Urban development

The most important, single issue facing government today is improving conditions for greater labour absorption.

The South African Bill of Rights says, “Every citizen has the right to choose their trade, occupation or profession freely.” But local laws and institutions do not fully support that right, and one consequence is our staggering unemployment rate.

The results of the Quarterly Labour Force Survey (QLFS), recently published by Statistics South Africa, revealed some alarming labour market trends. According to the strict definition, the unemployment rate increased from 24.3 percent (4.165 million) in the last quarter of 2009 to 25.2 percent (4.310 million) in the first three months of 2010 – a loss of 145 000 jobs. When the first quarter of 2010 is compared to that of 2009, if we include discouraged work seekers who have given up searching for work because they believe there is none available, the unemployment rate increases from 28.4 percent (5.4 million) to 32.4 percent (6.1 million) unemployed people.

This paints a very bleak picture indeed.

To make matters worse, these employment figures are at odds with the growth in real gross domestic product (GDP) – 4.6 percent in the first quarter of 2010 compared to 1.6 per cent in the first quarter of 2009. And, according to the Quarterly Employment Survey (QES), gross labour earnings paid to employees in the formal non-agricultural sector in the first quarter of 2010, was 11.7 percent more than in the first quarter of 2009. Therefore, on average, for those with jobs in South Africa, things got a whole lot better despite almost a million losing theirs in 2009.

A further worrying concern is that, of the unemployed, 63.5 percent have been out of a job for longer than a year, and the majority are young with limited education and other skills. If the low end of the labour market were allowed to function unhindered, young and unskilled people would not have such a desperate struggle to get onto the first rung of the employment ladder. Without doubt, the already employed will protest that any weakening of job-security legislation or erosion of minimum wages will lead to increased poverty. Studies have shown that unemployment is a significant driver of poverty, so how can we close our eyes to it.

Often ignored is that worker productivity is the main determinant of what employers are willing to pay, and a legislated increase in the price of labour does not increase worker productivity. According to fundamental economic logic, if a minimum wage of R2 000 per month can improve conditions for workers, then one of R20 000 per month should improve conditions even more. But, obviously, a minimum of R20 000 would render more people unemployable. People who do not get jobs as a result of such legislation are unseen victims while those who can clearly be seen to lose jobs are only too visible.

Claire Bisseker states in an article (Financial Mail, 25 June 2010) that, “There are 387 manufacturers that have refused despite an exhaustive legal process by the clothing industry national bargaining council, to honour minimum wages and conditions of employment.” She reveals that a total of 43 percent of clothing manufacturers in the country are not complying with minimum wage legislation. The clothing industry national bargaining council is currently sitting on execution orders against the first 70 firms that have failed to meet their regulatory obligations, which, if carried out, could result in about 4 000 workers losing their jobs. I know that if I were one of these 4 000 individuals facing unemployment, I would certainly be against the carrying out of the execution orders.

Bisseker sums up the situation succinctly, “The standoff in the clothing industry forces a choice to be made between upholding decent working standards and making thousands of people redundant in the middle of winter”. So, at the heart of the matter is the African National Congress’ policy of ‘the creation of decent work’. The small firms that ‘refuse to honour minimum wages and conditions of employment’ do not do so out of pure cussedness or because they are mean but because they cannot afford to pay the higher costs. But, who gets to decide what is ‘decent work’? Despite all statistics, if you were the one unemployed, so that, as far as you are concerned, the rate of unemployment is 100 percent, surely you would want to have the right to decide for yourself what constitutes ‘decent work’.

Employees do not happily work under trying conditions for extremely low wages because they prefer such jobs to better paying and more attractive ones. They take such jobs because, at the time, it is their only chance to earn the money they need to support their families. Their choice is often between a poorly paid, unpleasant job, and starvation for their families and themselves.

A significant and laudable factor that emerges from Bissiker’s article is that it was the South Africa Clothing and Allied Workers’ Union (SACTWU) that asked for the writs of execution to be delayed to “explore further avenues”. The spokesperson for the Apparel Manufacturers of South Africa (AMSA) was more uncompromising. According to Ms Bissiker he said that, “they don’t want to shut companies down either but neither can the status quo be allowed to continue, simply to save jobs”.  Do AMSA and SACTWU truly believe that the workers will be better off unemployed than in jobs that, in their view, are not “decent”? Will they support the families of the unemployed workers who lose their jobs because of these actions? Self-interest is usually buried in such strange logic.

Other manufacturers will benefit if the 387 firms can be knocked out of the competition, but the self-interest of the labour union seems more obscure. Is it in the interests of SACTWU members for their union to be a party to making first 4,000 and later even more workers unemployed? Labour unions are supposed to look after the interests of their members, a task they perform with vigour. It is not their responsibility to solve the country’s socio-economic problems. That is the task of government.

The most important, single issue facing government today is improving conditions for greater labour absorption. For government to achieve its stated objective of reducing unemployment and stimulating growth, it has to urgently address labour market policies and laws that exacerbate unemployment, such as those that abridge the constitutional and human rights of garment manufacturing workers, and threaten to imminently make thousands of them unemployed.

- Jasson Urbach is an economist at the Free Market Foundation. This article first appeared in the Tshikululu Social Investments’ (TSI) Thought Leadership. It is republished here with the permission of TSI.