The unemployed seldom know why they are unemployed. They are unlikely to realise that they would be employed if labour law barriers were removed or relaxed.
They can, on the other hand, from harsh personal experience, relate more directly to policies that protect those fortunate enough to have jobs from a similar fate. The unemployed masses are unlikely to realise, without it being explained by honest and informed political leaders, that improving pay and conditions of employment for people with jobs comes at the expense of people without jobs. It also comes at the expense of consumers, especially the poor (for whom prices are driven upwards), and at the expense of society at large (for whom prosperity is curtailed). In the context of nebulous and reckless calls for ‘nationalisation’, the unemployed are especially vulnerable. No one ever explains by what process or mechanism changing ownership from people who created real jobs (investors), to ones who did not (bureaucrats), should benefit anyone other than a handful of new undeserving super-elites.
This analysis has focused primarily on flexibility of demand, that is, the degree to which the cost of employing people affects the propensity to employ. On the other side is flexibility of supply, the propensity to work in response to wages and working conditions.
When there is full or near-full employment, job-seekers have a seller’s market and there is little need to be concerned about ‘exploitation’ because workers can pick and choose without the risk of unemployment. Employers have to compete for labour, which drives wages and working conditions upwards.
Under conditions of widespread destitution, such as we have in South Africa, supply is substantial, flexibility of supply is low, and workers have less ‘bargaining power’. They have to accept almost any employment they can get, which means that they are more likely to be ‘exploited’ (‘starvation wages’ and harsh working conditions). This increases the likelihood of labour laws to protect workers, but decreases the likelihood of barriers to employment being removed for the unemployed.
- Leon Louw is the Executive Director of the Free Market Foundation. This article first appeared on the Free Market Foundation (FMF) website. It is republished here with the permission of FMF.