Introduction
In another post I presented the twenty largest employers in the Quebec City census metropolitan area (CMA) (see List of Major Employers in the Quebec City Census Metropolitan Area (CMA). In this post, I will calculate the rate of exploitation of workers at one of those large employers in Quebec City, the National Bank of Canada.
What is the National Bank of Canada? Its nature is set out in its Annual Report:
At a Glance
Founded in 1859, National Bank of Canada offers financial services to individuals, businesses, institutional clients and governments across Canada. We are one of Canada’s six systemically important banks and among the most profitable banks on a global basis by return on equity.
We operate through three business segments in Canada—Personal and Commercial Banking, Wealth Management and Financial Markets—which represent our main sources of revenue. A fourth segment—U.S. Specialty Finance and International—complements the
growth of our domestic operations.We are a leading bank in our core Quebec market and also hold leadership positions across the country in selected activities.
The Nature of the Rate of Exploitation
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.
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).
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 various cities in 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.
To calculate the rate of surplus value, we need to divide “Second and final adjustment of surplus value (s) or “Income before income taxes” by “Adjusted variable capital (v) or “Compensation and employee benefits.”
So, with the adjustments in place, the rate of exploitation or the rate of surplus value=s/v=3,102/2,284=136 percent.
This means that, in terms of money, $1 of wage or salary of a regular National Bank of Canada worker results in $1.36 surplus value or profit for free. Alternatively,that means that for every hour worked that results in an hourly wage, a worker at the National Bank of Canada works around an additional 82 minutes (1 hour 22 minutes) for free for the Bank. It also means that, within an hour worked, a worker at the National Bank of Canada works 25 minutes to obtain her/his wage or salary and 35 minutes for free for the Bank.
In a 7-hour (420 minutes) work day, the National Bank of Canada workers spend 2 hours 58 minutes (178 minutes) to obtain their wage for the day, and they spend 4 hours 2 minutes (242 minutes) for free for the Bank.
In a 7.5-hour (450 minutes) work day, the National Bank of Canada workers spend 3 hours 11 minutes (191 minutes) to obtain their wage for the day, and they spend 4 hours 19 minutes (259 minutes) for free for the Bank.
In an 8-hour (480 minutes) work day, the National Bank of Canada workers spend 3 hours 23 minutes (203 minutes) to obtain their wage for the day, and they spend 4 hours 37 minutes (277 minutes) for free for the Bank.
In a 9-hour (540 minutes) work day, the National Bank of Canada workers spend 3 hours 49 minutes (229 minutes) to obtain their wage for the day, and they spend 5 hours 11 minutes (311 minutes) for free for the Bank.
In a 10-hour (600 minutes) work day, the National Bank of Canada workers spend 4 hours 14 minutes (254 minutes) to obtain their wage for the day, and they spend 5 hours 46 minutes (346 minutes) for free for the Bank.
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.
Political Considerations and Conclusions
National Bank 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 collective organizations of resistance against the power of particular employers. However, their power should not be exaggerated.
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–a minority–has the power to dictate to workers–the majority– 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?
The Rate of Exploitation of National Bank of Canada Workers
Initial Data for the Calculation of Surplus Value (s) or Profit
Operating results
Net interest income 3,596
Non-interest income 3,836
Total revenues 7,432 [3,596+3,836=7,432]
Non-interest expenses 4,301
Contribution 3,131 [7,432-4,301=3,131]
Provisions for credit losses 347
Income before income taxes 2,784 [3,131-347=2,784]
First Adjustment of Surplus Value (s) (Profit)
The category “Non-interest expenses” is broken down further in table 6 into subcategories; one of these categories is relevant for making an adjustment to surplus value “Capital and payroll taxes,” and another subcategory is relevant for specifying variable capital “Compensation and employee benefits”:
Table 6 – Non-Interest Expenses
(millions of Canadian dollars)
Compensation and employee benefits (Note 1) 2,532
Occupancy 254
Technology 372
Amortization – Premises and equipment 44
Amortization – Technology 332
Communications 62
Professional fees 249
Travel and business development 128
Capital and payroll taxes 70
Other 258
Total 4,301
Note 1: Compensation and employee benefits include $10 million in severance pay.
In the case of capitalist compnanies, the source of taxes, whether income or capital and payroll taxes, is surplus value obtained by exploiting its workers. Consequently, it must be added to the category “Income before income taxes.” Accordingly:
First adjustment of surplus value (s) or Income before income taxes 2,854 (2,784+70]
The second and final adjustment of surplus value (s) or Income before income taxes requires us to look at variable capital (v) or “Compensation and employee benefits.”
Variable Capital (v)
Compensation and employee benefits (Note 1) 2,532
Note 1: Compensation and employee benefits include $10 million in severance pay.
Part of what is included in this category needs to be shifted to surplus value since it represents the result of exploiting workers and not in being exploited, namely most of “Share-Based Payments,” which include
several share-based compensation plans: the Stock Option Plan, the Stock Appreciation Rights (SAR) Plan, the Deferred Stock Unit (DSU) Plan, the Restricted Stock Unit (RSU) Plan, the Performance Stock Unit (PSU) Plan, the Deferred Compensation Plan (DCP) of National Bank Financial, and the Employee Share Ownership Plan.
As the annual report states:
The compensation expense for these plans, net of related hedges, is recognized in the Consolidated Statement of Income [presumably it is included in the category “Non-interest Expenses”].
All of these plans, with the exception of perhaps “Employee Share Ownership Plan,” are likely related to the exploitation of National Bank workers. As I wrote in another post (edited to make sense in the context of the present post);
Justification for excluding this compensation from “Compensation and employee benefits” (variable capital) (subtracting it) and adding it to “Income before income taxes” (surplus value) is grounded in the nature of the employees who receive this amount: this compensation is not mainly for the coordination of the work of others but for the exploitation of others–it is pure surplus value.
The following (taken from the annual report) outlines the nature of these plans:
Stock Option Plan
The Bank’s Stock Option Plan is for officers and other designated persons of the Bank and its subsidiaries. Under this plan, options are awarded annually and provide participants with the right to purchase common shares at an exercise price equal to the closing price of the Bank’s common share on the Toronto Stock Exchange on the day preceding the award.
The compensation expense recorded for this plan for the year ended October 31, 2019 was $11 million.
Stock Appreciation Rights (SAR) Plan
The SAR Plan is for officers and other designated persons of the Bank and its subsidiaries. Under this plan, participants receive, upon exercising the right, a cash amount equal to the difference between the closing price of the Bank’s common share on the Toronto Stock Exchange on the day preceding the exercise date and the closing price on the day preceding the award date.
A compensation expense of $2 million was recognized for the year ended October 31, 2019 with respect to this plan
Deferred Stock Unit (DSU) Plans
The DSU Plans are for officers and other designated persons of the Bank and its subsidiaries as well as directors. These plans allow the Bank to tie a portion of the value of the compensation of participants to the future value of the Bank’s common shares.
A compensation expense of $9 million was recognized for the year ended October 31, 2019 with respect to these plans
Restricted Stock Unit (RSU) Plan
The RSU Plan is for certain officers and other designated persons of the Bank and its subsidiaries. The objective of this plan is to ensure that the compensation of certain officers and other designated persons is competitive and to foster retention.
A compensation expense of $175 million was recognized for the year ended October 31, 2019 with respect to this plan.
Performance Stock Unit (PSU) Plan
The PSU Plan is for officers and other designated persons of the Bank. The objective of this plan is to tie a portion of the value of the compensation of these officers and other designated persons to the future value of the Bank’s common shares.
A compensation expense of $29 million was recognized for the year ended October 31, 2019 with respect to this plan
Deferred Compensation Plan of National Bank Financial (NBF)
This plan is exclusively for key employees of NBF Wealth Management. The purpose of this plan is to foster the retention of key employees and promote the growth in income and the continuous improvement in profitability at Wealth Management. Under this plan, participants can defer a portion of their annual compensation, and NBF may pay a contribution to key employees when certain financial objectives are met.
During the year ended October 31, 2019, a $22 million compensation expense was recognized for this plan
Employee Share Ownership Plan
Under the Bank’s Employee Share Ownership Plan, employees who meet the eligibility criteria can contribute up to 8% of their annual gross salary by way of payroll deductions. The Bank matches 25% of the employee contribution up to a maximum of $1,500 per annum.
The Bank’s contributions, amounting to $12 million for the year ended October 31, 2019 were charged to Compensation and employee benefits when paid.
It is only this last plan that may or may not be compensation for working for the National Bank of Canada since it is not clear the eligibility criteria restrict such compensation to executives and directors. I did search on the Internet and found a few jobs which included this form of compensation, with the job titles “Wealth Associate,” “Corporate Banking Analyst,” and “Senior Operations Agent.” These titles seem to indicate executives, but I am unsure of this, so I exclude it from any adjustments.
The total sum of adjustments for share-based payments, excluding the “Employee Share Ownership Plan,” is $248 million. Accordingly:
Second and final adjustment of surplus value (s) or Income before income taxes 3,102 [2,854+248]
Adjusted variable capital (v) or Compensation and employee benefits 2, 284 [2,532-248=2,284]
The Rate of Exploitation of National Bank of Canada Workers
To calculate the rate of surplus value, we need to divide “Second and final adjustment of surplus value (s) or “Income before income taxes” by “Adjusted variable capital (v) or “Compensation and employee benefits.”
So, with the adjustments in place, the rate of exploitation or the rate of surplus value=s/v=3,102/2,284=136 percent.
This means that, in terms of money, $1 of wage or salary of a regular National Bank of Canada worker results in $1.36 surplus value or profit for free. Alternatively,that means that for every hour worked that results in an hourly wage, a worker at the National Bank of Canada works around an additional 82 minutes (1 hour 22 minutes) for free for the Bank. It also means that, within an hour worked, a worker at the National Bank of Canada works 25 minutes to obtain her/his wage or salary and 35 minutes for free for the Bank.
I have used the lengths of the working day as 7, 7.5, 8, 9 and 10 because the length of the working day does extend past eight hours a day sometimes:
En moyenne je travaille 7,5h par jour
I worked seven hours except for thursday
I worked seven and a half
On average I work 8 hours a day but I used to work much more than that to reach my goals
8am to 5 pm
Habituellement de 8h30 a 16h30 des fois beaucoup plus d’hrs mais pas rénumérer
Regular Hours 9-5 with some extra overtime.
In a 7-hour (420 minutes) work day, the National Bank of Canada workers spend 2 hours 58 minutes (178 minutes) to obtain their wage for the day, and they spend 4 hours 2 minutes (242 minutes) for free for the Bank.
In a 7.5-hour (450 minutes) work day, the National Bank of Canada workers spend 3 hours 11 minutes (191 minutes) to obtain their wage for the day, and they spend 4 hours 19 minutes (259 minutes) for free for the Bank.
In an 8-hour (480 minutes) work day, the National Bank of Canada workers spend 3 hours 23 minutes (203 minutes) to obtain their wage for the day, and they spend 4 hours 37 minutes (277 minutes) for free for the Bank.
In a 9-hour (540 minutes) work day, the National Bank of Canada workers spend 3 hours 49 minutes (229 minutes) to obtain their wage for the day, and they spend 5 hours 11 minutes (311 minutes) for free for the Bank.
In a 10-hour (600 minutes) work day, the National Bank of Canada workers spend 4 hours 14 minutes (254 minutes) to obtain their wage for the day, and they spend 5 hours 46 minutes (346 minutes) for free for the Bank.
Of course, during the time that the worker works to receive an equivalent of 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).
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 the National Bank of Canada to control their working lives in order to obtain surplus value or profit.
Political Considerations and Conclusions
National Bank 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 collective organizations of resistance against the power of particular employers.
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–a minority–has the power to dictate to workers–the majority– 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?
