The Rate of Exploitation of the Workers of Toronto-Dominion Bank (TD Bank), One of the Largest Private Employers in Canada

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).

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

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

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

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

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

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

Conclusions First

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

We have the following:

Adjusted income before income taxes=s= $13,570
Adjusted total salaries and employee benefits=v=$10,997

The rate of exploitation or the rate of surplus value of Toronto Dominion Bank workers is =s/v=13,570/10,997=123 percent.

That means that for every hour worked that is equivalent to her/his wage, a worker at TD Bank works around an additional 74 minutes for free for TD Bank. Alternatively, this means that, in terms of money, $1 of wage or salary of a regular TD Bank worker results in $1.23 surplus value or profit for free (calculated on the basis of the procedure outlined in the post on the rate of exploitation of Canadian Imperial Bank of Commerce bank workers).

It also means the following (I use minutes as well as hours):

  1. For a 6.5 hour working day (390 minutes), TD Bank workers spend 174 minutes (2 hours 54 minutes) to obtain their wage for the day, and they spend 216 minutes (3 hours 36 minutes) in obtaining a surplus value or profit for TD Bank.
  2. For a 7.5 hour working day (450 minutes), TD Bank workers spend 201 minutes (3 hours 21 minutes) to obtain their wage for the day, and they spend 249 minutes (4 hours 9 minutes) in obtaining a surplus value or profit for TD Bank.
  3. For an 8-hour working day (480 minutes), TD Bank workers spend 214 minutes (3 hours 34 minutes) to obtain their wage for the day, and they spend 266 minutes (4 hours 26 minutes) in obtaining a surplus value or profit for TD Bank.
  4. For an 8.5 hour working day (510 minutes), TD Bank workers spend 228 minutes (3 hours 48 minutes) to obtain their wage for the day, and they spend 282 minutes (4 hours 42 minutes) in obtaining a surplus value or profit for TD Bank.
  5. For a 9-hour working day (540 minutes), TD Bank workers spend 241 minutes (4 hours 1 minute) to obtain their wage for the day, and they spend 299 minutes (4 hours 59 minutes) in obtaining a surplus value or profit for TD Bank.
  6. For a 10-hour working day (600 minutes), TD Bank workers spend 268 minutes (4 hours 28 minutes) to obtain their wage for the day, and they spend 332 minutes (5 hours 32 minutes) in obtaining a surplus value or profit for TD Bank.
  7. For a 17-hour working day (1020 minutes), TD Bank workers spend 455 minutes (7 hours 35 minutes) to obtain their wage for the day, and they spend 565 minutes (9 hours 25 minutes) in obtaining a surplus value or profit for TD Bank.

TD 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 organizations of resistance against the power of particular employers.

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

Data on Which the Calculation Is Based

The annual report has both statistics on revenue and expenses, but there are also reported statistics in the annual report modified by an adjustment that is specific to the Toronto Dominion Bank; the adjustment in the annual report is not a standard adjustment. I have omitted any reference to such an adjustment since it would probably make the posts on the rate of exploitation in other posts less comparable.

The calculation of the rate of exploitation is undoubtedly imperfect, and I invite the reader to correct its gaps.

In millions of Canadian dollars:

page 15:

(millions of Canadian dollars, except where noted) 2019
Results of operations
Total revenues $ 41,065
Provision for credit losses $3,029
Insurance claims and related expenses $2,787
Non-interest expenses $22,020
Income before income taxes and equity in net income of an investment in TD Ameritrade $13,229

Page 23:

NON-INTEREST EXPENSES

Salaries and employee benefits
Salaries $ 6,879
Incentive compensation 2,724
Pension and other employee benefits 1,641
Total salaries and employee benefits 11,244

Occupancy
Rent 944
Depreciation and impairment losses 405
Other 486
Total occupancy 1,835

Equipment
Rent 245
Depreciation and impairment losses 200
Other 720
Total equipment 1,165

Amortization of other intangibles 800
Marketing and business development 769
Restructuring charges 175
Brokerage-related fees 336
Professional and advisory services 1,322
Other expenses 4,374 }

Total expenses $ 22,020

Adjustments

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

Before entering into the issue of adjustments according to Marxian theory, however, it is necessary to address one of the categories that I did not include in the above calculation. It is a reference to Income before income taxes and equity in net income of an investment in TD Ameritrade,” which is equal to the $13.229 billion reported above. The inclusion of the term “equity” seems to refer to assets, but the following led me to believe that it was referring to net income rather than to assets as such (https://seekingalpha.com/news/3507506-td-bank-expects-230m-net-income-from-td-ameritrade-in-q4):

TD Bank expects ~$230M net income from TD Ameritrade in Q4

TD Bank Group (NYSE:TDexpects TD Ameritrade’s fiscal Q4 net earnings to translate to ~C$301M (~US$230M) reported equity in net income of an investment in fiscal Q4.

I therefore leave the category “Income before income taxes and equity in net income of an investment in TD Ameritrade” as is, except that I shorten it now to just “Income before income taxes.”

In the annual report, the category of “Non-interest expense” is subtracted from total revenue, to yield the category “Income before income taxes.” However, to calculate the rate of exploitation according to the principles of Marxian economics, it is necessary to make certain adjustments. To that end, we need to look in more detail at the category “Non-interest expense.”

In the category “Salary and employee benefits,” there is the subcategory “Incentive compensation.” A one-page TD document indicates what this involves for all employees:

TD’s Approach to Compensation

TD provides employees with a comprehensive total rewards package that includes a combination of base salary, incentive compensation, benefits, and retirement and savings plan

Further, for executives:

Executive Compensation

We have a balanced approach to executive compensation that is intended to attract, retain and motivate high-performing executives to create sustainable value for shareholders over the long term. … This compensation is tied to the bank’s share price and promotes decision-making that is in
the best long-term interests of the bank and its stakeholders.

There is thus additional compensation called incentive compensation, but the issue is whether such additional compensation is a result of workers being exploited or exploiting workers.

As I wrote in the post on the exploitation of Canadian Imperial Bank of Commerce (CIBC) workers:

Most employees, whether executive or not, seem to be eligible to some support of bonus as a function of performance. However, the gap between executive pay and the pay of regular employees has widened over the years, so it is reasonable to infer that the category “Performance-based compensation” is divided into two parts: one part is a function of the number of hours worked by regular employees as well as the intensity of that work; the other is based on the extent to which bank managers and senior executives are successful in exploiting those regular employees.

Without further information, it is impossible to determine the proportion that is derived from exploiting bank workers and being exploited. I will assume, as I did in the case of the CIBC, that 10 percent of the “Incentive compensation” originates from the exploitation of TD bank workers. This 10 percent is equal to $247 million and must be subtracted from the subcategory “Total salaries and employee benefits” and added to the category “Income before income taxes.”

Another expense category is also relevant for making adjustments–the category “Rent.” The rent of buildings, like the rent of equipment, is an expense both at the level of the firm and at the level of the economy as a whole. However, in the case of occupancy, rent also includes the capitalized value of land, and this capitalized value of land is derived from surplus value (see Jorden Sandemose (2018), Class and Property in Marx’s Economic Thought: Exploring the Basis for Capitalism). Again, without further information, it is impossible to tell or determine the proportion that is paid for the rental of buildings and the rental of land. I will assume that 10 percent of rent is due to the exclusive ownership of land (a non-produced means of production). This 10 percent is equal to $94 million and must be subtracted from the subcategory and added to the category “Income before income taxes.”

Adding $94 million to $247 million gives $341 million.

“Income before income tax” must thus be increased by $341 million, and “Total salaries and employee benefits” must be decreased by $247 million.

This gives us the following:

Adjusted Results

Adjusted income before income taxes $13,570
Adjusted total salaries and employee benefits $10,997

The Rate of Exploitation of TD Bank Workers

To calculate the rate of surplus value, we need to relate “Income before income taxes” to “Total salaries and employee benefits.” So, with the adjustments in place:, s=13,570; v=10,997. The rate of exploitation or the rate of surplus value=s/v=13,570/10,997=123 percent.

That means that for every hour worked that produces her/his wage, a worker at TD Bank works around an additional 74 minutes for free for TD Bank.

According to a few people who have worked at TD Bank, the length of the working day is:

I worked 7.5 hrs each day, some overtime is required. but not so often.

I normally am scheduled to work 8 1/2 hours a day Monday to Thursday. On fridays i am scheduled for 6 1/2.

It depends on the activity but can vary from 10 hours to 17+ hours

8 hours a day

Nine hours

I will calculate the division of the working day from the shortest to the longest in the above quotes accordingly. I use minutes rather than hours.

  1. For a 6.5 hour working day (390 minutes), TD Bank workers spend 174 minutes (2 hours 54 minutes) to obtain their wage for the day, and they spend 216 minutes (3 hours 36 minutes) in obtaining a surplus value or profit for TD Bank.
  2. For a 7.5 hour working day (450 minutes), TD Bank workers spend 201 minutes (3 hours 21 minutes) to obtain their wage for the day, and they spend 249 minutes (4 hours 9 minutes) in obtaining a surplus value or profit for TD Bank.
  3. For an 8-hour working day (480 minutes), TD Bank workers spend 214 minutes (3 hours 34 minutes) to obtain their wage for the day, and they spend 266 minutes (4 hours 26 minutes) in obtaining a surplus value or profit for TD Bank.
  4. For an 8.5 hour working day (510 minutes), TD Bank workers spend 228 minutes (3 hours 48 minutes) to obtain their wage for the day, and they spend 282 minutes (4 hours 42 minutes) in obtaining a surplus value or profit for TD Bank.
  5. For a 9-hour working day (540minutes), TD Bank workers spend 241 minutes (4 hours 1 minute) to obtain their wage for the day, and they spend 299 minutes (4 hours 59 minutes) in obtaining a surplus value or profit for TD Bank.
  6. For a 10-hour working day (600 minutes), TD Bank workers spend 268 minutes (4 hours 28 minutes) to obtain their wage for the day, and they spend 332 minutes (5 hours 32 minutes) in obtaining a surplus value or profit for TD Bank.
  7. For a 17-hour working day (1020 minutes), TD Bank workers spend 455 minutes (7 hours 35 minutes) to obtain their wage for the day, and they spend 565 minutes (9 hours 25 minutes) in obtaining a surplus value or profit for TD 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 TD Bank to control their working lives in order to obtain surplus value or profit.

TD 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 organizations of resistance against the power of particular employers.

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

The Rate of Exploitation of the Workers of Rogers Communications Inc., One of the Largest Private Employers in Toronto

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). 

I have tried to calculate the rate of exploitation of workers of Magna International in an earlier post (see The Rate of Exploitation of Workers at Magna International Inc., One of the Largest Private Employers in Toronto, Part One); Magna International is one of the largest employers in Toronto. I also calculated the rate of exploitation for Air Canada workers and the Canadian Imperial Bank of Commerce (CIBC) workers. 

The Nature of the Rate of Exploitation

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

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

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

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

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

Conclusions First

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

Income before income tax expense s=$3.773 billion or $3773.5 million and
Employee salaries, benefits, and stock-based compensation v=$1.8045 billion or $1804.5 million

The rate of exploitation or the rate of surplus value=s/v=3773.5/1804.5=209%.

That means that for every hour worked that produces her/his wage, a worker at Rogers Communications works around an additional 125 minutes or 2 hours 5 minutes for free for Rogers Communications. Alternatively, in terms of money, $1 of wage or salary of a regular Rogers Communications worker produces $2.09 surplus value or profit for free. 

  1. In a 4.5-hour work day (270 minutes), the worker produces her/his wage in about 87 minutes (1 hour 27 minutes) and works 183 minutes (3 hours 3 minutes) for free for Rogers Communication.
  2. In a 7.5-hour work day (450 minutes), the worker produces her/his wage in about 146 minutes (2 hours 26 minutes) and works 304 minutes (5 hours 4 minutes) for free for Rogers Communications.
  3. In an 8-hour work day (480 minutes). the worker produces her/his wage in about 155 minutes (2 hours 35 minutes) and works 325 minutes (5 hours 25 minutes) for free for Rogers Communications.
  4. In an 10-hour work day (600 minutes). the worker produces her/his wage in about 194 minutes (3 hours 14 minutes) and works 406 minutes (6 hours 46 minutes) for free for Rogers Communications.

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 also unfree during that time (see The Rate of Exploitation of Magna International Inc., One of the Largest Private Employers in Toronto, Part Two, Or: Intensified Oppression and Exploitation and   Employers as Dictators, Part One).

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? 

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.

Now, the calculation:

In millions of Canadian dollars:

The data are taken from Rogers Communications Inc. Annual Report.

Total revenue 15,073

Operating Expenses

Operating Costs

Cost of equipment sales 2,254
Merchandise for resale 242
Other external purchases 4,360
Employee salaries, benefits, and stock-based compensation 2,005

Total operating costs 8,861
Depreciation and amortization 2,488
Restructuring, acquisition and other 139

Total operating expenses 11,488
Finance costs 840

Interest on borrowings  746
Interest on post-employment benefits liability  11
Interest on lease liabilities  61
Capitalized interest (19)
Loss on repayment of long-term debt 19
(Gain) loss on foreign exchange (79)
Change in fair value of derivative instruments 80
Other 21

Total finance costs 840
Other income  (10)
Income before income tax expense 2,755

Total revenue therefore=11,488+840-10+12,318+2,755=15,073 (as above)

To calculate the rate of surplus value, the key categories are “Employee salaries, benefits, and stock-based compensation,” which is equivalent to wages/salaries (=v) and “Income before income tax expense” (surplus value (s) or profit).

Adjustments

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

Adjustment of Stock-Based Compensation

The subcategory “stock-based compensation” in the category “Employee salaries, benefits, and stock-based compensation” includes two further subcategories (sub-sub categories, so to speak): 1. Options to purchase Class B Non-Voting Shares on a one-for-one basis (granted to employees, directors, and officers) and 2. Performance options (granted to certain key executives). It may seem unnecessary to adjust for the second sub-sub category since there were ” nil performance-based options” in 2019. However, there are at least two reasons for making adjustments. Firstly, payment for some of the stock-based compensation is due to stock-based compensation acquired in previous years: “These options vest on a graded basis over four years provided that certain targeted stock prices are met on or after each anniversary date. As at December 31, 2019, we had 1,068,776 performance options outstanding.”

Secondly, some of the stock options  in the first sub-sub category are based on “performance-based options” on the part of middle and senior management: “We granted 180,896 performance-based RSUs [restricted share units] to certain key executives in 2019.” 

I use the following logic from my post on the rate of exploitation of Canadian Imperial Bank of Commerce Workers to justify shifting 10 percent of the amount from the category ” (I change the wording slightly to make the quote apply to Rogers Communications workers): 

Most employees, whether executive or not, seem to be eligible to some support of bonus as a function of performance. However, the gap between executive pay and the pay of regular employees has widened over the years, so it is reasonable to infer that the category “Stock-based compensation” is divided into two parts: one part is a function of the number of hours worked as well as the intensity of that work by regular employees; the other is based on the extent to which managers and senior executives are successful in exploiting those regular employees. 

It is impossible to determine the proportion of stock options that form part of salaries and bonuses that represent the exploitation of Rogers Communications regular workers. 

It is probably reasonable to assume that a minimum of 10 percent of the “Stock-based compensation” comes from the exploitation by middle and senior Rogers Communications executives of regular workers.

It would be necessary to have more detailed information to determine whether more or less of the money obtained in this category were distributed between regular bank workers and management executives. If regular bank workers received more, then the rate of exploitation would be less than the rate calculated below. If management executives received more, then the rate of exploitation would be more than the rate calculated below.

On the assumption of 10 percent, this means that 10 percent of the total “Stock-based compensation is reduced by 10 percent, or $200.5 million dollars, and that amount is added to “Income before income tax expense.” This gives, so far: 

Employee salaries, benefits, and stock-based compensation $1804.5 billion
Income before income tax expense $2955.5 billion

Adjustment of Finance Costs

Another adjustment relates to interest. As I indicated in my post about the rate of exploitation of workers at Magna International:

An 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. It should be added to “Income before income tax expense.”

As for the category “Interest on post-employment benefits liability,” from the point of view of Rogers Communications, it is an expense or cost because, presumably, Rogers Communications had to borrow money (and pay interest) to meet its financial obligations to its retired workers; this interest comes from the surplus value produced by the workers and is therefore included as part of profit.

I treat the category “Interest on lease liabilities” like other interest categories: it is paid out of the surplus value produced by Rogers Communications workers.

The interest charges so far that must be subtracted from “Finance costs” and added to “Income before income tax expense” is $818 million. 

That leaves $22 million for Finance Costs so far. 

As I explained on my post on the rate of exploitation of Air Canada workers:

Some explanation of “interest capitalized” is in order. I have had difficulty in understanding the nature of “Interest capitalized.” As far as I can tell, interest that is normally paid and is an expense for the particular employer is treated, in Marxian economics, as part of surplus value because, at the macro level, it comes from the surplus value produced by the workers.

Interest capitalized seems to be different since the interest charged on money borrowed for the purpose of the construction of fixed assets (with a specific interest rate attached to it) is “capitalized,” or not considered part of interest expenses until the construction is finished and the fixed asset is ready to use. This accounting distinction, however, from the macro point of view, is irrelevant since both interest expenses and interest capitalized are derived from the surplus value produced by workers (or appropriated from them in another industry). Accordingly, both interest expenses and interest capitalized should be added to the amount of “Income before income taxes” category.

In the case of Air Canada, capitalized interest was positive (not in parentheses), and I therefore added it to the amount of surplus value produced by the workers. In the case of Rogers Communication, it is negative (since it is in parentheses). Accordingly, I have subtracted it from “Finance Costs” (as the accountants have done). Whether that it is legitimate I will leave for those who more adequately understand modern accounting principles and their relation to Marxian economics. I have found no guidance in the literature so far to aid me in dealing with such issues. 

The three categories, “Loss on repayment of long-term debt,” “(Gain) loss on foreign exchange,” and
“Change in fair value of derivative instruments” seem to have nothing directly to do with interest payments and therefore I leave them as part of “Finance Costs.”

Since the category “Other” remains unspecified, I also leave it as part of “Finance Costs.”

Accordingly, adjusted Finance Costs are:

Adjusted Finance Costs

Loss on repayment of long-term debt 19
(Gain) loss on foreign exchange (79)
Change in fair value of derivative instruments 80
Capitalized interest (19)
Other 21

Total finance costs 22

The category “Other income” is somewhat misleading since, in a note, the category is really “Other (income) expense.” The subcategories are as follows: 

Losses from associates and joint ventures 18 
Other investment income (35) 
Total other income (10)

The $10 million is actually additional investment income, but since it is placed in an expense category, it is put into parentheses. Normally, when an amount is placed in parentheses, it is subtracted, but since it is additional income rather than an expense, it is added. It therefore is already accounted for in the original “Income before income tax expense,” it is already accounted for. 

The remaining 818 in so-called finance costs (which are hidden surplus value) are transferred to the adjusted “Income before income tax expense” category, so that the adjustment for the total of the category is 2,955.5.+818=3773.5. 

So, with the adjustments in place:

Income before income tax expense s=$3.773 billion or $3773.5 million and
Employee salaries, benefits, and stock-based compensation v=$1.8045 billion or $1804.5 million

The Rate of Exploitation

The rate of exploitation or the rate of surplus value=s/v=3773.5/1804.5=209%.

That means that for every hour worked that produces her/his wage, a worker at Rogers Communications works around an additional 125 minutes or 2 hours 5 minutes for free for Rogers Communications. Alternatively, in terms of money, $1 of wage or salary of a regular Rogers Communications worker produces $2.09 surplus value or profit for free. 

The length of the working day at Rogers Communications, like most places, varies. Here are a sample of working days from the Internet:

  1. 7 days a week. 32 hours a week.
  2. Varying 8hr shifts depending on dept. two paid 15 minutes break and 30mins unpaid lunch
  3. 37.5 a week
  4. 7.5 to 8 hrs
  5. 8 – 10 hours per day depending on projects etc. There is a great deal of flexibility in how you work
  1. In a 4.5-hour work day (270 minutes), the worker produces her/his wage in about 87 minutes (1 hour 27 minutes) and works 183 minutes (3 hours 3 minutes) for free for Rogers Communication.
  2. In a 7.5-hour work day (450 minutes), the worker produces her/his wage in about 146 minutes (2 hours 26 minutes) and works 304 minutes (5 hours 4 minutes) for free for Rogers Communications.
  3. In an 8-hour work day (480 minutes). the worker produces her/his wage in about 155 minutes (2 hours 35 minutes) and works 325 minutes (5 hours 25 minutes) for free for Rogers Communications.
  4. In an 10-hour work day (600 minutes). the worker produces her/his wage in about 194 minutes (3 hours 14 minutes) and works 406 minutes (6 hours 46 minutes) for free for Rogers Communications.

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 also unfree during that time (see The Rate of Exploitation of Magna International Inc., One of the Largest Private Employers in Toronto, Part Two, Or: Intensified Oppression and Exploitation and   Employers as Dictators, Part One).

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? 

A Basic Income Versus the Expansion of Public Services? Part One: Critique of the Social-democratic Idea that the Expansion of Public Services is Socialist

Introduction

Simran Dhunna and David Bush have written an article that criticizes moves towards a universal basic income (see https://springmag.ca/against-the-market-we-can-do-better-than-basic-income).

The Aim or Goal of Their Intervention

The first question to ask is: What is the aim or goal of their intervention? What are they seeking to achieve?

They write:

But those committed to principled class struggle should strive for the decommodification of public services. Compared with universal basic income, universal basic services cost less, meaningfully improve the material realities of working class and oppressed people, and affirm the power of publicly owned and operated infrastructure. That’s our bread and butter.

They seek to achieve three things, it seems:

  1. “meaningfully improve the material realities of working-class and oppressed people”
  2. affirm the power of publicly owned and operated infrastructure
  3. achieve points 1 ad 2 at minimal cost.

In this post, I will critically look at the first point.

In another post, I will look at the second point, and in a final post I will address the issue of costs–and how they create a strawman of a minimal basic income.

Meaningfully Improving the Material Realities of Working-Class and Oppressed People

Part of the title of their article claims that they are against the market–apparently against the market providing certain services; their alternative is having the government provide those services (hence the term “decommodification”–the conversion of services from services or commodities that are purchased on the market via money to the offering of such services without the direct mediation of money). This idea of supporting the working class by means of state services rather than through the capitalist market is supposed to “meaningfully improve the material realities of working-class and oppressed people.”

They write:

At the cost of $29 billion annually, we could have free transit in major cities ($10 billion), clean drinking water for every First Nation ($4.5 billion), eliminate tuition fees at all universities ($11 billion), and end homelessness ($4.5 billion). If we are spending $177 billion dollars a year (the cost of a negative income tax model to raise people to $21,810), we could have all of the above plus a universal pharmacare program, universal childcare, universal dental care, and begin to implement a robust public housing policy.  

It may not appear that they are social democrats since they evidently state that class struggle from below will be necessary to realize the provision of such services:

But those committed to principled class struggle should strive for the decommodification of public services.

The state is supposed to be forced to provide such services through class struggle (I will address the adequacy of the term “decommodification” later in this post). Now, I certainly agree with the need to engage in class struggle in order to provide as many services as possible without the direct mediation of the market. The realization of free tuition, for example, would have saved me the need to work for an employer in order to pay off students loans that I had needed three times in my adult life. Struggles to achieve such services furnished by the state rather than directly through the market should therefore be supported.

One of the questions to be asked is: What is the purpose or aim of shift from the provision of services provided by the market to the provision of services provided by the state or public services? Is it to move towards the elimination of the power of employers as a class? Towards the elimination of corresponding oppressive and exploitation structures at work in the private sector (see for example a general outline of such oppressive and exploitative structures in Employers as Dictators, Part One)? Towards the elimination of oppressive structures of the government as a public power (the oppressive structures of the government in relation to citizens and residents internally and military structures externally)? Towards the oppressive and exploitative relations of the government as an employer? (See the post referenced above as well as The Money Circuit of Capital). It would seem not.

Rather, the main aim is to “meaningfully improve the material realities of working-class and oppressed people” in order, ultimately, to eliminate “the level of poverty and inequality”–presumably measured according to the level of income. The focus is on the elimination of poverty and inequality (defined according to level of income):

Some of the appeal of UBI comes from the wishful idea that it can solve all of our problems at once, lifting people out of poverty and making education and public services accessible. But the basic costs show that UBI is, by any measure, a terrible use of resources to address inequality and poverty. As the CCPA’s David MacDonald noted in his study, the $29 billion spent on such a UBI scheme would achieve — at best — less than a 2 percent reduction in the poverty rate, which would “be quite wasteful” when considering the amount of money spent.

The first aim of the authors, then, is limited to an enhanced welfare state–something like what John Cartwright, president of Toronto and York Labour District Council, called for (see my critique in The Limitations of Social-Democracy in the Face of the Coronavirus). Mr. Cartwright wrote:

Reinvestment in our public services and social safety net is the right thing to do – not only now, during COVID-19, but permanently in Canadian society.

The Feasibility of Their Goal

Are such reforms feasible? There is evidence that their proposals could indeed be achievable within the existing social structure and social relations, and such reforms should be supported–all the while criticizing any attempt to limit the class struggle to such goals.

I have pointed out in another post how free transit has already been implemented in various capitalist countries (see What’s Left, Toronto? Part Four). Free tuition at the undergraduate level is available in Germany.

Homelessness has been addressed without changing the basic class structure by combining the aim of eliminating it with other measures that facilitate achieving that aim. In the northern Italian city of Trieste, for example, homelessness was reduced by providing supports for those with mental health problems since around half of those homeless have mental health issues (https://www.theguardian.com/cities/2019/dec/10/homelessness-is-not-inevitable-and-can-be-solved-these-cities-show-us-how). Helsinki, the capital of Finland, by contrast, addressed the issue of homelessness by providing access to housing while providing other social supports through the Housing First program. From https://borgenproject.org/homelessness-in-helsinki/:

In Helsinki, homelessness decreased to 35 percent, with 1,345 people now off the streets. Rough sleeping is almost non-existent, and there is only one 50-bed night shelter remaining. This is good news for street sleepers who have endured deadly winter temperatures as low as -7C° (19F°). “If you’re sleeping outside [in the middle of winter], you might die,” said Thomas Salmi, a tenant at a housing facility in Helsinki. Deputy Mayor Sanna Vesikansa, who witnessed a large number of homeless people in Helsinki as a child, said, “We hardly have that any more [sic]. Street sleeping is very rare now.”

Since 2008, Housing First has spent over 250 million euros in creating new homes and hiring staff. Meanwhile, Helsinki has seen savings upward of 15,000 euros a year in emergency healthcare, social services and the justice system. In 2018, some tenants moved out of Rukilla, able to live independent lives. The benefits outweigh the cost.

Eradicating homelessness in Helsinki is far from complete. However, the major reduction in long-term homelessness must be applauded. Helsinki has proven when authorities are fully committed, positive change can occur.

There is therefore room for reform in various social domains within societies dominated by the class of employers. Such reforms undoubtedly improve the lives of some of the workers and community members, and as a consequence they should be praised and fought for.

Limitations of Their Goal

I fail to see anything wrong with aiming to improve the material well being of workers and oppressed peoples. The problem arises when the advocates of such proposals simultaneously limit the goals of workers and oppressed peoples by ignoring their problems or by criticizing alternative proposals that address such problems.

It is my contention that their opposition to basic income does just that: it limits the aspirations of workers and oppressed peoples to a society that continues to be dominated by a class of employers despite calls for class struggle and material well-being. They oppose a policy of basic income in part because it might free workers from the need to work for an employer–which they implicitly identify falsely with the need to work:

Basic income would have the effect of distancing workers’ labour from their wages. Instead of being paid directly for their work, part of the wage of workers would come from their own tax dollars in the form of basic income. 

Dhunna and Bush object to aiming for the goal of “distancing workers labour from their wages.” There is, however, a tradition of aiming for the goal of separating or distancing labour from the needs of workers and others.

Distancing workers’ labour from their wages” is itself a worthy socialist goal. From Marx’s Critique of the Gotha Programme:

In a higher phase of communist society, after the enslaving subordination of the individual to the division of labor, and therewith also the antithesis between mental and physical labor, has vanished; after labor has become not only a means of life but life’s prime want; after the productive forces have also increased with the all-round development of the individual, and all the springs of cooperative wealth flow more abundantly- only then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banners: From each according to his ability, to each according to his needs.

By focusing mainly on consumption, income level, the standard of living and poverty rates as defined by the level of income, Dhunnah’s and Bush’s goal, ultimately, is social democratic despite the reference to class struggle; many social democrats in the past have referred to class struggle without really aiming for the abolition of the power of the class of employer nor the abolition of classes–such as the German Social Democratic Party in the late nineteenth and early twentieth century (see Reform Versus Abolition of Police, Part Three).

From Moritz Muller (2019), “Of (Anti-)Capitalism, Countermovements, and Social-democratic Bedtime Stories. A Review of Recent Literature on Polanyi,” pages 135-148, Culture, Practice & Europeanization, Volume 4, Number 1, page 136:

… social democracy’s concept of socialism centers around the idea that private ownership should be replaced by public and/or cooperative ownership, together with the state’s acceptance of its role as the responsible institution for social welfare.

Dhunna and Bush, like Cartwright, only look, one-sidedly, at the problem since their focus is on poverty rates, standard of living (defined by consumption) and level of income. Their implied emphasis on distribution and consumption as opposed to production and employment fails to consider that production, distribution and consumption are interrelated since human beings produce their own social lives. Distribution and consumption are two aspects of this process, but they are part of a process of socially reproducing our live through the use of means of production (machines, buildings, tools, land, raw material, auxiliary material and so forth). There is no reference to employers and their power at work in their article at all, however.

Indeed, their focus is exclusively on issues of distribution of income and consumption; they neglect to include in the concept of “the Material Realities of Working-Class and Oppressed People” material interests of workers in controlling their own lives as they produce those lives over time. The “material realities” or workers include being oppressed and being exploited–which they never address (see for example The Rate of Exploitation of Workers at Magna International Inc., One of the Largest Private Employers in Toronto, Part One and The Rate of Exploitation of Magna International Inc., One of the Largest Private Employers in Toronto, Part Two, Or: Intensified Oppression and Exploitation).

Their article reflects Marx’s characterization of the liberal reformist John Stuart Mill. From Grundrisse: Foundations of the Critique of Political Economy, page 87:

The aim is, rather, to present production – see e.g. Mill – as distinct from distribution etc., as encased in eternal natural laws independent of history, at which opportunity bourgeois relations
are then quietly smuggled in as the inviolable natural laws on which society in the abstract is founded.

Here is what the reformist John Stuart Mill wrote (quoted from Judith Janoska, Martin Bondeli, Konrad Kindle and Marc Hofer, page 104, The Chapter on Method of Karl Marx: An Historical and Systematic Commentary (in German, but the quote is in English):

The laws and conditions of the production of wealth partake of the character of physical truths [they cannot be changed–they are natural and eternal]. There is nothing optional or arbitrary in them. … It is not so with the Distribution of wealth. That is a matter of human institutions solely.

I have criticized the definition of poverty mainly according to level of income (the poverty rate) (and the corresponding standard of living) in another post since the definition fails to capture the continuing lack of freedom characteristic of work relations characterized by a market for workers (see “Capitalism needs economic coercion for its job market to function” (Ontario Coalition Against Poverty: OCAP)). I also criticized, in two other posts, Mr Bush’s inconsistent views (see Basic Income: A Critique of the Social-Reformist Left’s Assumptions and Analysis: Part One and Basic Income: A Critique of the Social-Reformist Left’s Assumptions and Analysis: Part Two). At least in his earlier writing, he tried to link production to distribution (though inadequately). Now he has abandoned all pretense of being concerned about the working lives of worker–despite the rhetoric of “class struggle.”

The push for a shift of many services from the private sector to the public sector will meet substantial opposition when it begins to affect the market for workers since the market for workers is a basic condition for the continued power and existence of employers as a class. Of course, the fact that there will be determined resistance and violence by employers and the government to ensure a ready supply of workers does not mean that such a policy should not be pursued. The authors do indeed imply that class struggle will be necessary to achieve their limited aims, but their form of class struggle works well within the limits of the continued existence of the class power of employers. However ironic it may sound, their form of class struggle is a reformist class struggle. Its aim is not the abolition of classes and therefore the class struggle, but rather the permanence of class struggle.

Their aim, in other words, is to humanize the class power of employers through class struggle rather than abolishing that class power. Their concept of socialism is really an enhanced welfare state–not the abolition of the class power of employers.

Struggles for an Expansion of Public Services and Socialism

There is no necessary connection between struggles for the expansion of free public services (free in terms of the consumer of such services not having to pay personally for such services and everyone having access to such services) and socialism. Should socialists, though, ignore such struggles? Of course not. The expansion of free public services can indeed enhance the life of workers and oppressed peoples, and it can, perhaps, permit a great possibility for the creation of a socialist society (I say perhaps for all the reasons above–the expansion of free public services often becomes a substitute for the creation of a socialist society–a society without the existence of a class of employers).

Socialists should support the expansion of free public services while simultaneously criticizing the limitations of such proposals. As Daniel Ankarloo (2009) writes, “The Swedish Welfare Model: A Road Ahead? A Road to Socialism? Or a Dead End?,” Rethinking Marxism Conference:

the first presupposition for the Left of coming out of this impasse in welfare policies is the abandonment of ‘the social policy road to socialism’ [the kind of socialism advocated by Dhunna and Bush]. And in its place embrace the seeming paradox – that even if the welfare state model in Sweden is not socialism, not even a road to socialism, as a precondition for socialism, it is vital to fight for.

Socialists must strive to integrate the present and future rather than separating them–which is typical of both social democrats and the extreme left:

as regards the welfare state, the Left in Sweden has for the most part … been unable to deal adequately with the relation of ‘welfare’ to socialism. Some in the Left – having found out that ‘welfare’ is not socialism – have denounced previous welfare achievements and current popular welfare struggles in Sweden altogether. This has left the playing field open for social democrats to
lead the movement on issues of ‘welfare’ and subsequently ‘the social policy road to
socialism’ has largely remained unchallenged. More prevalent, however, has been to try to
overcome this impasse by balancing the ‘reformist’ policies of ‘welfare’ with the
‘revolutionary’ goal of ‘socialism’ as the overthrow of capitalist relations.

Unfortunately within the Swedish Left this has almost exclusively led to a de-habilitating
gap between theory and practice, between today and tomorrow. Just as historical social
democracy in Sweden in the 1940s tried to overcome its contradictions between the Marxian
vision of socialism and ‘Functional Socialism’, … by ‘pushing socialism ahead in time’, the Left in Sweden has inherited the same problematic. Hence, for this Left, socialism is always something that happens ‘in the future’ or ‘somewhere else’ – but it is never something existing in Sweden here and now. From this perspective, at best, all we can do is to support the ‘reformist’ Swedish welfare
model, in wait for socialism. In theory the Left has adhered to ‘revolutionary socialism’, but
since this is never an immediate presence, and only happens ‘tomorrow’, in practice one is at
best ‘reformist’ in welfare issues, i.e. exponents of ‘the social policy road to socialism’.

But, the challenge of the Left today is to break with ‘the social policy road to socialism’,
with the realization that although the Swedish welfare model is not socialism, not even a road
to socialism, there is indeed an alternative way to connect welfare struggles to socialism.

We have seen the issue of how the social-democratic or reformist left break the link between the present and future before (see Reform Versus Abolition of Police, Part Three and Reform Versus Abolition of the Police, Part Five: More Philosophical Considerations).

Fighting for welfare reforms that enhance the immediate lives of workers and oppressed peoples–the “bread and butter issues” to which Dhunna and Bush refer–while striving for socialism in the present–this is what is needed (and this is what this blog is for).

Returning to the issue of basic income–there is no reason for socialists to see welfare reforms that enhance the lives of workers and oppressed peoples and the proposal for a robust basic income as mutually exclusive; we should struggle for both. However, the struggle for a robust basic income is more fundamental since it has greater potentiality for questioning the power of employers as a class at work than the distributional struggles over what is produced.

Both a robust basic income and the expansion of public services, however, are means to the end of the creation of a socialist society and not ends in themselves.

Conclusion

Dhunna and Bush’s first aim–to “meaningfully improve the material realities of working class and oppressed people”–sounds both practical and radical. It is actually conservative since its focus is entirely on distributional struggles rather than struggles over control of working conditions at both the micro and macro levels. Indeed, since this is their primary goal, they practically define a socialist society as an enhanced welfare state–capitalism with a more human face.

By focusing on distributional struggles, they imply, without ever saying it, that wider struggles to control working conditions are impractical and utopian. They, the realists, know what “bread and butter issues” are relevant for the working class, and such “bread and butter issues” are purely distributional struggles. Such a stance is conservative–its aim is not to end class rule, but to perpetuate it–though in a more humanized form than at present.

So much for Dhunna’s and Bush’s first aim. In a second post, I will address the second aim, probably more briefly–the aim of affirming the power of publicly owned and operated infrastructure.

The issue of basic income and costs and how Dhunna and Bush present mainly a straw basic income model, however, will be addressed only in the last post of this series.

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

Introduction

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

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

The Nature of the Rate of Exploitation

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

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

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

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

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

Conclusions First

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

We have the following:

Income before income taxes: $6,656=s
Employee compensation and benefits: $5,539=v

The rate of exploitation or the rate of surplus value is s/v; therefore, s/v is 6,656/5,539=120 percent.

This means that, for every hour worked that enables her/his to obtain a wage, a CIBC worker works 72 minutes (or 1 hour 12 minutes) for free for CIBC. Alternatively, in terms of money, $1 of wage or salary of a regular bank worker results in $1.20  surplus value or profit for free.

  1. in a 5.75 hour working day, CIBC workers spend 157 minutes (2 hours 37 minutes) to obtain their wage for the day, and they spend 188 minutes (3 hours 8 minutes) in obtaining a surplus value or profit for CIBC.
  2. For a six-hour working day, follow the same procedures as above, but replace 345 by 360: result: in a 6-hour working day, CIBC workers spend 164 minutes to obtain their wage for the day, and they spend 196 minutes in obtaining a surplus value or profit for CIBC.
  3. 7-hour working day: 420 minutes: in a 7-hour working day, CIBC workers spend 191 minutes to obtain their wage for the day, and they spend 229 minutes in obtaining a surplus value or profit for CIBC.
  4. 7.5-hour working day: 450 minutes: in a 7,5-hour working day, CIBC workers spend 205 minutes to obtain their wage for the day, and they spend 245 minutes in obtaining a surplus value or profit for CIBC.
  5. 8-hour working day: 480 minutes: in an 8-hour working day, CIBC workers spend 218 minutes to obtain their wage for the day, and they spend 262 minutes in obtaining a surplus value or profit for CIBC.
  6. 10-hour working day: 600 minutes: in a 10-hour working day, CIBC workers spend 273 minutes to obtain their wage for the day, and they spend 327 minutes in obtaining a surplus value or profit for CIBC.

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

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

Data on Which the Calculation Is Based

Now, the calculation:

In millions of Canadian dollars:

Revenue:  $18,611

Net interest income $ 10,551
Non-interest income $8,060

Provision for credit losses $1,286
Non-interest expenses $10,856

Employee Compensation and Benefits:

Salaries: $3,081
Performance-based compensation: $1,873
Benefits: $772

Total employee compensation: $5,726

Other expenses:

Occupancy costs:  $892
Computer, software and office equipment: $1,874
Communications: $303
Advertising and business development: $359
Professional fees: $226
Business and capital taxes: $110
Other: $1,366

Total other expenses: $5,130

Income before income taxes (Revenue minus provision for losses minus non-interest expenses): $6,469 ($18,611-$1,286-$10,856=$6,469).

Adjustments

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

It is necessary, however, to make adjustments on the revenue side; From  https://www.payscale.com/research/CA/Employer=Canadian_Imperial_Bank_of_Commerce_(CIBC)/Bonus :

How much does Canadian Imperial Bank of Commerce (CIBC) pay in bonuses?

Canadian Imperial Bank of Commerce (CIBC) pays an average of C$4,962 in annual employee bonuses. Bonus pay at Canadian Imperial Bank of Commerce (CIBC) ranges from C$1,014 to C$30,521 annually among employees who report receiving a bonus. Employees with the title Information Technology (IT) Director earn the highest bonuses with an average annual bonus of C$30,521. Employees with the title Customer Service Representative (CSR) earn the lowest bonuses with an average annual bonus of C$1,014.

Although there is no direct evidence to indicate whether such bonuses form part of “Performance-based compensation,” there is indirect evidence.

Bloomberg notes the following (https://www.bnnbloomberg.ca/canada-s-bankers-face-the-bleakest-bonus-year-in-almost-a-decade-1.1358606):

The Canadian banks pay bonuses based on performance, with most of the variable compensation going to capital-markets employees such as investment bankers, research analysts and those in sales and trading. …

Senior investment bankers will see a 10 per cent decline in compensation from last year, hurt by fewer financings and a decline in mergers-and-acquisitions activity, according to Vlaad & Co. Junior investment bankers will see little change in their payouts following three years of increases, while those in sales, trading and research will see compensation fall 15  per cent to 25  per cent, and fixed-income employees will face a similar decline, the firm said.

Most employees, whether executive or not, seem to be eligible to some support of bonus as a function of performance. However, the gap between executive pay and the pay of regular employees has widened over the years, so it is reasonable to infer that the category “Performance-based compensation” is divided into two parts: one part is a function of the number of hours worked by regular employees as well as the intensity of that work; the other is based on the extent to which bank managers and senior executives are successful in exploiting those regular employees. Evidence for such exploitation is indirect, via the level of compensation of some senior executives. For example, Victor Dodig, president and CEO,  received $9,017,000 in total compensation in 2019 (salary, $1,000,000; share-based awards, $4,806,420; option-based awards, $1,201,560; Non-equity GPS awards, $1,501,950; Pension value, $505,000; all other compensation, $2,250) (CIBC Proxy Circular 2020, page 79).

It is impossible to determine the proportion of bonuses that form part of salaries and bonuses that represent the exploitation of bank workers. Some facts may, however, be relevant. From   https://www.comparably.com/companies/cibc/executive-salaries:

The average CIBC executive compensation is $270,917 a year. The median estimated compensation for executives at CIBC including base salary and bonus is $253,828, or $122 per hour. At CIBC, the lowest compensated [executive] makes $52,000.

It is probable that even middle-level bank executives receive some surplus value or profit through the exploitation of regular bank workers. This means that part of their compensation is a function of how much work regular bank workers work for nothing or for free.

Given that the level of income for top executives is far beyond the level of income of even the lowest executive, as well as the fact that the average executive compensation is almost five times the level of the lowest executive (not even taking into account additional compensations for senior executives), it is probably reasonable to assume that a minimum of 10 percent of the “Performance-based compensation” comes from the exploitation by senior bank executives of regular workers.

It would be necessary to have more detailed information to determine whether more or less of the money obtained in this category were distributed between regular bank workers and management executives. If regular bank workers received more, then the rate of exploitation would be less than the rate calculated below. If management executives received more, then the rate of exploitation would be more than the rate calculated below.

On the assumption of 10 percent, though, this means that 10 percent of the total of “Performance-based compensation, ” is reduced by 10 percent, or $187,300,000, and that amount is added to “Income before income taxes.” As a consequence, we have the following:

Adjusted Results

Income before income taxes: $6,656=s
Employee compensation and benefits: $5,539=v

The Rate of Exploitation of CIBC Workers

The rate of exploitation or the rate of surplus value is s/v; therefore, s/v is 6,656/5,539=120 percent.

This means that, in terms of money, $1 of wage or salary of a regular bank worker results in $1.20 cn surplus value or profit for free (calculated as follows–you can skip this calculation if not interested in how the result was obtained). Alternatively, for every hour worked, a CIBC worker works 72 minutes (or 1 hour 12 minutes) for free for CIBC.

  1. s/v=1.2
  2. multiplying  s/v and 1.2 by v (multiplying both sides by v does not change the equation), we have (s timesv)/v=1.2v;
  3. Dividing v by itself in the left-hand part of the equation in 2 above results in 1 (any number divided by itself except 0 is equal to 1, and any number multiplied by 1 is the same number), so we have: s=1.2v
  4. We can use this equation to calculate the division of the working day into time required to obtain the equivalent of the wage for workers at CIBC and the time they provide free of charge to obtain surplus value for CIBC.

According to a few people who have worked at CIBC, the length of the working day is:

8 hours a day

Work hours are manageable and flexible. The company is accommodating with every schedule.

They vary – just like it does anywhere.

8 hours in a day, 1 hour for break and lunch.

8-10 hours

I work 7.5 hours each day.

6 – 5.75 hours a day, 4 days a week. for the last 1.5 years

Evidently, the length of the working day varies for workers at CIBC. I will calculate the division of the working day from the shortest to the longest in the above quotes accordingly. I use minutes rather than hours. I provide more detail for the calculation for the first one so that others can more easily calculate similar rates in the cities where they live.

  1. A 5.75- hour working day: 345 minutes;
  2. We can use this information to create an equation:
  3. v+s=345;
  4. We also have the equation s=1.2v from above;
  5. We can therefore replace, in equation 3 above, s by 1.2v since they are the same.
  6. We now have: v+1.2v=345;
  7. From 6, we have 2.2v=345
  8. Dividing both sides by 2.2 does not change the equation, so the result is: v=345/2.2=157 minutes (rounded to the nearest minute).
  9. Since v+s=345, we have 157+s=345;
  10. Subtracting 157from both sides does not change the equation, so now we have s=345-157=188 minutes
  11. So, in a 5.75 hour working day, CIBC workers spend 157 minutes (2 hours 37 minutes) to obtain their wage for the day, and they spend 188 minutes (3 hours 8 minutes) in obtaining a surplus value or profit for CIBC.
  12. For a six-hour working day, follow the same procedures as above, but replace 345 by 360: result: in a 6-hour working day, CIBC workers spend 164 minutes to obtain their wage for the day, and they spend 196 minutes in obtaining a surplus value or profit for CIBC.
  13. 7-hour working day: 420 minutes:i n a 7-hour working day, CIBC workers spend 191 minutes to obtain their wage for the day, and they spend 229 minutes in obtaining a surplus value or profit for CIBC.
  14. 7.5-hour working day: 450 minutes: in a 7,5-hour working day, CIBC workers spend 205 minutes to obtain their wage for the day, and they spend 245 minutes in obtaining a surplus value or profit for CIBC.
  15. 8-hour working day: 480 minutes: in an 8-hour working day, CIBC workers spend 218 minutes to obtain their wage for the day, and they spend 262 minutes in obtaining a surplus value or profit for CIBC.
  16. 10-hour working day: 600 minutes: in a 10-hour working day, CIBC workers spend 273 minutes to obtain their wage for the day, and they spend 327 minutes in obtaining a surplus value or profit for CIBC.

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 CIBC to control their working lives in order to obtain surplus value or profit. (I leave the issue of how banks exploit workers as consumers to others more competent to deal with the issue; the point here is to focus on the exploitation of bank workers as workers and not as consumers.)

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

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

Do Workers Work for a Particular Employer or for the Class of Employers? Part One: A Limitation of Some Radical Left Critiques of Capitalist Relations of Production and Exchange (A.K.A. Capitalism)

While doing some research for a post on this blog, I became aware of how many Marxists claim that workers really work for the capitalist class or the class of employers rather than a particular employer. I asked my wife, who worked in Guatemala as a saleswoman, whether she thought that she worked for a particular employer or for the class of employers. She replied that she worked for a particular employer.

Although this is true in one way, it is also false in another way (I will elaborate on this below). Nonetheless, from the point of view of the experience of workers, they generally conceive of the relation between their working lives and their employer as a particular relation and not as a class relation. Marxists often ignore this concrete experience of workers and, as a consequence, limit their capacity to communicate with workers and to organize them.

First, I would like to provide quotes from several radical socialist sources to show that they often ignore the concrete experience of workers in relation to employers. All words in boldface are my emphasis.

From Alexander Berkman (2003), What is Anarchism, page 11:

Are you not compelled to work for an employer? Your need compels you, just as the highwayman’s gun. You must live, and so must your wife and children. You can’t work for yourself; under the capitalist industrial system you must work for an employer. The factories, machinery, and tools belong to the employing cl ass, so you must hire yourself out to that class in order to work and live. Whatever you work at, whoever your employer may be, it always comes to the same: you must work for him. You can’t help yourself You are compelled.

In this way the whole working class is compelled to work for the capitalist class. In this manner the workers are compelled to give up all the wealth they produce. The employers keep that wealth as their profit, while the worker gets only a wage, just enough to live on, so he can go on producing more wealth for his employer. Is that not cheating, robbery?

Again: From Socialist Party of America, National Platform, Adopted by the Thirty-Sixth National Convention, University of Akron, Akron, Ohio, July 18-23, 1983, page 1:

Under capitalism, society is divided into two principal classes–the capitalist class and the working class. The capitalist class consists of the wealthy few who own the means of production and distribution. The working class consists of the vast majority who own no productive property and who must in order to live, seek to work for the capitalist class, or for the present government it controls.

Another example is from Great Britain (from the website Socialist Party of Great Britain):

Today, a world working class is forced to work for a wage or salary, and confronts a world capitalist class who live off unearned incomes from rent, interest and profit.

This one-sided emphasis on the capitalist class also can be seen in the following 1904 report by James Moroney, Report of the Australian Socialist League to the International Socialist Congress at Amsterdam:

The Working Class, in order to secure food, clothing, shelter and fuel, must sell their labor-power to the owning Capitalist Class — that is to say, they must work for the Capitalist Class [my emphasis]. The Working Class do all the useful work of Society, they are the producers of all the wealth of the world, while the Capitalist Class are the exploiters who live on the wealth produced by the Working Class.

To be sure, there is recognition that the workers do work for a particular employer. From James O. Moroney (1904), the Australian Socialist League. Report of the Australian Socialist League to the International Socialist Congress at Amsterdam:

In most of the Australian States the railways, and in some the tramways, are owned and managed by the government on strictly commercial principles. In other directions the State has extended its functions and employs labor direct. But the worker remains in Australia, whether employed by the State government or the individual private employer, and exploited wage slave, as is his exploited fellow wage slave in other countries.

These two views are often not integrated in a coherent manner. Workers do both. The reality of working for a particular employer in the private sector hits home when the private employer closes shop for whatever reason–as the workers working for GM in Oshawa, Ontario, relatively recently experienced; around 2,500 direct workers were out of work due to the shutting down of the GM auto plant in Oshawa in December, 2019.

Workers who work in the public sector may also experience severance from their particular employer as government departments are down-scaled or reorganized. They do not just work for “the government,” but in a particular field, department or political division.

This experience of working for a particular employer needs to be recognized when radicals write and give speeches. Marx recognized that the form in which workers work for the class of employers, which constitutes their immediately lived experience,  needs to be taken into account. From the notebooks Marx drafted in 1857-1858 called the Grundrisse (Outlines), in the Collected Works of Marx and Engels (Marx’s best friend and comrade), Volume 28, pages 392-393):

To start with, the first presupposition is the transcendence of the relation of slavery or serfdom. Living labour capacity belongs to itself and disposes by means of exchange over the application of its own energy. The two sides confront each other as persons. Formally, their relation is that of equal and free exchangers. That this form is mere appearance, and deceptive appearance at that, appears, as far as the juridical relationship is concerned, as an external matter. What the free worker sells is always only a particular, specific measure of the application of his energy. Above every specific application of energy stands labour capacity as a totality. The worker sells the specific application of his energy to a specific capitalist, whom he confronts independently as a single individual. Clearly, this is not his [real] relationship to the existence of capital as capital, i.e. to the class of capitalists. Nevertheless, as far as the individual, real person is concerned, a wide field of choice, caprice and therefore of formal freedom is left to him. In the relation of slavery, he belongs to the individual, specific owner, and is his labouring machine. As the totality of the application of his energy, as labour capacity, he is a thing belonging to another, and hence does not relate as a subject to the specific application of his energy, or to the living act of labour. In the relation of serfdom, he appears as an integral element of landed property itself; he is an appurtenance of the soil, just like draught-cattle. In the relation of slavery, the worker is nothing but a living labouring machine, which therefore has a value for others, or rather is a value. Labour capacity in its totality appears to the free worker as his own property, one of his own moments, over which he as subject exercises control, and which he maintains by selling it. [my emphasis] 

John Sitton draws out the effect of the immediate experience of working for a particular employer on individual members of the working class. From John Sitton, editor, (2010), Marx Today Selected Works and Recent Debates,  pages 19-20:

Since the wage-laborer must sell his or her labor to someone in the class of employers, Marx often states that this “freedom” is an illusion. “The Roman slave was held by chains; the wage-laborer is bound to his owner by invisible threads. The appearance of independence is maintained by a constant change in the person of the individual employer, and by the legal fiction of a contract.” But Marx himself admits that this “appearance” of individual freedom is reinforced by the fact that the worker, unlike the slave, is also an autonomous consumer. “It is the worker himself who converts the money into whatever use-values he desires; it is he who buys commodities as he wishes and, as the owner of money, as the buyer of goods, he stands in precisely the same relationship to the sellers of goods as any other buyer. Of course, the conditions of his existence—and the limited amount of money he can earn—compel him to make his purchases from a fairly restricted selection of goods. But some variation is possible as we can see from the fact that newspapers, for example, form part of the essential purchases of the urban English worker. He can save or hoard a little. Or else he can squander his money on drink. But even so he acts as a free agent; he must pay his own way; he is responsible to himself for the way he spends his wages.” Given this reality, Marx did not anticipate how class identity could be effaced by the status of consumer. The status of independent— although severely constrained—owner of the commodity labor-power, and of owner of money who can spend it as he or she pleases, makes it easy to see how in people’s minds class differences come to be considered as merely differences in income.

This “appearance” of freedom is bolstered in an additional way. As Marx acknowledges, although class situation greatly reduces the range, there are some differences in individual wages depending on skill. For a worker, there is therefore “an incentive to develop his own labor-power” so as to increase his or her wages. “[T]here is scope for variation (within narrow limits) to allow for the worker’s individuality, so that partly as between different trades, partly in the same one, we find that wages vary depending on the diligence, skill or strength of the worker, and to some extent on his actual personal achievement. Thus the size of his wage packet appears to vary in keeping with the results of his own work and its individual quality. . . . Certain though it be that the mass of work must be performed by more or less unskilled labor, so that the vast majority of wages are determined by the value of simple labor-power, it nevertheless remains open to individuals to raise themselves to higher spheres by exhibiting a particular talent or energy.” Marx is not explicit, but, combined with the possibility of changing one’s employer, this opens up the prospect of some, although small, measure of social mobility. Marx is correct that this does not abolish the essential nature of wage-labor as oppression. However, Marx greatly underappreciated the effects that even these limited opportunities have on an individual’s perception of life under capitalism and the sense of belonging to a class.

The possibility of advancing one’s economic situation by developing one’s individual talents or simply through greater “diligence” encourages many members of the working class to believe that one can “make it” through hard work. It is no surprise that many people believe that an individual’s prospects are not determined by class structure but by individual virtues or the lack thereof. These facts of working class existence, raised by Marx himself, make the class analysis of capitalism, whatever its broader theoretical cogency, less convincing to great numbers.

In the Manifesto, Marx asks, “Does it require deep intuition to comprehend that man’s ideas, views and conceptions, in one word, man’s consciousness, changes with every change in the conditions of his material existence, in his social relations and in his social life?” What Marx failed to understand is that freedom to choose employers, the equal autonomy of consumers, the limited but real possibilities for individual and generational advancement, and the limited but real political possibilities of democratically managing the economy are the lived experiences of individuals under capitalism. These shape how people today perceive their lives and how they perceive the legitimacy of the existing order. For the Marxian tradition to find a larger audience, it must be able to connect its broad theory of capitalism as a class-structured society with the actual experiences of individuals in capitalist society, rather than dismissing those freedoms as illusory. Workers do not experience them as illusory, and this makes it plausible for them to blame their economic situation on themselves, rather than on a class structure.

It is not only Marx who underestimated the importance of the lived experiences of individuals under capitalism. The radical left here in Toronto (and probably elsewhere) fail to take into account the importance of the often ideological nature of that experience and how it must be subject to criticism when any opportunity arises. The radical left here do not engage in any systematic recognition of the limited nature of the lived experiences of workers and the need to engage in criticism of such experience in order to connect up systematically the lived experiences of workers critically with the class structure. Often they call for revolution–without considering the need to engage systematically and in the long-term with the lived experiences of workers.

Alternatively, they indulge the beliefs of the workers (fearing to criticize them), practically becoming social democrats or social reformers, thereby failing to develop the critical capacity of workers and community members. Either way the lived experiences are not transformed but remain as they were before.

Indeed, social democrats and social reformers often limit themselves to focusing on the immediate exchange between workers and employers–as I pointed out in another post (see  Basic Income: A Critique of the Social-Reformist Left’s Assumptions and Analysis: Part Two). The social-democratic or social-reformist left often pay lip service to class relations and workers working for the class of employers, but they then commit the opposite mistake to those among the radical left who one-sidedly focus on working for the class of employers.

I will address the issue of the one-sided error of focusing mainly on individual employers or group of employers while not really addressing the issue of working for the class of employers in the next post.

The Rate of Exploitation of Workers at Air Canada, One of the Largest Private Employers in Canada

The following applies to Air Canada workers before the COVID-19. The situation undoubtedly has changed since then since the airline industry has suffered disproportionately an economic crisis relative to some other industries (such as food production).

In another post, I presented the twenty largest employers in Canada according to level of profit (see A Short List of the Largest Private Employers in Canada, According to Profit). One of those employers is Air Canada, a privatized airline company (that used to be under public ownership).

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

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

Conclusions First

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:

For every hour worked that produces her/his wage, a worker at Air Canada works around an additional 42 minutes for free for Air Canada.

In a 6-hour work day, the worker produces her/his wage in about 3.5 hours and works 2.5 hours for free for Air Canada. 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  also 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 about 5 hours 36 minutes and works for 2 hours and 24 minutes free for Air Canada.

In a 12-hour day, the worker produces her/his wage in about 8 hours 24 minutes and works for free for 3 hours 36 minutes for Air Canada.

Of course, social democrats refer to this situation, in one way or another, as “fair.” They do so by using such terms as “fair contract,” “free collective bargaining,” “fairness,” “economic justice,” “good contract,” “decent work,” “companies paying their fair share of taxes” and similar rhetoric. Such rhetoric, rather than enlightening workers about their situation, actually hide it. The working class deserves better than this ideology.

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.

How I Calculated the Rate of Exploitation of Air Canada Workers

I calculated the conclusion as follows:

The income statement is broken into the following categories for 2019 (in millions of Canadian  dollars) :

Total revenue: $19,131
Total operating expenses: $17,481

Wages, salaries and benefits: $3,184
Aircraft fuel: $3,862
Regional airlines expense:

Aircraft fuel: $485
Other: $1,95

Depreciation and amortization: $1,986

Aircraft maintenance: $1,004

Airport and navigation fees: $990

Sales and distribution costs: $874

Ground package costs: $627

Catering and onboard services: $445

Communications and information technology: $397

Other: $1,671

Operating income: $1,650
Non-operating income (expense) [if it is income according to standard accounting practices, it has no parentheses; if it is an expense, it is within parentheses and needs to be subtracted–but see below): $125

Foreign exchange gain (loss): $499
Interest income: $164
Interest expense: ($515)
Interest capitalized: $35
Net financing expense relating to employee benefits: ($39)
Gain (loss) on financial instruments recorded at fair value: $23
Gain on debt settlements and modifications: $6
Gain (loss) on disposal of assets: $13
Other: ($61)

Income before income taxes: $1,775 (adding operating income and non-operating income (expense) together)

Some explanation of “interest capitalized” is in order. I have had difficulty in understanding the nature of “Interest capitalized.” As far as I can tell, interest that is normally paid and is an expense for the particular employer is treated, in Marxian economics, as part of surplus value because, at the macro level, it comes from the surplus value produced by the workers. Interest capitalized seems to be different since the interest charged on money borrowed for the purpose of the construction of fixed assets (with a specific interest rate attached to it) is “capitalized,” or not considered part of interest expenses until the construction is finished and the fixed asset is ready to use. This accounting distinction, however, from the macro point of view, is irrelevant since both interest expenses and interest capitalized are derived from the surplus value produced by workers (or appropriated from them in another industry). Accordingly, both interest expenses and interest capitalized should be added to the amount of “Income before income taxes” category.

The adjusted “Income before income taxes” therefore is: ($1775 +$515)=$2,290 (interest capitalization has already been added to income so there is no need to add it here).

Another necessary adjustment relates to the category and amount “Net financing expense relating to employee benefits: ($39)”. Pension-related expenses should probably form part of wages and hence should be shifted to “operating expenses.” This shift does not change the surplus value produced nor the “Income before income taxes” category; it just changes the distribution of expenses, from “Non-operating income (expense) to “Total operating expenses” by way of increasing the category “Wages, salaries and benefits” by $39; the category “Wages, salaries and benefits” are therefore $3,223.

The final calculations with adjustments before determining the rate of surplus value are:

Total revenue: $19,131
Total operating expenses: $17,520
Operating income: $1611
Non-operating income: $640
Income before income taxes: $2251

To calculate the rate of surplus value, we need to relate “Income before income taxes” to “Wages, salaries and benefits.” So, with the adjustments in place:, s=2251; v=3223. The rate of exploitation or the rate of surplus value=s/v=2251/3223=70%.

That means that for every hour worked that produces her/his wage, a worker at Air Canada works around an additional 42 minutes for free for Air Canada.

In a 6-hour work day, the worker produces her/his wage in about 3.5 hours and works 2.5 hours for free for Air Canada. 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 about 5 hours 36 minutes and works for 2 hours and 24 minutes free for Air Canada.

In a 12-hour day, the worker produces her/his wage in about 8 hours 24 minutes and works for free for 3 hours 36 minutes for Air Canada.

I have used the lengths of the working day as 6, 8 and 12 because the length of the working day varies. According to one source:

As a customer service agent, you ll work from 3:00 am, 4:00 am and 5:00 am morning shifts, or 11:00 am, 12:00 pm, 2:00 pm. Afternoon shifts. Not sure about night shifts as I never work any of them. Part time is 6 hrs per day and full time can be 8-16 hrs. per day. You can exchange shifts, give away shifts, trade, pick or even parcial shifts. That part helps a lot when you need a day or 2 off.

Social-Democratic Rhetoric Neglects the Wider Context that Reveals the Exploitation of Workers

Of course, social democrats refer to this situation, in one way or another, as “fair.” They do so by using such terms as “fair contract,” “free collective bargaining,” “fairness,” “economic justice,” “good contract,” “decent work,” “companies paying their fair share of taxes” and similar rhetoric. Such rhetoric, rather than enlightening workers about their situation, actually hide it. The working class deserves better than this ideology.

By neglecting the fact of exploitation, other social democrats draw incorrect political conclusions. Thus, there are social democrats who try to claim that we need to reform the police rather than abolish it (see, for example, Reform versus Abolition of Police, Part Two) because workers have property. Some workers in the more developed capitalist countries do indeed have property (and fewer, of course, in the less developed capitalist countries), but they obtain that property by being exploited in the first place. If they understood that, would they support the police, whose main function is to protect the power of the employer to exploit them (and, only secondarily, to protect them and their own property)?

If the above calculations can be improved in any way, please comment on the above. I have been unable to find many guideposts about how to calculate the rate of exploitation or the rate of surplus value at the level of particular companies.

Unions and the Coronavirus Pandemic: A Critique of a Social-Democratic View, Part Two

This is a continuation of commentary on an article written by Professor Tufs (geography professor, York University, Toronto, Ontario, Canada) (see https://socialistproject.ca/2020/05/covid19-and-actually-existing-unions/).

In my last post, I pointed out that Professor Tuft’s reference to Sam Gindin’s call for restructured and more radical unions is inadequate. Rather than addressing directly the issue of the inadequacy of modern-day unions in addressing the problems which workers face, Professor Tuft shuffles off the issue to Mr. Gindin. This shift permits Professor Tuft to focus almost exclusively on the creation of stop-gap measures to address the possible crisis in unions as a result of the pandemic.

Let us now turn to his discussion of reformed unions. He points out that many unions are not created by the members themselves in any real sense of the workers organizing themselves into  a fighting unit that functions to protect the common interests of its members I take it that that is what he means by the following:

There is also the reality that the current structures of the labour movement are limited. Rank-and-file members are not mobilized to self-organize.

Such a criticism needs elaboration, but Professor Tuft fails to do so. The very nature of modern unions (at least in Canada and the United States) as organizations whose primary function is to negotiate collective agreements, sets limits to the self-organizing capacity of unions–as long as they accept the model of “free collective bargaining” as somehow beyond criticism. Unions could develop the capacity to see collective bargaining and collective agreements as merely contracts forced upon them due to the inevitable power imbalance between the working class and the class of employers rather than somehow being “fair,” and they could also come to see such expressions as “decent work” as ideological in the bad sense of the word–of covering up the reality of the exploitation and oppression of workers.

By being vague, Professor Tuft fails to specify what he means by self-organize, and he thereby permits himself the luxury of not confronting the general limitations of unions, of collective bargaining and collective agreements. To openly call into question the center around which modern unions revolve–collective bargaining and collective agreements–would threaten the interests of many representatives of modern unions and thereby expose Professor Tuft to insults and ridicule by the social-reformist left.

Professor Tuft mentions another limitation of unions–they address mainly only the interests of their immediate employed members and not the unemployed. He mentions the construction trades as an exception:

 But there is the larger problem that labour organizations are simply not oriented toward the unemployed. Some unions such as the building trades maintain relationships with unemployed workers through hiring-hall ‘lists’. But this is an exception.

Professor Tuft fails to show how the lack of orientation towards the unemployed by unions is a larger problem. Rather, the lack of orientation towards the unemployed is interrelated with the focus on collective bargaining and the collective agreement.  Since unions focus on collective bargaining and collective agreements, and since unemployed workers have limited or no rights under such agreements (such as call-back rights), workers covered by a collective agreement who lose their job generally “vanish” or cease to exist as far as unions are practically concerned. The issue of unions not being oriented towards the unemployed is thus linked to the issue of their focus being collective bargaining and the collective agreement.

To be sure, workers in construction unions do not vanish from the union; they form part of a list to be hired. Professor Tufts does not explore this exception at all to determine whether it overcomes the limitations of traditional unions. (My brother, by the way, worked as a construction labourer in Calgary and a few other places in Alberta, Canada, when he was younger, and he evidently found the work not only difficult but exhausting.)

The construction industry is seasonal , and therefore many workers have only temporary jobs. Once their work for a particular employed has ended, they form part of a list to be hired by a pool of employers in the construction industry. The reason why the relation of the laid off member to the union is maintained, therefore, is because the worker is potentially employable by many different employers.

The hiring-hall list converts unions in the construction industry into, in some ways, a temporary job agency. From Michael Duke, Luke Bergmann, Genevieve Ames (2010), “Competition and the Limits of Solidarity among Unionized Construction Workers,” in Anthropology of Work Review, Volume 31, Number 2, page 85:

…the union serves as a job broker between workers and employers. In this capacity, union representatives from a given Local receive notice of job openings at particular job sites, and are tasked with providing those employers with workers from the union’s membership roster. The duration of these jobs varies widely, from 1 or 2 days to more or less permanent employment, resulting in many workers facing a continual struggle to receive a steady paycheck, and a continuous jockeying among members for jobs.

In addition to the seasonal nature of construction work, there is the additional but related fact that workers in the construction industry often work for a number of employers during a year and not just one employer. Construction workers go from periods of employment with one employer to periods of unemployment and then periods of employment with, possibly, a different employer.

There is, however, a major difference between this function as performed by construction unions and temporary agencies. Construction unions try to smooth out the distribution of work so as to make the system fairer as a whole for the construction workers in the union. Page 89:

There is little doubt that the hiring list benefits job seekers by reducing the influence of
favoritism, connections, and other influences that privilege some workers over others, and by spreading the risk of joblessness more or less equally among those on its roles.

Like most features of worker organizations in a capitalist society, though, the hiring-hall list is a double-edged sword. Being on the list is an expression of being unemployed, and in particular being at the bottom of the list expresses the likelihood of being unemployed for a longer period of time than many workers can afford. Page 89:

At the same time, the list represents a potent symbol of this alienation for these workers, in
that it provides a constant reminder of the temporary nature of their employment, and of the ephemeral quality of relationships on the job site.More centrally, the list represents for members the limits of union solidarity, the loss of a common stake in work and job security, and, ultimately, the alienation of laborers from the work they produce and the relationships that develop through that work.

A hiring-hall list does indeed maintain a relationship between workers and the union even when there is no specific employment relationship–but because the union functions in part as a temporary work agency, it also functions in part as an oppressive mechanism. A union that overcomes one of the limitations of collective bargaining–being connected to the union only by being connected to an employer (or set of employers in the case of more centralized bargaining)–often involves contradictions in other areas (such as the oppressive function of a temporary hiring agent).

Therefore, even when unions expand their functions to those beyond collective bargaining and collective agreements, they become involved in further contradictions that they cannot resolve. They are limited institutions for the self-organization of the working class. These limitations should be admitted and addressed.

Nevertheless, the issue of the unemployed not being organized by unions is certainly important. Employed and unemployed workers form, in general, part of one and the same working class.

Employed workers are united (temporally, during the working day) with the means of their work (buildings, machines, tables, floors, raw material, computers, and so forth). After work, they too , like their unemployed counterparts, become separated not only physically but also socially from those means (they do not own and control them).

The unemployed are separated physically and socially from all means of production for a shorter or longer period of time. Of course, some who work for employers may become unemployed, and some who are unemployed may become employed again. There is a often a change of who is employed and who is unemployed, due in great part to the changing needs of employers and, to some extent, the changing needs of workers (workers are not tied to a specific employer but can quit and try to find another employer to hire them).

Both groups of workers form part of the working class as class. As members of a class, those who work for a particular employer also are working for the class of employers.  No particular worker can work at any particular activity for any length of time without other workers producing both the means of production (machines, computers, phones, raw material, pens, pencils, tables and so forth) with which the worker works. In other words, there is a division of labour, where other workers are working for other employers in a system of interdependence. (Such interdependence has recently been experienced by some workers because of the coronavirus epidemic–as some workers stopped working, so too did others since they depended on other workers for the resources or means of production required to produce in their particular sphere). Or, as Thomas Hodgskin (1825), in his Labour Defended Against the Claims of Capital, remarked (page 45):

If we push our inquiries still further, all that we can learn is, that there are other men in existence who are preparing those things we need, while we are preparing those which they need.

The source of the active army of labour, at least in Canada, is the continued births of children within Canadian borders, on the one hand, and immigrants on the other.

The workers themselves, or the active army of workers of the class of employers, however, are subject to various levels of precariousness, some more and some less since changes in technology, rates of accumulation, taxes, state expenditures and its composition, intensity of work and so forth  can change employment levels. The precise composition of the active army of workers can of course also vary according to kinds and degrees of racism, sexism and so forth prevalent in and outside work.

In the world, there are “around 1.65 billion in the active labor army” (R. Jamil Jonna and John Bellamy Foster (April, 2016), “Marx’s Theory of Working-Class Precariousness – And Its Relevance Today,” in Monthly Review, page 38). 

The active army of labour is always subject to more or less unstable working conditions since the workers do not control the machines, buildings, resources, raw materials and so forth that they use, but are rather subject to the immediate control of particular managers and employers and, ultimately, to the control of the pressures of the world market.

The same could be said of the unemployed: they too are subject to varying levels of precariousness and subject to varying connections to particular employers and to the class of employers in general.

There are, in general, four kinds of groups that constitute the unemployed or the reserve army of labour: floating, latent, stagnant and pauperized. From R. Jamil Jonna and John Bellamy Foster, page 26:

… the floating population consisted of workers who had a connection – if a precarious one – to the active labor army, with a recent history of employment; they constituted those who would likely be the first to be re-hired in an expansion.

A section of the unemployed that has more precarious roots in the working class is the latent surplus population. From page 26:

The next layer of the reserve army, in Marx’s description, is the latent surplus population. For the most part this refers to the (self-sustaining) segments of the agricultural (or rural) population. This population served as a vast source of potential labor for capitalist industry (hence, “latent”).

In Canada, one of the sources for this form of unemployment is probably overseas in the form of the The Temporary Foreign Worker Program (TFWP). From the Canadian government’s website:

The Temporary Foreign Worker Program (TFWP) allows Canadian employers to hire foreign nationals to fill temporary labour and skill shortages when qualified Canadian citizens or permanent residents are not available.

In other countries, similarly, the temporary immigrant population also form part of the latent reserve army of labour. Many students can now be considered to form part of the latent reserve army of labour.

In earlier times, women also formed part of the latent part of the reserve army of labour; employers eventually hired women, for example, for weapons factories during the Second World War. (My mother worked in a weapons factory in Toronto during  part of the War.)

The third form of the unemployed or the reserve army of labour is the stagnant group: it is a very precarious section of the reserve army of labour, characterized by very low wages and superexploitation. Some workers in short-term positions, some workers for temporary agencies, day workers, workers in the informal economy and the like constitute this layer of the reserve army of labour, which is subject to very irregular work. Even some substitute teachers may form part of this group since they are effectively shut out of obtaining a permanent position as teachers and often have no hiring rights at all (as is (or was) the case for substitute teachers as members of the Winnipeg Teachers’ Association, or WTA).

Finally, the pauperized layer of the reserve army of labour constitutes the lowest layer of the reserve army of labour, which includes those incapable of working for an employer, those who live from social assistance (and who, occasionally, can be obliged to work if they are to continue to receive social assistance), those who live from petty thefts and the like. Part of those workers in the informal economy (including children) form part of this layer, including those who try to sell small amounts of commodities at an individual level.

The distribution of the active and reserve army of labour (with their various layers) can be seen from the following (page 38):

In 2013, according to International Labour Organization (ILO, 2015b) figures, the global reserve army consisted of some 2.3 billion people, compared to around 1.65 billion in the active labor army, many of whom are precariously unemployed. The number of officially unemployed at that time (corresponding roughly to Marx’s floating population) was 200 million workers. Some 1.5 billion workers were classified as “vulnerably employed” (related to Marx’s stagnant population), made up of workers working “on their own account” (informal workers and rural subsistence workers) and “contributing family workers” (domestic labor). Another 600 million individuals between the prime working ages of 25-54 were classified as economically inactive. This is a heterogeneous category but undoubtedly consists preponderantly of those of prime working age who are a part of the pauperized population.

Unions, indeed, are limited since their focus is mainly on the organized sections of the active army–although we should not forget that unions have, in various ways, fought, indirectly if not directly, for the interests of various layers of the unemployed at specific periods in their history in the form of a national pension system, part of a pension system based on the duration of residence in Canada (Old Age Security), rather than on length of employment and level of contribution, medicare and so forth.

Professor Tuft’s  reference to the need for an organization dedicated to addressing the needs of the unemployed in the face of a possible decrease in the power of organized unions makes some sense–but it made sense even before the pandemic since unions often tooted the mere organization of workers into a union (and the effective enforcement of a collective agreement) as sufficient for ensuring “decent work,” a “fair contract,” “fairness” and the like.

With the emergence of the pandemic and the likely decrease in the working effectiveness of unions to protect the immediate interests of their members, on the one hand, and the increase in the need for stop-gap measures as more workers remain unemployed for a longer period of time, a gap arises that can be filled by former union representatives who also may well lose their jobs. According to Professor Tufts:

Most important, union representatives know the workers that will require a range of labour market adjustment services such as: assessment of the mental and physical health impacts of COVID-19; help with navigating emergency assistance, the CERB, and EI bureaucracies; assistance with resume writing; ensuring licenses and certifications are maintained during unemployment; counsel for workers considering early retirement; and guidance for workers considering re-training options. If the pandemic reoccurs in waves, as some have predicted, workers will shift in and out of employment and require training in COVID-19 health and safety measures. Who is going to do this work?

The federal government has allocated $350-million to help keep afloat the not-for-profit agencies providing needed services. These funds should be expanded and target labour organizations to deliver labour market adjustment services to unemployed workers. Economically, it makes sense as union communications infrastructure and staff can be efficiently deployed to assist workers. The social benefit of providing successful labour market adjustment and support is self-evident as it reduces hardship and the period of unemployment.

This solution seems to be reasonable  in the face of the likely increased instability of both the active army of workers and the reserve army of labour in the wake of the coronavirus pandemic, on the one hand, and the likely decreased power of unions on the other. This situation will, of course, vary between sectors of the economy and over time; in other words, some groups of the active working class will be more subject to increased precariousness as will some groups of the reserve army when compared to their situation before the pandemic and when compared to other groups of workers in the active army or in the reserve army.

Professor Tuft’s solution is to call for Workers’ Resource Centres  to address the problem of the unemployed. Such centres would link active workers with unemployed workers and the community:

Politically and practically, resource centres make sense. ‘Actually existing’ unions have been in decline for decades. Serving all working people and entire communities rather than just employed members is fundamental to making unions relevant during the crisis. It also gives union staff work to do during a slow recovery that might preserve some institutional integrity that will be needed to fight inevitable workplace restructuring and austerity. As sectors recover, unions will be crucial in advocating for sufficient staffing levels and new COVID-19 related health and safety protocols.

This solution is certainly worthy of consideration–but of course it is hardly sufficient. The present-day workers’ action centres are entirely reformist and aim to address the immediate needs of workers without taking into consideration their long-term needs.

Professor Tuft then shifts to wishful thinking: such resource centres might serve as transitional organizations for a “green economy”:

A workers’ resource centre approach is admittedly full of contradictions and compromises. But we need realistic options for presently insufficient unions to survive in the short-term and meet workers material needs. Indeed, such efforts should be seen as part of building capacities for more transformative demands and actions. This may very well include expanding resource centre mandates in the future to administrate ‘just-transition’ supports for workers as economies adapt to green production. COVID-19 is a potentially transformative event for organized labour, but a sober analysis of what is possible to meet the needs of unemployed workers at this moment is required alongside aspirational calls.

He pays lip service to the “contradictions and compromises” that such workers’ resource centres would experience since funding for such centres would likely come from government coffers by way of funding community organizations and other non-governmental organizations:

It would not cost the government a great deal as these services will, in any case, need to be delivered by community organizations.

Professor Tuft implies that such organizations could somehow be self-organizations of the working class. What is more likely is that they will become at best reformist organizations like their trade union counterparts or, worse, even more restricted in their functions because of their dependence on the government for their continued functioning. Such a situation is hardly an expression of self-organization. Professor Tufts, like his social-reformist comrades, fails to address the limitations that workers’ resource centres would likely face that would prevent them from being institutions of self-organization. Professor Tufts, then, like his social-democratic or social reformist comrades, fails to address the limitations of such institutions.

Furthermore, the idea that such centres could be the stepping stone to “green production” is wishful thinking since a really green economy could only arise through the abolition of a society characterized by the class power of employers and the infinite increase of money–at the expense of human beings and this planet (see  The British Labour Party’s 2019 Manifesto: More Social Democracy and More Social Reformism, Part One).

Professor Tuft’s proposal for workers’ resource centres, from his point of view, then, undoubtedly express a “realistic option” for the self-organization of workers.

From my point of view, by contrast, his proposal will foster illusions of the self-organization of the working class while, in reality, perpetuating the exploitation and oppression of the working class by employers. His proposal is only realistic for social reformers and not for workers who reject the legitimacy of working for any employer.

It is necessary to link the interests of the unemployed and the employed by creating a common goal of controlling their life process through controlling the conditions of that life process–which is currently owned and controlled by the class of employers and protected by a government responsive to the need to reproduce itself in and through the protection of such forms of property and control. That common goal cannot arise without critiquing workers’ organizations that may have some independence from the class of employers locally or at the micro level but that operate at the macro level to confine the class struggle to limits set by the structural economic, political and social conditions characteristic of a society dominated by a class of employers.

The Rate of Exploitation of Magna International Inc., One of the Largest Private Employers in Toronto, Part Two, Or: Intensified Oppression and Exploitation

As I argued in the last post on this topic  (see  The Rate of Exploitation of Workers at Magna International Inc., One of the Largest Private Employers in Toronto, Part One), Christopher Arthur, in his The New Dialectic and Marx’s Capital, claims that there are two forms of exploitation (pages 55-56):

It is obvious here that this exploitation time to which I refer comprises the whole of the working day, not just the so-called ‘surplus labour time’. It is not the case in reality that the workers first supply themselves and then check into the factory to work the extra. On the contrary, the accounting of necessary and surplus labour time is the outcome of the struggle at the point of production over exploitation; and the unremitting pressure of capital’s representatives on the workforce is present the whole day from the first minute. Since capital ‘takes charge’ of production, the ‘pumping out’ of surplus labour cannot be distinguished on the ground from the pumping out of labour generally because during the whole working day its use value is exploited. So there is a conceptual distinction hidden here, between exploitation in this sense, and the sense in which exploitation is identified with only the extension of the working day beyond its necessary part.

I would be inclined to reverse Marx’s emphasis when he said: ‘Capital is not only command over labour, as Adam Smith thought. It is essentially command over unpaid labour.’48 Instead I would write: ‘Capital is not only command over unpaid labour, as Karl Marx thought. It is essentially command over labour, i.e. of the entire working day.’ (Of course Marx knew perfectly well that it is only because capital acquires ‘command over labour’ that this ‘coercive relation . . . compels the working class to do more work than would be required by the narrow circle of its own needs’.)

… My view allows for a ‘traditional’ measure of exploitation if we distinguish
two kinds of exploitation. Exploitation in production is in effect not dissimilar
to alienation in that it involves the subjection of workers to alien purposes;
it goes on throughout the day. Exploitation in distribution arises from
the discrepancy between the new wealth created and the return to those
exploited in production.

Arthur has a point: too often those who refers to Marx’s theory of exploitation emphasize surplus production and surplus value while neglecting to note how workers experience the situation: they do not produce their wage first independently of the employer or her/his representatives (forewomen/men, supervisors and managers) and then produce a surplus. The time that they spend producing their wage or salary is subject to the power and will of the employer–and not just the surplus labour and surplus time that the workers provide for free. This fact is too often neglected.

Nonetheless, there is a good reason for distinguishing the time that workers require to produce  their own wage or salary an the surplus time that they devote free of charge to employers: this has to do with the accumulation of capital.

I referred to this situation in an earlier post when criticizing the views of the social democrat David Bush (see Basic Income: A Critique of the Social-Reformist Left’s Assumptions and Analysis: Part Two).

Essentially, the question needs to be asked: Where does the investment funds come from that Magna International (or any other capitalist employer) uses to purchase c (constant capital, or the machines, raw material, desks, buildings, etc.) and v (the variable capital, or the labour power or capacity that workers sell to the employer)? From the surplus produced by workers in former years and, eventually, an “original investment” that does not come from the exploitation of workers by capitalist employers. (How this “original investment” arose is an historical question which Marx addressed in part 8 of Capital, volume 1: “The Secret of Primitive Accumulation.).

I quoted from Marx in the earlier post:

From Capital: A Critique of Political Economy, volume 1, pages 727-728:

Let us now return to our example. It is the old story: Abraham begat Isaac, Isaac begat Jacob and so on. The original capital of £10,000 brings in a surplus-value of £2,000, which is capitalized. The new capital of £2,000 brings in a surplus-value of £400, and this too is capitalized, transformed into a second additional capital, which in its turn produces a further surplus-value of £80. And the process continues in this way.

We leave out of account here the portion of the surplus-value consumed by the capitalist. We are also not interested, for the moment, in whether the additional capital is joined on to the original capital, or separated from it so that it can valorize itself independently. Nor are we concerned whether the same capitalist employs it who originally accumulated it, or whether he hands it over to others. All we must remember is this: by the side of the newly formed capital, the original capital continues to reproduce itself and to produce surplus-value, and this is true of all accumulated capital in relation to the additional capital engendered by it. The original capital was formed by the advance of £10,000. Where did its owner get it from? ‘From his own labour and that of his forefathers’, is the unanimous answer of the spokesmen of political economy.4 And, in fact, their assumption appears to be the only one consonant with the laws of commodity production. But it is quite otherwise with regard to the additional capital of £2,000. We know perfectly well how that originated. There is not one single atom of its value that does not owe its existence to unpaid labour. The means of production with which the additional labour-power is incorporated, as well as the necessaries with which the workers are sustained, are nothing but component parts of the surplus product, parts of the tribute annually exacted from the working class by the capitalist class. Even if the latter uses a portion of that tribute to purchase the additional labour-power at its full price, so that equivalent is exchanged for equivalent, the whole thing still remains the age-old activity of the conqueror, who buys commodities from the conquered with the money he has stolen from them.

If the additional capital employs the person who produced it, this producer must not only continue to valorize the value of the original capital, but must buy back the fruits of his previous labour with more labour than they cost. If we view this as a transaction between the capitalist class and the working class, it makes no difference that additional workers are employed by means of the unpaid labour of the previously employed workers. The capitalist may even convert the additional capital into a machine that throws the producers of that capital out of work, and replaces them with a few children. In every case, the working class creates by the surplus labour of one year the capital destined to employ additional labour in the following year.5 And this is what is called creating capital out of capital.

The accumulation of the first additional capital of £2,000 presupposes that a value of £10,000 exists, advanced by the capitalist, and belonging to him by virtue of his ‘original labour’. The second additional capital of £400 presupposes, on the contrary,
only the prior accumulation of the £2,000, of which the £400 is the capitalized surplus-value. The ownership of past unpaid labour is thenceforth the sole condition for the appropriation ofliving unpaid labour on a constantly increasing scale. The more the capitalist has accumulated, the more is he able to accumulate. The surplus-value that makes up additional capital no. 1 is the result of the purchase of labour-power with part of the original capital, a purchase which conformed to the laws of commodity exchange and which, from a legal standpoint, presupposes nothing
beyond the worker’s power to dispose freely of his own capacities, and the money-owner’s or commodity-owner’s power to dispose freely of the values that belong to him; equally, additional capital no. 2 is merely the result of additional capital no. 1, and is therefore a consequence of the relations described above; hence each individual transaction continues to conform to the laws of commodity exchange, with the capitalist always buying labour power and the worker always selling it at what we shall assume is its real value. It is quite evident from this that the laws of appropriation or of private property, laws based on the production and circulation of commodities, become changed into their direct opposite through their own internal and inexorable dialectic. The exchange of equivalents, the original operation with which we started, is now turned round in such a way that there is only an apparent exchange, since, firstly, the capital which is exchanged for
labour-power is itself merely a portion of the product of the labour of others which has been appropriated without an equivalent; and, secondly, this capital must not only be replaced by its producer, the worker, but replaced together with an added surplus. The relation of exchange between capitalist and worker becomes a mere semblance belonging only to the process of circulation, it becomes a mere form, which is alien to the content of the transaction itself, and merely mystifies it. The constant sale and purchase of labour power is the form; the content is the constant appropriation by the capitalist, without equivalent, of a portion of the labour of others which has already been objectified, and his repeated exchange of this labour for a greater quantity of the living labour of others.

The immediate exchange between workers and employers is an exchange of equivalents, so that workers receive the value of their cost of production. However, when considering the larger context of previous production, then the immediate exchange between employer and workers is a semblance or appearance. The employer uses a part of the surplus produced by the workers in a previous round as means of production (machines, raw material, buildings, etc.) and another part (socially as money and physically as means of consumption, such as food, clothing, shelter) to further employ them (in addition to the initial investment).

As “costs,” the workers’ previous products are used against them to further exploit them.

Of course, the workers’ previous products are not only used to further exploit them but to further control their lives even when they are producing the equivalent value of their own wage. In other words, when we consider the accumulation process, the power of capital–produced by workers–has increased and is used to intensify the weight of the control of their past labour over their present lives.

That is why we need to distinguish the concept of exploitation as the production of surplus value from the concept of oppression, which is what occurs during the control of workers during the time they reproduce their own wage–that is to say, during the time in which workers produce an equivalent in value for their own wage.

Although Arthur recognizes that, when considering accumulation of capital in time, the wage that is paid in the present year is influenced by the previous rounds of the accumulation of surplus value, he does not consider the importance of this situation for the changing level of power that private employers (capitalists) have over workers. It is not just a question of the workers lacking power of controlling their work during the time that they reproduce the value of their wage; it is also the degree to which employers have the past power produced by workers at their disposal in the present (via the production of previous rounds of surplus value and their investment).

To call both parts of the oppression experienced in capitalist society “exploitation” would confuse the issue of the increasing power of capitalists or private employers over worker by means of the increasing power of past investment over the present lives of workers.

In the case of Magna International, the rate of exploitation, as noted in the previous post on this topic, is 79%. That means that in an 8-hour work day, Magna workers produce their wage in 4.5 hours, and they work for free for 3.5 hours. However, in addition to working for free for 3.5 hours for Magna International, and being subject to the control of the supervisors and managers, they are also subject to such control during the 4.5 hours that they produce their own wage.

The social-democratic left have little to say about either the exploitation of such workers or about the control of workers not only during this time but also during the time when they produce their wage. If Magna workers belong to an independent union (one that can engage in collective bargaining independently of the particular employer), then for the social-democratic left, such workers have decent work and have “fair contracts,” “fair collective agreements,” “fair wages,” and other such expressions.

My position has always been that both the exploitation of workers and the time when workers produce the value of their own wage, since they are both subject to the power of employers, involve treating human beings as things to be used for inhuman purposes (see  The Money Circuit of Capital) need to criticized and abolished. Given the social-democratic rhetoric of fairness and decent work, is there really any wonder that I was insulted by them in Toronto?

What do you think of workers at Magna International being exploited? What do you think of the time during which they produce the value of their wage? What do you think about whether the power of employers to exploit such workers and to control their lives during that time and during the time they produce their wage? Is either justified? What of the increasing power of the accumulated capital–and therefore the collective power of employers–over the present life of workers?

 

Socialism, Part Ten: An Inadequate Conception of the Nature of Freedom and Necessity, or Free Time and Necessary Time, Part One

The class formal principle of employers–that workers receive from society what they contribute (contradicted at a practical level through systematic exploitation of workers necessarily in a capitalist context–that is why it is a formal principle that contradicts reality–see  for example The Rate of Exploitation of Workers at Magna International Inc., One of the Largest Private Employers in Toronto, Part One) would be realized in a socialist society on average since exploitation of one class by another would be eliminated. However, the principle of relating individual life to labour is still a bourgeois or capitalist principle that needs to targeted because it still reduces human beings to merely one criterion–labour. From  Karl Marx, Critique of the Gotha Programme, pages 86-87 of Marx-Engels Collected Works, volume 24):

Hence, equal right here is still in principle bourgeois right, although principle and practice are no longer at loggerheads, while the exchange of equivalents in commodity exchange only exists on the average and not in the individual case.

In spite of this advance, this equal right is still constantly encumbered by a bourgeois limitation. The right of the producers is proportional to the labour they supply; the equality consists in the fact that measurement is made with an equal standard, labour. But one man is superior to another physically or mentally and so supplies more labour in the same time, or can work for a longer time; and labour, to serve as a measure, must be defined by its duration or intensity, otherwise it ceases to be a standard of measurement. This equal right is an unequal right for unequal
 abour. It recognises no class distinctions, because everyone is only a worker like everyone else; but it tacitly recognises the unequal individual endowment and thus productive capacity of the workers as natural privileges. It is, therefore, a right of inequality, in its content, like every right. Right by its nature can exist only as the
application of an equal standard; but unequal individuals (and they would not be different individuals if they were not unequal) are measurable by an equal standard only insofar as they are made subject to an equal criterion, are taken from a certain side only, for instance, in the present case, are regarded only as workers and nothing more is seen in them, everything else being ignored. Besides, one worker is married, another not; one has more children than another, etc., etc. Thus, given an equal amount of work done, and hence an equal share in the social consumption fund, one will in fact receive more than another, one will be richer than another, etc. To avoid all these defects, right would have to be unequal rather than equal.

But these defects are inevitable in the first phase of communist society as it is when it has just emerged after prolonged birthpangs from capitalist society. Right can never be higher than the economic structure of society and its cultural development which this determines.

Neither Tony Smith nor Schweickart, both advocates of market socialism, refer to this. For Schweickart at least, any elimination of the market economy will lead to various negative effects, such as authoritarian conditions. Sam Gindin, similarly, does not take into consideration the inadequacy of markets as an expression of human freedom.

This model so far is a market-socialist model. Rather than conceiving it as a definitive model of how future society will work, however, we should consider it as a transition society that may last for longer than Marx thought but, nonetheless, is itself inadequate.

This inadequacy can be seen in the omission by Smith and Schweickart of any consideration of the need to transform the division of labour. In Schweickart’s book, for example, there is no discussion at all of the division of labour. If we are to live in a full life, though, we need to reduce or eliminate the gap between labour that is predominantly physical and labour that is predominantly intellectual.

Another aspect over which both Smith and Schweickart are silent is the implication for human beings if prices are to continue to exist. Schweickart does not directly address the question, but his assumption that prices will always exist fails to address the problem of the continued valuation of objects ultimately in terms of labour. Marx’s theory of exploitation is not just a critique of exploitation but a critique of the form of exploitation–through the mediation of relations between objects instead of a conscious connection with other human beings. Human beings, via ultimately money, are related to each other via objectified labour measured externally as money.

Market socialism may well be needed for some time, but it is inadequate as a form of society for human beings. At first, it is necessary to create a society where the reality of labour time being the measure of human wealth corresponds to the principle of determination by labour time: what workers contribute to society and what they receive from it do not differ quantitatively (workers are not exploited).

However, the principle of the life process is still based on one principle–labour and its measure, time. The human life process, however, is much more than this process, and the need for human beings will be to surpass this principle and to break the link between contribution and the flow of goods and services based on that contribution.

Now, let us listen to a person who claims to aim at realistic socialism–Sam Gindin, head of the Toronto Labour Committee (and former research director for the Canadian Auto Workers (CAW) (now Unifor). Mr. Gindin implies that, due to what he calls scarcity, we will always need a market form of socialism:

Scarcity — the need to make choices between alternative uses of labor time and resources — is unlikely to end outside of utopian fantasies because popular demands, even when transformed into collective/socialist demands, are remarkably elastic: they can continue to grow. Think especially of better health care, more and richer education, greater care for the aged, the expansion of art and of cultural spaces — all of which require labor time and generally also complementary material goods. That is, they demand choices.

Furthermore, the calculation of scarcity can in particular not ignore leisure, with leisure representing the “realm of freedom.” Even if we produced enough of what we wanted, as long as some of that labor isn’t completely voluntary but instrumental, then effective scarcity of either labor time or the good/service remains. Workers may even like their jobs and see them as a source of creative expression and satisfaction, but as long as they’d periodically prefer to not show up or leave early, some further inducement is needed to offset the sacrifice of providing those labor hours. That inducement is a measure of the persistence of effective scarcity. And once scarcity is acknowledged as an inherent and essentially permanent frame in the restructuring of society, the question of structured incentives becomes paramount. This is not just a matter of motivating adequate hours of work, but of affecting its intensity and quality, and influencing where that work is best applied (i.e., determining society’s overall division of labor).

Mr. Gindin, it is clear, identifies the need to make choices of “labour time and resources” with scarcity. There is an identity between the need to make choices in the realm of labour and the continued existence of scarcity. 

The counterpart of this is the implicit denial of the need to make choices in “leisure,” which is identified with the “realm of freedom.” Mr. Gindin, of course, fails to justify this identity and fails as well to explore the nature of “leisure.” 

Mr. Gindin follows neoclassical economics (which justifies capitalism in various ways) by arguing that “scarcity” in the abstract (eternally or forever, without qualification) characterizes human life. Consider the following quotation from a typical textbook on neoclassical (or capitalist) economics (Steven A. Greenlaw, Timothy Taylor, Principles of Microeconomics, page 8:

Economics is the study of how humans make decisions in the face of scarcity. These can be individual decisions, family decisions, business decisions or societal decisions. If you look around carefully, you will see that scarcity is a fact of life. Scarcity means that human wants for goods, services and resources exceed what is available. Resources, such as labor, tools, land, and raw materials are necessary to produce the goods and services we want but they exist in limited supply. Of course, the ultimate scarce resource is time- everyone, rich or poor, has just 24 hours in the day to try to acquire the goods they want. At any point in time, there is only a finite amount of resources available.

People live in a world of scarcity: that is, they can’t have all the time, money, possessions, and experiences they wish.

Mr. Gindin argues, then, that scarcity arises objectively when there are alternative possibilities that exist for the use of resources and labour time. Choices must be made, and the choices necessarily involve the realization of some projects and the exclusion of others. We can never have our cake and eat it simultaneously.

This idea seems valid, and yet it is really superficial. Mr. Gindin practically wants to ridicule those who believe that work can be itself a realm of freedom–despite the need to make choices and despite the need to engage in the production of food, shelter, clothing, health care, education and so forth. To be realistic for Mr. Gindin is to believe in the necessity of drudgery throughout human history. What else does he mean when he writes “And once scarcity is acknowledged as an inherent and essentially permanent frame in the restructuring of society, the question of incentives becomes paramount.”

Mr. Gindin’s implicit assumption is that all incentives are external or instrumental in nature. There is, for this social democrat, no such thing as an intrinsic incentive (or motivation). Such an assumption needs to be questioned.

Rather than addressing the issue of scarcity (pure necessity for Mr. Gindin) directly, let us look at the so-called opposite realm of leisure (pure freedom for Mr. Gindin).

He claims that leisure is somehow the “realm of freedom.” What leisure is that? Leisure is a concept that is purely non-instrumental, it would seem, for Mr. Gindin. All leisure.

As an aside: Mr. Gindin borrows his concepts from current experiences and then generalizes them throughout history. Thus, leisure in the current context of work life characterized by the power of employers using people as things for their own ends is often a compensation for the drudgery of such daily life. Such an uncritical use of the concept of leisure will be addressed in another post.

Thus, Mr. Gindin separates completely labour and leisure. Leisure is purely non-instrumental, and labour can be to a certain extent enjoyable but, ultimately, is tainted with instrumentality by its very nature. Since leisure is identified with the “realm of freedom” and non-instrumentality, and labour is tainted with instrumentality by its very nature, scarcity must arise by necessity since workers by their very nature would prefer leisure (freedom) over work (necessity and instrumentality). To engage in work, workers must be externally motivated to do so (since their default mode is to prefer leisure (pure freedom) over work (pure necessity).

Mr. Gindin’s assumption concerning the so-called identity of leisure with the realm of freedom and a lack of instrumentality is questionable. Many so-called leisure activities have an instrumental aspect to them. For example, I “leisurely” drove my daughter, Francesca, to the Royal Tyrrell Museum summer camp in Alberta some time ago, from Winnipeg, Manitoba, Canada (about a distance of 1,300 kilometers). It took a “leisurely” time of around 18 hours (stopping along the way for lunch and supper). For me, the activity was stressful though enjoyable (when compared to working for an employer) since Francesca was with me. The leisure activity of driving, though, was instrumental since it was a means to the end of developing my daughter’s capacities–that was the real end.

I had a choice to make in whether I was going to ask Francesca whether she wanted to go to the camp at all and, given that choice, what means I would use to achieve that goal. 

It cannot be said that the act of driving the car was secondary to the end of developing her capacities in a certain direction since she could not do so without attending the camp. The act of driving the car, though instrumental, was an essential condition for achieving that end (of course, it was not the only means by which to achieve that end–taking a plane, bus or train were possible alternatives). Furthermore, the end of developing Francesca’s capacities motivated me to drive for long periods of time in the first place, so the end itself formed an instrumental aspect of my activity of driving the car–it formed an ideal or motivating aspect of the physical aspect of driving the car.

My drive to Drumheller was thus instrumental for Francesca, my daughter, despite being a leisure activity. I had to make choices, of course. I could have taken a bus with her. We could have flown. The goal of the trip, for me, though constrained by certain means, was non-instrumental as an ultimately intrinsic end and yet was instrumental, ideally, in guiding my own activity in the present (driving the car towards Drumheller, Alberta, where the Royal Tyrrell Museum is located). I had an internal incentive or intrinsic incentive.

Of course, human life is finite, but who would deny that? However, Mr. Gindin draws false conclusions from that fact not only in relation to leisure but also to “education” and “art.” These issues will be dealt with in another post or posts.

Mr. Gindin’s assumption, then, that leisure is the pure realm of freedom is simple nonsense. Mr. Gindin’s hidden assumption of the mutual exclusion of instrumentality and intrinsic ends–that they are separate–remains an unproven assumption.

But some may say that this is an example from the realm of leisure (which does not exclude the realm of necessity despite Mr. Gindin’s implicit assertion to the contrary). What of the realm of work? Does it need external incentives because alternatives arise and choices must be made?

In a follow-up post, I will shift to Mr. Gindin’s opposite view concerning work. Since leisure is supposedly the pure realm of freedom that lacks instrumentality, work, according to Mr. Gindin, if in any way instrumental (which it must be for Mr. Gindin), involves a lack of freedom, which is expressed in the concept of scarcity and thus requires external or extrinsic motivation. Just as leisure is supposed to be the pure realm of freedom, so too the realm of work is supposed to be always tainted by the realm of necessity. 

This issue has to do with the two main divisions of labour: academic or intellectual and practical (or manual or physical). I referred briefly to such a division when I provided a critique of such a division in schools and the school curriculum (see Critical Education Articles Placed in the Teacher Staff Lounge While I Was a Teacher, Part Three). 

(As an aside: Mr. Gindin probably follows his colleague, Leo Panitch (they wrote a book together), in rejecting (without understanding) Marx’s so-called labour theory of value (really a theory of commodities and capital). (I attended Mr. Panitch’s class on globalization in the winter of 2014. Mr. Panitch explicitly stated that he considered Marx to have taken a wrong turn in Capital, especially Marx’s use of some of the dialectic of the German philosopher, G.W.F. Hegel, who, among other things, argued for the need to reconcile opposite relations, such as freedom and necessity).) 

 

 

 

 

 

 

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 https://www.indeed.com/cmp/Magna-International-Inc/faq/how-are-the-working-hours-at-magna-international-inc?quid=1at7gf6rrak7i9ff)–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 https://www.indeed.com/cmp/Magna-International-Inc/faq/how-are-the-working-hours-at-magna-international-inc?quid=1at7gf6rrak7i9ff)–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.