Reprinted from Labor's Champion
March, 1988

Profit Sharing:

In recent years, the capitalists have revived the old device of so-called "profit sharing" to divert the workers' movement from the path class struggle. In this, the capitalists have had the help of their servants, the trade union bureaucrats, who have been more than eager to put this scheme over on the workers. The workers in the auto industry have had plenty of experience with the effects of this scheme. But before we examine the effects in this particular industry, let us see what "profit sharing" really means.

First of all, the term "profit sharing" for the workers is a misnomer. It makes no sense, because capitalist economy by its nature only exists for the sole purpose of accruing profits for the bosses, which are not to be "shared" but accumulated. Let us turn our attention to a sketch of the process of production and we will see how true this is.

The labor of the workers produces all value. But the value of the product (individual and social) consists of three components:

(a) the part that replaces the raw materials and instruments of production,

(b) the part which replaces wages or the maintenance of the workers, and

(c) the surplus value - commonly called profits.

Part (a) from above results from previous labor and its value is transferred to the value of the final product unchanged. But (b) and (c) result from new labor created new by the last phase of the process. Let us concentrate our attention on wages and the relation between wages and profits because this is how we can recognize the gimmick called "profit sharing." Wages are the price of the commodity labor power. A money wage is paid to the worker by the capitalist for the use of this commodity. The employer can make the payment in regular intervals (daily, weekly, monthly or yearly) or at other intervals. He may even choose to pay the main portion of the wage at a regular interval and pay the rest later in a lump sum. This is the secret of so-called "profit sharing" by the workers. The capitalist simply pays the workers the bulk of, or nearly all, their wages at regular intervals and holds back the remainder and pays it later in a lump sum. The portion he holds back he mislabels "profits" when, in fact, it is really a portion of the workers' wages. The typical "profit sharing" plan operated by the owners today conceals this fact well. The workers are given the outward appearance of being stock owners in the company by holding worthless stock entitling them to a "share" of the profits. Since the financial records are kept by the employers, it is easy for them to claim that the lump sum handed out later is a share of the profits, not a portion of their wages.

Profit sharing was devised by the capitalists to promote class collaboration. Its aim is to make the workers feel that they have an interest in common with the bosses, since they are allegedly getting a share of the profits.

Money paid in "profit sharing" schemes is really a part of the workers' wages.

These attempts to blunt the workers' class consciousness, while also cutting their pay, are not new. Over 75 years ago, in 1921, at an international trade conference held in Portugal, a former French trade minister named Delombe stated: "Profit-sharing is one of the most efficient means of achieving social progress [read maximum profits], because it ensures harmony between Capital and Labor, and assures the workers' interests in the smooth running of the concern." The aim of this scheme is clear - that the workers' who believe they are getting a "share in the profits" will want to work harder to produce greater profits for the company. This scheme is also put forward by the trade union bureaucrats, who have all along been preaching the "common interests" between the workers and the capitalists.

Clearly, so-called "profit sharing" serves the capitalists by increasing the exploitation of the workers. First, the intensity of labor is increased in an attempt to boost profits. And second, the workers' wages can actually be reduced while giving the opposite impression. This, of course, means that the capitalists keep a larger portion of the new value created by the workers. The capitalist owners of Abbott-Laboratory, Hewlett-Packard and thousands of other firms, have reduced their labor costs by hundreds of thousands of dollars a year, simply by substituting the lump-sum "profit-sharing" payment for an increase in the workers' hourly wage rate. These companies have agreed to annual bonuses sometimes amounting to 10 percent of the workers' pay, which seems like a substantial raise. Yet the workers get less of a raise than if they had received a 3% annual increase in their hourly wage rate over three years. That is because the dollar earnings of the 3% raise compounded annually, get bigger and bigger. In addition, many important benefits (overtime, vacation pay, pensions, etc., which are also part of the workers' wage) are calculated on the base wage rate.

Thus, the capitalists have found "profit-sharing" and similar schemes to be a successful means of shifting the burden of the current economic crisis onto the backs of the workers. A recent survey of 1,600 U.S. industrial firms showed 69% had instituted one or more bonus plans in the last five years. The plans are variously called "profit-sharing," "incentive payments," "gain-sharing," etc. But they are all the same. The workers agree to give up increases in their hourly wage rate (or even take cuts) and instead receive part of their wages as lump sum payments. The amount of the payments varies by some formula concocted and controlled by the capitalists.

Let us examine the case of General Motors. After signing the contract for 1984, the capitalists and union bureaucrats tried to deceive the workers by claiming that "profit sharing" would give them wage increases of at least $1,000 per year. But these are the (official) profits GM made from 1984 on and the average lump sum payment each worker received the following year:

Despite the huge profits pocketed by the capitalist billionaires, the hundreds of thousands of workers who are the source of these profits have been cheated out of more than $3,000 in wages over the term of the contract. The capitalists claim that the 1987 profits are due to changes in their accounting methods, and that they were produced mainly by workers at GM's plants abroad (who do not receive "benefits" under GM's "profit sharing" plan.) Therefore the capitalists will not pay out anything to the workers.

"Profit sharing" can also benefit the capitalists by sharing their losses among the workers in a given industry in times of crisis. When a company loses money, this loss can be distributed among the workers in the form of a wage reduction, as the consequence of "profit sharing" in reverse. The so-called "employee stock ownership plans" (ESOPs) function this way. Instead of being paid wages, the workers receive "stock" in the company. Of course, they never really own the company. Often the employee "stocks" are special non-voting shares. In any case the controlling interest continues to be held by a bank, "management council," etc. There is no guarantee that the workers will ever get back the funds thus "invested." Generally when a worker leaves the company, he or she must turn in their stock for far less than the wages they gave up in exchange for it. Many failing steel companies, like Weirton Steel in West Virginia, have spread their losses to the workers in this manner.

The case of Smith's Transfer Company, a trucking firm based in Virginia, is an especially glaring example of how these schemes are used to bilk the workers. In 1985, employees were asked to take a 15% wage cut, about $80 a week for the average truck driver, in order to save the company from bankruptcy. In exchange, they got stock in the company. They were told that the stock would increase in value and eventually the workers would get back more than what they had "invested." The owners took about $35 million in workers wages in this manner, used it to pay off debts it had incurred, then canceled the plan and sold the company. The workers were paid less than three cents on the dollar for their "stock." To make matters worse, many of the workers were then laid-off and are now with out jobs. Said one driver, who gave up about $6,000 in wages and got back $144, "When I saw what happened to our jobs and our money, it made me sick."

The workers must expose and oppose all schemes of "profit sharing." In place of such schemes, they must unite in struggle to defend their living standard against capitalist attacks and struggle for improved wages, benefits and working conditions. But above all they must prepare themselves for the final battle to abolish exploitation of the workers once and for all. For as the Red International of Labor Unions, a revolutionary organization of workers worldwide, said in their program in 1921: "Workers' participation in profit-sharing presupposes the existence of profits, in other words the preservation of the capitalist system, whereas the task of the working class consists in suppressing capitalist relations and abolishing capitalist society itself."

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