The Rate of Exploitation of Workers at Empire Company (or Sobeys or Thrifty Foods or FreshCo or Safeway Canada or IGA or Foodland Workers), One of the Largest Private Employers in Victoria, British Columbia, Or: How Unionized Jobs Are Not Decent or Good Jobs

I was, in part, inspired to start this blog because of the incredible lack of criticla thinking on the part of the pro-union left here in Toronto. In particular, when I tried to bring up the issue of whether striking brewery workers could ever except to obtain “a fair deal, good jobs, pension security and fair benefits” (verbatim by Tracy McMaster, (union steward, former president of the Greater Toronto Area Council, to which are affiliated 35 local unions of the Ontario Public Service Employees Union (OPSEU)), and former vice president of the Ontario Public Service Employees Union (OPSEU)), I was met with hostility by the so-called left here in Toronto.

This post looks at the rate of exploitation of workers of Empire Compnay Limited, which includes the subsidaries, according to its annual report:

Empire’s Food retailing segment is carried out through Sobeys, a wholly-owned subsidiary. Sobeys owns, affiliates or franchises more than 1,500 stores in all 10 provinces under retail banners that include Sobeys, Safeway, IGA, Foodland, FreshCo, Thrifty Foods, Farm Boy and Lawtons Drugs as well as more than 350 retail fuel locations.

Introduction

In another post I presented a list of some of the largest employers in the Victoria, British Columbia region (see The Twenty Largest Employers in the Victoria, British Columbia Region, Based on the Number of Employees, 2011). Thrifty’s was one of those largest employers.

I have tried to calculate the rate of exploitation of workers in other companies, including Bombardier (The Rate of Exploitation of Workers at Bombardier, 2018, One of the Largest Private Employers in Quebec and in Toronto, Ontario: Or: How Unionized Jobs are Not Decent or Good), General Motors (The Rate of Exploitation of General Motors Workers) and Metro (The Rate of Exploitation of Workers at Metro, One of the Largest Private Employers in Quebec, or: How Unionized Jobs Are Not Decent or Good Jobs)

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 (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.

Adjusted Results

Adjusted earnings before income taxes (surplus value or profit) $555.8 million
Adjusted Employee Benefits Expense (Variable capital) $3,174.8 million (or $3.1748 billion)

To calculate the rate of surplus value, we need to divide “Adjusted earnings before income taxes (Surplus value or profit) (s) by “Adjusted employee benefits expense (Variable capital) (v).

So, with the adjustments in place, the rate of exploitation or the rate of surplus value=s/v=555.8/3,174.8=18% .

That means that for every hour worked that produces her/his wage, a worker at Empire Inc. (and its subsidiaries) works around an additional 11 minutes for free for Empire. It also means that, within an hour worked, a worker at Empire Inc works 51 minutes to produce her/his wage or salary and 9 minutes for free for Empire.

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 a 2-hour (120 minutes) work day, the worker produces her/his wage in 1 hour 42 minutes) (102 minutes) and works 18 minutes for free for Empire.

In a 4-hour (240 minutes) work day, the worker produces her/his wage in 3 hours 24 minutes (204) minutes) and works 36 minutes for free for Empire.

In a 5.5-hour (330 minutes) work day, the worker produces her/his wage in 4 hours 41 minutes) (281 minutes) and works 49 minutes for free for Empire.

In a 6-hour (360 minutes) work day, the worker produces her/his wage in 5 hours 6 minutes (306 minutes) and works 54 minutes for free for Empire.

In a 7-hour (420 minutes) work day, the worker produces her/his wage in 5 hours 57 minutes (357 minutes) and works 1 hour 3 minutes (63 minutes) for free for Empire.

In a 8-hour (480 minutes) work day, the worker produces her/his wage in 6 hours 48 minutes (408 minutes) and works 1 hour 12 minutes (72 minutes) for free for Empire.

In a 8.5-hour (510 minutes) work day, the worker produces her/his wage in 7 hours 14 minutes (434 minutes) and works 1 hour 16 minutes (76 minutes) for free for Empire.

In a 9-hour (540 minutes) work day, the worker produces her/his wage in 7 hours 39 minutes (459 minutes) and works 1 hour 21 minutes (81 minutes) for free for Empire.

Political Considerations and Conclusion

Again, the rate of exploitation measures the extent to which workers work for free, producing all the surplus value and hence all the profit for employers. However, even during the time when they work to produce their own wage, they are hardly free. They are subject to the power and dictates of their employer during that time as well.

Do you think that these facts contradict the talk by the left and unionists of “fair wages,” “fair contracts” (see Fair Contracts (or Fair Collective Agreements): The Ideological Rhetoric of Canadian Unions, Part One for the rhetoric of the largest union in Canada, the Canadian Union of Public Employees (CUPE)) and “decent work?” Do they ignore the reality of life for workers, whether unionized or non-unionized? If exploitation and oppression of workers is a constant in their lives, even if they are only vaguely aware of it, should this situation not be frankly acknowledged by their representatives? Do such representatives do so? If not, why not? Do workers deserve better than neglecting the social context within which they live and work? Should such problems be addressed head on rather than neglected?

Even if workers were not exploited, they would still be oppressed since they are used as things (means) for purposes which they as a collectivity do not define (see The Money Circuit of Capital). Does that express something fair? Management rights clauses (implied or explicit in collective agreements give management as representative of employers–and as a minority–the power to dictate to workers what to do, when to do it, how to do it and so forth–and is not the imposition of the will of a minority over the majority a dictatorship? (See Employers as Dictators, Part One). Is that fair? Do union reps ever explain how a collective agreement somehow expresses something fair? Is that fair?

Are the following examples of what union reps mean by a “fair contract?” “Good jobs?” “Decent work?” Other such cliches?

COLLECTIVE AGREEMENT Between SOBEYS INCORPORATED SOBEYS CAMPBELL HEIGHTS RSC (hereinafter referred to as “the Employer”) And UNITED FOOD AND COMMERCIAL WORKERS UNION, LOCAL NO. 247 Chartered by the United Food and Commercial Workers International Union, AFL-CIO, CLC (hereinafter referred to as “the Union”)

June 1, 2020 to June 1, 2030
Pages 4-6:

Article 4 – MANAGEMENT’S RIGHTS

4.01 Except as specifically limited by the express provisions of this Agreement, the Company retains exclusive right to exercise all management rights or functions.

These shall include:

a) The right to formulate, enforce, revise and administer rules, policies and procedures covering the operations including but not limited to attendance, discipline and safety.

b) The right to discipline or discharge for just cause.

c) The right to select the products to be handled, choose customers, determine the methods and scheduling of shipping, receiving and warehousing, determine the type of equipment or vehicle used and the sequence of operating processes within the facility, determine the size and character of inventory and to introduce different shipping, receiving and warehousing methods. Without restricting the generality of the foregoing, the Union agrees that the Company has the right to study or introduce new or improved production methods or facilities.

d) The right to establish work schedules, to determine the number of employees necessary to operate any department or classification of the Company, to determine management organization for each department, to hire, layoff, suspend, promote, transfer and demote, to assign work on a temporary and permanent basis, to establish or revise reasonable performance and quality standards.

4.02 It is agreed that listing of the foregoing management rights shall not be deemed to exclude other rights of management not specifically listed.

2. COLLECTIVE BARGAINING AGREEMENT BETWEEN: SOBEYS WEST INC., SAFEWAY DIVISION, a body corporate, carrying on business in the Cities of REGINA, SASKATOON, PRINCE ALBERT & SWIFT CURRENT, hereinafter referred to as the “COMPANY” OF THE FIRST PART AND: SASKATCHEWAN JOINT BOARD, RETAIL, WHOLESALE AND DEPARTMENT STORE UNION, LOCALS 454, 480, 496 & 950 hereinafter referred to as the “UNION” OF THE SECOND PART
AGREEMENT
Expires June 25, 2022

Page 4:

ARTICLE 4 – Management’s Rights

4.01 The management of the Company and the direction of the working force, including the right to plan, direct and control retail operations; to maintain the discipline and efficiency of the employees and to require employees to observe Company rules and regulations; to hire, lay off or relieve employees from duties; to suspend, demote, transfer, promote, discipline and discharge employees for cause are to be the sole right and function of the Company.

4.02 The Company shall be the sole judge of the merchandise to be handled in its stores.

4.03 The parties agree that the enumeration of management’s rights set out in Articles 4.01 and 4.02 shall not exclude other functions not specifically set forth. The Company, therefore, retaining all rights not otherwise specifically covered in this Agreement.

4.04 In exercising the foregoing rights, the Company shall act in good faith and shall not evade or alter any of the specific provisions of this Agreement. The Company will not exercise its rights under this Article or any other provisions of this Agreement to discriminate against any employee because of his activity in or for the Union.

3. COLLECTIVE AGREEMENT Between Sobeys Capital Incorporated (FreshCo) And United Food and Commercial Workers Union, Local 1518 January 1, 2019 to December 31, 2023.

Pages 2-3:

ARTICLE 3 – Management Rights

The Union agrees that the Employer has the exclusive right and power to manage its business, to direct the staff and to suspend, discharge or discipline employees for just and sufficient cause, to hire, promote, demote, transfer or lay off employees, to establish and maintain reasonable rules and regulations covering the operation of the store provided however, that any exercise of these rights and powers in conflict with any of the provisions of this Agreement shall be subject to the provisions of the grievance procedure as set out herein.

It is agreed that the direction of the staff shall be at the discretion of the Employer within the terms of this Agreement. The Employer, therefore, retains all rights not otherwise specifically covered in this Agreement.

Should workers not be discussing why management has these rights? Should workers not be discussing whether an unelected management should have such rights? Should workers not be discussing how to organize to abolish this dictatorship? Should workers not be criticizing any union rep who claims that a collective agreement somehow expresses a “fair contract?” A “good contract?” A “decent job?” A “good job?” All other such platitudes?

The collective agreement–like any employment agreement between workers and employers–fosters the illusion that the workers are paid for the whole working day and hides the economic coercion behind the “agreement” or contract.

Should not the left be constantly exposing this? Is it? What do you think?

But let us listen to a so-called Marxist, Marv Gandall, concerning what unions do. He writes the following (on a Marxist listserve):

Should I in any or all of these settings, have insistently pointed out the “limitations of collective bargaining”? It wasn’t necessary to do so. Trade unionists, particularly those who are active, are already aware on the basis of their own experience with the negotation and administration of contracts of the system’s inherent limitations. It was enough to simply refer to the language of specific clauses to illustrate the point.”

Such an absurd statement by a so-called Marxist; Gandall simply ignores one of the most objectionable aspects of unions–their ideological integration of workers into a system dominated by a class of employers. Gandall’s claim is at best a social-reformist point of view and, at worst, a fraud and lie. I responded to his statement with the following:

This is made-up. Union reps often use the term “fair contracts” and similar phrases to justify their idealization of collective bargaining and collective agreements.

Where does Gandall show that unions do indeed systematically educate their members on the “limitations of collective bargaining?” Evidence, please–not Gandall’s assurance that this is so. If they do indeed educate their members about the limitations of collective bargaining, why is it that they so frequently use the term “fair contract.?”

And what does Gandall think Marxists should do about this phrase? Nothing? What is his position with respect to the frequent use of this phrase by unions? What has his response been with respect to this phrase–given his frequent reference to “material conditions” of workers?

Gandall’s response was–silence. And what do most so-called Marxists on the listserve do? Nothing. Only a few openly challenge his reformist and fraudulent views. Indeed, when I called Gandall a crackpot leftist, one so-called Marxist, Michael Pugliese, responded with the following:

Is it really necessary to call , a long-time member of this listserv , a “crackpot leftist.”

If the glove fits, wear it.

Data on Which the Calculation Is Based

The calculation of the rate of exploitation is undoubtedly imperfect, and I invite the reader to correct its gaps. Nonetheless, the lack of any attempt to determine the rate of exploitation at the city level has undoubtedly reinforced social-reformist tendencies.

Surplus Value (Profit)

($ in millions)

Sales $ 25,142.0
Cost of sales 19,058.4
Gross profit 6,083.6 [25,142-19,058.4=6,083.6]
Selling and administrative expenses 5,587.5
Other income 68.3
Share of earnings from investments, at equity 87.9
Operating income 652.3 [6,083.6-5,587.5+68.3+87.9=652.3]
Finance costs, net 91.6
Earnings before income taxes (Surplus Value or profit) 560.7 [652.3-91.6=560.7]

Adjustments to Surplus Value (Profit)

I will address some of the items in the above account in order.

Selling and administrative expenses
In Marxian economics, selling expenses (and probably administrative expenses) are expenses from the point of view of the individual capitalist, but from the point of view of the capitalist class as a whole, it is an expense that is paid out of surplus value since its function is to convert surplus value into the money form or to convert money into commodities. However, given the nature of this capitalist company, salaries and benefits seem to form a large part of this category, so they cannot be included in the surplus value actually received by this company. Consequently, I will not make any adjustment in this instance. For further considerations about the issue of including selling expenses as part of surplus value (at the macro level, at least), see the appendix in The Rate of Exploitation of Workers of Suncor Energy, One of the Largest Private Employers in Canada).

Other income

This category consists of the following two subcategories:

Net gain on disposal of assets $ 48.9
Lease income from owned property 19.4
Total $ 68.3

In relation to the first subcategory–“Net gain on disposal of assets”–as I wrote in the post about the disposal of assets owned by Metro Inc.:

It cannot be assumed that the value of property disposed of has nothing to do with the exploitation of Metro workers; the profit obtained from their exploitation might have been reinvested in the acquisition of ACT in the first place.

However, since such possible exploitation would have occurred earlier, I will exclude it from the calculations since the issue is the current rate of exploitation in 2019.

Accordingly, it is necessary to subtract $48.9 million from $560.7 million.

First Temporary Adjusted Profit $511.8 million

The same logic applies to the second category. The acquistion of the property that Empire leased may well have been due to the earlier exploitation of its workers, but the income flowing to it from such leases is not due to the current exploitation of Empire workers. Accordingly, it is necessary to subtract $19.4 million from $511.8 million.

Second Temporary Adjusted Profit $492.4 million

Share of earnings from investments, at equity

The annual report has this to say about the above category:

(H) INVESTMENTS IN ASSOCIATES
Associates are those entities over which the Company is able to exert significant influence but which it does not control and which are not interests in a joint venture. Control is reassessed on an ongoing basis. Investments in associates are initially recognized at cost and subsequently accounted for using the equity method.

Changes resulting from the earnings or losses generated by the associate are reported within share of earnings from investments, at equity on the Company’s consolidated statements of earnings or loss. These changes include subsequent depreciation, amortization or impairment of the fair value adjustments of assets and liabilities.

Although Empire does not control the companies involved, it does jointly exploit workers in the current year and is, at least in part, actively involved in the exploitation of workers who technically work for other employers (this is unlike interest income, where the exploitation of non-bank workers is more general (which is why I excluded interest income in my calculation of the rate of exploitation of General Motors workers whereas I included income from joint ventures). Since the category specifically separates out “Earnings from investments, at equity” for Empire, I retain it as a form of surplus value. Consequently, there is no need to make any adjustements for this category.

Finance costs, net

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). When they are expenses at the macro level of the class of employers and not just at the micro level of the particular employer, 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 (finance costs) 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.

Accordingly, it is necessary to add back in the $91.6 million to surplus value or profit. include “Finance costs, net” in the calculation of the rate of exploitation of Empire workers.

Third Temporary Adjusted Profit $584 million

Further adjustments to “Earning before income taxes” (surplus value or profit) must await the calculation of variable capital, or the total cost of producing the commodity labour power, or the capacity of labour power.

Variable Capital

Employee Benefits Expense

Wages, salaries and other short-term employment benefits $ 3,156.2
Post-employment benefits 37.0
Termination benefits 9.8
Total $ 3,203.0

The above data, however, are misleading since the salaries and perks of managerial employees is included in the above amount. We need to take into account the “compensation” received by management since such compensation is not mainly for the coordination of the work of others but for the exploitation of others–hence it is pure surplus value. The following data are relevant:

Key Management Personnel Compensation

Key management personnel include the Board of Directors and members of the Company’s executive team that have authority and responsibility for planning, directing and controlling the activities of the Company.
Key management personnel compensation is comprised of:

Salaries, bonus and other short-term employment benefits $ 13.4
Post-employment benefits 3.4
Termination benefits 2.8
Share-based payments 8.6
Total $ 28.2

The $28.2 million in so-called compensation needs to be added to “Earnings before income taxes” (surplus value or profit) and subtracted from “Employee benefits expense” (variable capital). Accordingly:

Final Calculation (Based on Adjustments) of Surplus Value, Variable Capital and the Rate of Surplus Value