces her/his wage in 3.5 hours and produces a surplus value of 3.5 hours. If the working day increases to 7.5 hours, then the rate of exploitation increases, from 100% to 114% (s=4; v=3.5; s/v=4/3.5=1.14=114%).
b. the intensity of work (which itself can be a function of other factors, such as the level of managerial organization, the principles of managerial supervision and technological conditions that force workers to work at an intensified level). The same number of hours may contain, relative to before, more labour. With a constant real wage, more surplus value is produced and hence a higher rate of exploitation.
3. Relative surplus value, determined by changes in technology (which alter the value of the commodities consumed by workers, reducing the value of the commodities consumed by workers, thereby increasing the remaining value as surplus value. For example, at the brewery where I worked, when I first started to work there, we could produce a maximum of 550 bottles of beer per minute, and when I quit, we could produce a maximum of 1,400 bottles per minute. The value of the bottles of beer undoubtedly decreased (although the price did not reflect this proportionately–taxes form a substantial portion of price). With lower values–and prices–for commodities consumed by workers, the workers perform less time producing the equivalent value of their wage and hence more time producing a surplus value, which therefore raises the rate of exploitation, s/v. Thus, with the technological change in beer production, the value of beer decreased. With the same level of worker beer consumption as before (the same real wage), the value of the commodity the workers sell (labour power–the capacity to perform labour for a certain period of time) decreases, leading to more value remaining for the employer–hence more surplus value and a higher rate of exploitation.
To explain the divergences in the rate of exploitation at this micro level according to the above three factors or variables would require much more empirical work (and probably theoretical work to make required connections). I lack the capacity for this. If others can in any way improve on the calculation of the rate of exploitation, feel free to do so.
In any case, other factors undoubtedly influence the perceived or empirical rate of exploitation (as calculated by me). Thus, one major factor that would need to be included is the difference between the surplus value initially produced (or received by commercial and banking institutions) and the final distribution of surplus value. The production of surplus value and its distribution are unlikely to be the same since the proportion of investment in constant capital (c) and variable capital (v) will vary according to the kind of industry and level of technological development. I explain this in a comment to the post The Rate of Exploitation of Workers at Air Canada, One of the Largest Private Employers in Canada.
Static Versus Dynamic Considerations of the Rate of Exploitation
The above comparative analysis definitely has limitations since it provides only a snapshot picture of rates of exploitation for different employers. When we consider the mobility of workers within and between industries, however, there may be a tendency towards an equalization of the rate of exploitation. This would require further empirical research, of course, as well as further theoretical considerations.
One author argues that there is a tendency towards equal rates of exploitation via worker mobility (he sometimes calls it labour mobility). He refers to Adam Smith’s theory of worker mobility. Adam Smith was a political philosopher and political economist who published the book The Wealth of Nations in 1776.
From Jonathan Cogliano (2021), “Marx’s Equalized Rate of Exploitation,” Working Paper Series, University of Massachusetts, page 20:
One implication of the view put forward in sections 4 and 5 is that Marx fully adopts [Adam] Smith’s theory of the turbulent equalization of the whole of the advantages and disadvantages and re-purposes it into a turbulently equalizing rate of exploitation is that workers then know the degree to which they are exploited and move between sectors accordingly. Marx discusses how workers understand that they are exploited in his discussion of the struggle over the length of the working day, but he does not state explicitly that workers know their rate of exploitation (Marx 1976, pp.342-344). However, the wholesale adoption of Smith’s balancing whole of the advantages and disadvantages of labor implies that workers do know the degree to which they are exploited and migrate across sectors in response to changes or differentials across sectors.
Workers making decisions of how to allocate their labor across industries in this way does not require that workers base the decision on magnitudes measured in labor values— i.e. basing the decision on surplus value and the value of labor power. Workers’ movement across sectors as informed by money prices still induces the EQRE. As Foley (2016, pp.378- 380) discusses, surplus value captures overall surplus labor effort in the money form and if workers base their mobility decisions on the effort they expend and the wage they are paid then these movement decisions will tendentially induce the EQRE. This rests on some notion of a connection between labor effort and money value added
It would be necessary to consider both theoretically and empirically the dynamics of worker mobility in relation to the rate of exploitation to determine whether such a tendency in fact holds. Unfortunately, there is little research here in Toronto or indeed in Canada, as far as I can tell, concerning anything having to do with the rate of exploitation at the micro level and its interface with tendencies at the macro level.
The Abolitionary 