The Rate of Exploitation of Workers at Magna International Inc., One of the Largest Private Employers in Toronto, Part One

In another post, 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). One of those employers is Magna International Inc., a multinational corporation whose workers produce automobile supplies for inputs into car manufacturing.

This is a first attempt at calculating the rate of exploitation of one of the largest private employers in Toronto, Magna . It is undoubtedly imperfect in many ways, 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 by has undoubtedly reinforced social-reformist tendencies.

I am going to begin with a conclusion, and then explain what it means and how it is calculated so that the reader understands where I am headed in the calculations:

That means that for every hour worked that produces her/his wage, a worker at Magna International works around an additional 47 minutes for free for Magna International. In an 8-hour work day, the worker produces her/his wage in about 4.5 hours, and the remaining 3.5 hours works for free for Magna. In a 10-hour work day (both work days seem possible at Magna International—see–the worker produces her/his wage in about 5.6 hours and the remaining 4.4 hours works for free for Magna International.

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 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 and salaries).

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 if they are available in order to calculate the rate of exploitation at a more local level. I begin with one company and invite others to provide criticisms or suggestions for improvement.

I have used some of the ideas from Thomas Ittelson (2019), A Visual Guide to Financial Statements: Overview for Non-Financial Managers and Investors, and Antonios Patidis (2016), “A Micro-Approach for Testing Marx’s LTRPF:Evidence from Greece, 2000 and 2009,” Review of Political Economy. Patidis “utilises data taken directly from company reports and accounts” in order to determine whether the rate of profit falls in the major corporations in Greece. My purpose, however, is not, initially at least, in determining whether the rate of profit has fallen but rather what the rate of exploitation is in diverse companies in Toronto.

I also asked Michael Roberts how to calculate the rate of exploitation; he graciously sent me a couple of articles (one of which I read). After that, I sent him the above, and he commented that it looked good.

Again, the following undoubtedly contains many limitations, but I will leave that for further discussion, should the issue arise.

The income statement is broken into the following categories for 2019 (in millions of US dollars): (pages 5, 36):

Sales $39,431
Costs and Expenses $37,208

Cost of goods sold $34,022

Material $24,585

Direct labour $2,815

Overhead $6,622

Depreciation and amortization $1,345

Selling, general and administrative $1,697

Interest expense, net $82

Other expense, net $240

Equity income ($178) [If you add up all the numbers–34,022; 1,345; … 82, then you get 37,286; if you subtract 178 from that, you get 37,208–the same amount as “Costs and expenses.” That is why the 178 is in parentheses–it is necessary to subtract it from expenses since it is really income. 

Income from operations before taxes: $2,223 (profit or surplus value) 

A couple of adjustments are probably necessary. On page 37, there is a reference to pension benefits. I assume that this category belongs to “direct labour” since it forms part of the deferred wages of workers that is paid in the current year (but then again, it is unclear whether the category of direct labour includes this, but since it is subtracted from net income, this leads me to believe that it is not included in that category). This should be added to direct labour. Hence, direct labour would be: 2,815+47=2,862, “Costs and expenses” would be $37, 255 “Costs of goods sold”would be $34,069, and “Income from operations before taxes” should be adjusted downward accordingly.

A second adjustment should probably be the treatment of the payment of interest; despite being an expense from the point of view of the individual capitalist, it probably forms part of the surplus value. Hence, it should be added to “Income from operations before taxes.” Adjusting “Income from operations before taxes,” we have 2,223-47+82=2,258.

So, with the adjustments in place: s=2,258; v=2,862. The rate of exploitation or the rate of surplus value=s/v=2,258/2,862=79%.

That means that for every hour worked that produces her/his wage, a worker at Magna International works around an additional 47 minutes for free for Magna International. In an 8-hour work day, the worker produces her/his wage in about 4.5 hours, and the remaining 3.5 hours works for free for Magna. In a 10-hour work day (both work days seem possible at Magna International—see–the worker produces her/his wage in about 5.6 hours and the remaining 4.4 hours works for free for Magna International.

This is not, however, the end of the story. Christopher Arthur, in his book The New Dialectic and Marx’s Capital,  argues that there are two kinds of exploitation, one that occurs during the production of the wage by the workers (since they are subject to control by employers during that time), and the other kind of exploitation outlined above, where workers work for free for the employer. This issue, however, will be addressed in a follow-up post.



Review of Jane McAlevey’s “A Collective Bargain: Unions, Organizing, and the Fight for Democracy”: Two Steps Backward and One Step Forward, Part One

Jane McAlevey is everywhere these days. Recently appointed a senior fellow at Berkeley’s Labor Center, she is now also a regular columnist for both the Nation and Jacobin. Her webinar (“Organizing for Union Power”) has a global audience. She continues to be called on to address unions and run training sessions in the United States, Canada, the United Kingdom, Scotland, and Germany. In the midst of all this, McAlevey has just come out with a third book on unions and working-class struggles, A Collective Bargain: Unions, Organizing and the Fight for Democracy (and a fourth is not far behind).

So writes Sam Gindin in an article published on the Socialist Project’s website (“Workplace Struggles and Democracy: Challenges for Union Organizing,” December 13, 2019). Her popularity is undoubtedly due to her skills as an innovative union organizer and collective bargainer. It is, however, undoubtedly also due to her idealization of collective bargaining (and, implicitly, collective agreements)–which is a favourite tactic of the social-democratic left.

I reviewed Ms. McAlvey’s previous book, No Short Cuts: Prganizing for Power in the New Gilded Age before (see the section “Publications and Writings” on the home page of this blog). In that work, at least, Ms. McAlevey had an explicit section on the issue of the relationship between social structure and social agency (or conscious social action). I pointed out, in my review, that Ms. McAlevey, far from solving the problem, not only ignored the issue of the relationship between micro-organizing and the macro social structure but short-circuited the issue by identifying the solution to be micro-organizing at the level of the workplace. As a consequence, she idealized workplace organizing, collective bargaining and collective agreements.

In her latest book, she does not even seek to address explicitly the issue of the relationship between social structure and social agency. As a result, she continues to idealize local workplace struggles, collective bargaining and collective agreements. She also confuses the power of employers as persons and the power of employers as a class.

Rather than look first at some of the strengths of her latest book (which I already looked at in my review of her earlier book), I will look at the weaknesses of her book.

From Chapter 1 of her book:

Despite the weakened state of most unions, workers today who are either forming new ones or reforming older ones point us in the direction of how to solve the crisis engulfing our society and our politics. In the midterm elections in 2018—dubbed the year of the woman—the misogyny oozing from the White House was somewhat rebuked at the polls. Yet the year before, working women scored a series of thoroughly impressive wins, just after Donald Trump lost the popular vote but eked out a win from the Electoral College. Many of those victories received far less media attention. As in the midterm elections, men contributed to these wins, certainly, but the central characters were women—often women of color—who waged tireless campaigns of which the outcomes would have drastic consequences. Chapter 1 discusses three such examples of women winning big.

The arena for these battles was the workplace, in the mostly female sectors of the economy such as health care, education, and hospitality, but also in the tech sector, where sexual harassment and the gender pay gap serve as a stark reminder that, despite the tech elite’s rhetoric of building a new society, nothing much has changed, unless you count the creation of the new generation of Silicon Valley billionaires as progress. Women worker-led policy changes included people wresting control of their schedules away from tone-deaf managers, most of whom have never had to pick up their kids at the bus stop; securing fair and meaningful pay raises; achieving bold new safeguards from sexual predators; and ending racism and other discriminatory practices in their salary structure. The mechanism for securing these victories was the collective bargaining process [my emphasis], and each involved strikes—the key leveraging mechanism of unions.

Strikes are uniquely powerful under the capitalist system because employers need one thing, and one thing only, from workers: show up and make the employer money. When it comes to forcing the top executives to rethink their pay, benefits, or other policies, there’s no form of regulation more powerful than a serious strike. The strikes that work the best and win the most are the ones in which at least 90 percent of all the workers walk out, having first forged unity among themselves and with their broader community. To gain the trust and support of those whose lives may be affected, smart unions work diligently to erase the line separating the workplace from society.

Strikes (and well-organized and well-strategized strikes at that) will certainly form a part of a movement for the creation of a different kind of society, but already Ms. McAlevey idealizes the collective bargaining process. She never specifies how the collective bargaining process actually expresses anything more than some gains made by workers in the face of the overwhelming economic (and political) power of the class of employers.

I have persistently referred to management rights clauses in collective agreements–and collective bargaining and the resulting collective agreement do not address this issue except as a limitation (and not as a negation) of the power of any particular employer as a member of the class of employers (and that applies to both the private and public sector). See the various management rights clauses on this blog (for example,     Management Rights, Part Eight: Private Sector Collective Agreement, Quebec).

This exaggeration of the efficacy of the collective-bargaining process forms part of the exaggerated rhetoric of the social-democratic left–such as “fair contracts.” It is a sell job in order to get workers to support unions. This may have short-term gains, but when workers then experience the day-to-day grind of working for an employer (even a unionized worker and even deeply organized workers), the rhetoric of “securing victories” starts to wear thin. So does such rhetoric as the following:

The women-powered collective bargaining wins described in chapters 1, 5, and 6 represent monumental improvements to worker and community lives[my emphasis]  that happened much faster than traditional policy changes—unless, perhaps, you are the billionaire class.

What are these “monumental improvements?” In her previous book she often refers to “good agreements.” I compared one of her “good agreements” with a collective agreement between the brewery union to which I belonged and the employer. I concluded that the brewery collective agreement was probably slightly better–but that it hardly expressed a “good agreement.”

The reference to the billionaire class sounds very “class-like”–but there are also millionaires who are capitalists, and of course there are many workers in the public sector, many of whose bosses are not capitalists at all in the strict sense.

Although it is certainly necessary to personalize the employer class rather than always referring to such generalities as the “capitalist class,” the “employer class” and the like, the problem is not just billionaires but the economic, social and political structures that constitute the mechanisms by which workers are maintained as employees (and as unemployed and underemployed for a section of the working class). To reduce the problem to the “1%” may be legitimate as a short-hand for those structures, it may also hide the need to challenge these macro structures at every opportunity. By idealizing collective bargaining and collective agreements, on the one hand, and by reducing the power of the class of employers to “the 1%,” on the other, Ms. McAlevey simply ignores the problem of the relationship between social structure and social agency.

How are we going to solve that problem and control our lives by ignoring such a problem? How are we going to do when we read such rhetoric as:

It is precisely because unions can produce these kinds of gains, even in their emaciated state, that they have been the targets of sustained attacks from the corporate class. Unions’ track record of redistributing power—and therefore wealth—and changing how workplaces are governed is what led to a war waged against them by the business class. In just twelve years in the private sector, from 1935 to 1947, with massive strikes at the core of their strategy, workers made huge breakthroughs that benefited most people and created the concept of the American Dream—that your kids will do better than you, along with home ownership for workers and a right to retire and play with those grandkids.

“huge breakthroughs?” Ms. McAlevey is prone to exaggeration–as are many social democrats. Improvements there were, and such improvements as a rising standard of living in various domains are to be welcomed through struggling against the employer class, but this reference to the “American Dream” was hardly generalized, and one of the reasons why this Dream has increasingly vanished for the working class is the exaggeration of the gains achieved through collective bargaining, collective agreements and the union movement. Workers were still used as things for the benefit of employers-something which Ms. McAlevey never addresses (see  The Money Circuit of Capital).

Ms. McAlevey’s standard for improvement is rather low. Workers deserve much better–they deserve to control their own life process, and no collective agreement can ever do that.

Ms. McAlvey exaggerates often:

The methods organizers use to achieve these kinds of all-out strikes require the discipline and focus of devoting almost all of their time and effort reaching out to the workers who don’t initially agree, or even may think they are opposed to the strike, if not the entire idea of the union. This commitment to consensus building is exactly what’s needed to save democracy. To win big, we have to follow the methods of spending very little time engaging with people who already agree, and devote most of our time to the harder work of helping people who do not agree come to understand who is really to blame for the pain in their lives. Pulling off a big, successful strike means talking to everyone, working through hard conversations, over and over, until everyone agrees. All-out strikes then produce something else desperately needed today: clarity about the two sides of any issue. Big strikes are political education, bigly. [My emphasis] 

Strikes can indeed contribute to political education, but since there is evidence that Ms. McAlevey’s political education is drastically incomplete (ignoring the issue of the relationship between social structure and social agency and how to bridge the gap indicates a drastic lack of political education–as does the idealization of collective bargaining), “big strikes” do not necessarily generate certain kinds of political education.

As for saving democracy–political democracy has more or less existed (although even that is debatable), but the dictatorship which characterizes most workplaces–even unionized and radical ones–forms part and parcel of political democracy (see, for example, my post Employers as Dictators, Part One on economic dictatorship).

Ms. McAlevey refers to “working through hard conversations,” but when I tried to engage in such a conversation about the reference to “decent work” and “fair contracts,” with what I believed were the radical left in Toronto, I was insulted and ridiculed. I decided that such “hard conversations” had to occur without such insults and ridicule. I also decided to start this blog because, when I submitted an article for possible publication to the Canadian journal Critical Education, three anonymous reviewers rejected the article as it was and recommended extensive revisions. Since I did not consider their criticisms to be valid, I sought an alternative venue for expressing my views–hence this blog. (I will be posting their criticisms as well as my critical analysis of their criticisms in future posts.)

Ms. McAlevey often refers to winning “big”–while ignoring the impossibility of really winning control over our lives unless we address the macro issue. It is a definite limitation of her approach:

Chapter 1 discusses three such examples of women winning big.

The first chapter’s title is “Workers Can Still Win Big.” Ms. McAlevey refers to the strike of Local 2850 of Unite Here against Marriott Hotels in 2018. I tried to find the collective agreement but was unable to do so (if someone finds it, please send a commentary with the link). I looked at the UNITE HERE Local 2850 website, the American site for private-sector collective agreements, the following site Collective Bargaining Agreements File: Online Listings of Private and Public Sector Agreements – OLMS (Office of Labor-Management Standards), Department of Labor, United States) and the UNITE HERE Local 2850 Facebook page

On the Facebook page, one reference to the strike provides some idea of what was won:

Today members of UNITE HERE Local 2850 at the Oakland Marriott City Center ratified an agreement with Marriott and will end our strike as of tomorrow. We thank our allies who supported us in our fight for jobs that are enough to live on in Oakland.

The collective agreement, then, in this judgement, permits the workers represented by the Local sufficient wages to be able to live in Oakland.

She does refer to the persistent sexual harassment to which many hotel workers have been subject and the measures that have been taken to address the issue–as indeed the Local should. The Local, through such representatives as Irma Perez, has expanded its work to include organizing to push for (and pass) legislation that addresses sexual harassment at work.

In a footnote, Ms. McAlevey writes:

Irma Perez, author interview. Irma is what’s called a shop steward in her hotel, so she’s deeply familiar with her own contract and the standards in her area. She states, “We have to clean 15 rooms a day at my job. But at hotels that are not unionized, workers have to clean 28 rooms a day, or sometimes even 30.” From my time working in Las Vegas, the same union versus nonunion standard applied to number of rooms cleaned per day, fifteen in a unionized hotel versus upward of thirty in a nonunion casino.

Cleaning 15 rooms rather than 28 or 30 rooms is certainly a large improvement in working conditions for those who clean hotel rooms. I remember my mother, a small woman (4′ 9″ or around 145 cm) working at a hotel in Calgary, Alberta, Canada, at a hotel. She found it difficult. She finally quit when her supervisor (a Yugoslavian woman) slapped her in the face. A reduction in the intensity of labour by almost 100 percent indeed is significant.

However, let us not exaggerate such a change. The hotel workers still must do what management wants in general–there is no dignity in that–nor equity.

The strike, implicitly, was about better pay in order to eliminate the need to have two jobs to make ends meet:

has the kind of energy that can motivate everyone on the picket line for days on end, dancing as she’s [Irma Perez] chanting to remind the workers and their supporters that they are fighting for a better life, for the freedom from having to work two full-time jobs. Every picket sign has the strike slogan and the worker’s demand, ONE JOB SHOULD BE ENOUGH!

The standard of having only one job that pays sufficiently well to make ends meet is certainly a standard worthy to fight for. However, this does not meet that it is an adequate standard to justify writing such things as the following:

In addition to the wins I’ve already listed, the three unions in the case studies here have secured the right to affordable, high-quality health care; equitable pay [my emphasis]; pay policies that eliminate gender and racial disparities, and favoritism; the right to keep control over your own schedule; improvements in safety on the job, for the workers as well as the patients, students, or guests; effective tools to combat sexual harassment; advances in paid time off, whether to have and get to love a baby, to take vacation, or get sick and avoid getting everyone else sick by going to work. Part of what makes unions and collective bargaining so effective is that workers themselves pull up to the negotiation table to decide how to redistribute the profits they make for others and design rules that actually solve their immediate problems. No other mechanisms engage the ingenuity of workers themselves.

Ms. McAlevey now engages in social-democratic ideology–“equitable pay,” “fair contracts,” “decent work” and the like are catch phrases used by the social democratic left to hide the continued dictatorship of employers over the lives of workers–whether unionized or not.

I probably received higher pay in the unionized jobs that I worked than the UNITE HERE Local 2850 workers, but to claim that what I received was “equitable” in any way simply ignores the issue of how it is equitable. On what basis does Ms. McAlevey justify her claim of equitable pay? She simply ignores the issue.

Furthermore, her reference to “redistribute the profits they make for others” assumes that it is legitimate for employers to use workers to produce a profit in the first place; fighting for complete control over the workplace (and the massive class struggle that that would entail) is simply ignored.

Of course, Sam Gindin and other social-democratic activists consider such explicit aims as “taking control of the economy” (at the grassroots level) as unrealistic under existing conditions. They believe in some magical future where the issue of the power of employers as a class will be addressed–they will always push such an issue to the waited-for future.

How any aim is to be achieved except by using it in the present to organize our present activities is a mystery to me–for that is what a real aim is and not a pseudo-aim. (Among children, the inductive approach of realizing an aim less explicitly may be more appropriate, and adults may even formulate more explicit aims of what they are trying to achieve after engaging in practice for a certain time–but then again, they may never do so). This does not mean that the aim has to be clear from the outset–far from it since aims are often clarified as they are put into effect. Nevertheless, an explicit aim of eliminating the power of employers as a class is certainly a legitimate aim to be put on the agenda of the working class and discussing it in the present–rather than putting it off to the distant future that social democrats are accustomed to doing.

I will continue a critical review of Ms. McAlevey’s book in another post.