We Are Not a Cost

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clearysIf anyone is uncertain about the power relationship between employees and employers, I suggest they look to the Dunnes Stores dispute and the closure of Clerys.  These encapsulate the massive imbalance of power in the workplace.

I won’t get into the details of these ongoing disputes.  Any rational person hopes the workers succeed – in the case of Dunnes Stores, to win the right to negotiate collectively and reduce the level of precariousness; in the case of the Clerys workers, to be given their fair share of compensation – and dignity – after years of services to the company.

So here, let’s take a step back and look at the presentation of the relationship between employees and employers.  This may seem, at first, abstract but it leads us to something fundamental.

It starts with costs.

Labels are powerful things.  For instance, costs; this is usually not a good thing:  ‘that was a costly venture’, ‘a costly holiday’, a ‘costly day out’.  These are things we usually try to avoid, unless the ‘cost was worth it’.

‘Profit’, however, is usually something positive:  that was a ‘profitable experience’, I ‘profited’ from that lecture, we are ‘back in profit’.  Profit equals growth and prosperity.  Further, it is considered a good thing because it’s opposite – loss – is not.  Loss is bad for a household, a company, and a voluntary organisation.  Continued loss may result in bankruptcy or closure or poverty.

So when we discuss labour and capital in the economy or in a business, we are already using labels that colour the debate:  costs and profits.  If costs are something to be avoided or reduced in order to maximise benefit, then we must depress the price of labour (i.e. wages and working conditions), and diminish the agencies that champions this ‘cost’ (e.g. trade unions, the collective bargaining power of workers, legislation that benefits workers).

Likewise, if profits are an unqualified good – we should support the agencies that maximise profits and gear our legal, labour and tax framework to that end.

Even before we begin discussing the relationship between wages and profits, the former is considered a cost, a burden while the latter is a sign of prosperity, growth.

The interesting thing about this highly ideological reading, is that it is not vindicated by basic economic accounting (here comes the abstract part).

An enterprise creates income by creating gross value-added.  We can measure this by the following:

Gross value-added equals sales revenue minus the purchase of goods and services needed to produce the product the enterprise is selling (rent, accountancy services, machinery maintenance, etc.).

The important point here is that employees’ wages and working conditions is not a cost in the measurement for creating value.

Let’s take the example of an average warehousing firm from the CSO’s Annual Business Inquiry.   In 2012, there were 1,120 firms in this sector employing 14,600 people.  The average firm had:

  • Turnover (sales) of €3.4 million
  • Purchases of goods and services of €2.2 million

The average firm in the warehousing sector created €1.2 million in gross value-added (Turnover minus purchases of goods and services).

So what happens to this value that is created?  The EU Commission’s Klems database uses the appropriate terminology.  The value, the income, is shared out between (a)labour compensation and (b) capital compensation.  In the vocabulary, both are on equal footing.   For instance, in the average warehousing firm:

  • Labour compensation:  €698,000, or €53,800 per employee.  This figure includes all employees, even senior management and includes employers’ PRSI, pension benefits if any, bonuses, benefits-in-kind as well as the gross wage.
  • Capital compensation:  €460,000 per firm; that is, gross profits.

Both labour and capital are needed to produce value.  Both work (in their own ways) at producing this value and they do this collectively. Therefore, they are both ‘compensated’ for this work: mutual effort and shared compensation.

In this reading, labour is not a cost.  We are not a cost.  We are compensated for our work which is necessary to collectively produce value.  It hints at a kind of equality, a partnership, if only because it is neutral in its categorisation.

This is a different reading from the dominant labour cost / profit divide with its value-laden luggage.  If we are a cost – if labour is a cost – we are a burden, a nuisance, a frustration and an obstacle to maximising the good.   For many businesses, labour must be corralled, constrained, controlled – and when labour is no longer needed, dispensed with.

There are many ways we can resist this reduction to a burden.  We can engage with employers by joining a trade union with the collective power that gives (which sometimes is a lot and sometimes not so much).  We can elect a progressive government that will re frame industrial relations and company law to create a more level pitch on which employers and employees engage.  We can campaign for a social wage which will deliver social goods and services to our benefit, to be paid for primarily by employers.

But the over-riding theme that links the campaigns and struggles within and beyond the workplace is equality.  Equality – whether articulated in the social, political or economic spheres – is profoundly subversive and liberating.  If we are not a cost, it is because we are equal.

The vocabulary of equality is a profound challenge to the existing power structures.  Political parties may claim adherence to equality; if so, they must be challenged as to how they would apply this to the workplace.  Do employers and employees participate equally in the decisions over the production process in the enterprise; do they have equal access to information; do they; do they have an equal say in the apportionment of compensation; do they have an equal say and equal benefit in the disposal of assets?  If not, what are these parties proposing.

We can take this further.  Greater equality (participation) produces better results in the firm and the wider economy:  increased productivity, greater protection of jobs, more equal share-out of income.  We can see this in labour-managed firms where labour is in charge of capital – the exact opposite of the capitalist, profit-maximising firm.   Equality, therefore, is an instrument of sustainable and shared growth.

Why is there such popular revulsion at the treatment of the Dunnes Stores and Clerys workers?  Apart from the sheer economic barbarity, I get the sense that people feel the workers were not treated fairly, treated properly – that is, were not treated equally, however vague or imprecise that idea of equality may be.

The Left and trade unionists should re-appropriate the vocabulary of equality (it was always a foundation of our movement; it’s just that over time we forget the cadence).  It is a powerful tool of transformation and can inform our approach to a myriad of issues.  On this basis, we can raise the slogan:

We are not a cost.  Our labour creates wealth.  We are equal. 

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