"Free us from the shackles of labour laws"

John Kane-Berman writes on the idea of a "job seekers exemption certificate"

South Africa’s tragically high unemployment has frequently been described as a “ticking time bomb”. To what extent unemployment contributed to the violence in July in Kwazulu-Natal and Gauteng is difficult to determine. For its part, the African National Congress (ANC) sees no connection or doesn’t care anyway, for its policy response amounts to a collective shrug of the shoulders.

Not only has Cyril Ramaphosa said nothing to indicate any deviation from his party’s economically destructive policies, but that party is proceeding with at least two pieces of legislation that will undermine the country’s ability to generate growth and employment: derogations from constitutional property rights and increases in the power of the state to impose racial quotas on the private sector.

In the meantime, the violence in the context of high unemployment has prompted renewed calls for the introduction of a “job seekers exemption certificate”. The idea is not new. It was made as long ago as 2003 by Eustace Davie of the Free Market Foundation. But it was recently reiterated both by him and by the Langeberg Unemployed Forum.

When Mr Davie first made the call unemployment (including discouraged workers) was running at almost 8 million. In the second quarter of 2021 (before the violence) it was approaching 12 million.

Essentially the idea is that a person who has been unemployed for at least six months would be entitled to a certificate which would exempt them and their employer from labour legislation for a period of at least two years. In particular, they would be exempted from minimum wage laws.

Most of South Africa’s unemployed would qualify on the grounds that they have been out of work for longer than six months or have never had a job anyway.

In a recent statement, Xolile Mpini of the Langeberg forum said: “South Africa’s labour laws take away our right to decide for ourselves what level of wages and conditions of employment we are prepared to accept.” The certificate would be a legal document releasing long-term unemployed people from “the shackles of the labour laws” by enabling them to “ask anyone for a job and be free to enter into a contract with a prospective employer on any wage and any conditions of employment they are happy to accept”.

“We need jobs. We need jobs to keep hunger at bay, to keep our families clothed, housed, and fed. Jobs ensure survival and security. And they protect our dignity, to which we have an inalienable right.”  

Last year the forum argued that decision-makers sitting in “comfortable chairs” in universities, government departments, and labour union headquarters did not care about the unemployed, who had not asked for a minimum wage. There were not enough jobs paying whatever the minimum might be.

Because it was illegal for an employer to pay less, “millions of people who would be happy to earn less are denied a job”. Instead of earning R3 000 or R2 000 or R1 000 a month, “they earn zero”. (The current national minimum decreed by the employment and labour minister is R21.69 an hour, which works out at R3 796 a month. In particular sectors, including those governed by bargaining councils, the minima may be higher.)

Minimum wage laws and other restrictions on the labour market are no doubt only one among many reasons why unemployment in South Africa is so high, and why it has been growing. Liberalising labour law is a necessary though not a sufficient condition for faster growth in both employment and the economy.

The proposed certificate would be an important step on the road to liberalisation. Allowing greater freedom of contract would be a significant gain for both employers and employees.

It would further be in accordance with a vital principle enunciated by Adam Smith in The Wealth of Nations in 1776: “The property which every man has is his own labour. As it is the original foundation of all other property, so it is the most sacred and inviolable. The patrimony of a poor man lies in the strength and dexterity of his hands; and to hinder him from employing this…in what manner he thinks proper without injury to his neighbour is a plain violation of this most sacred property. It is a manifest encroachment upon the just liberty both of the workman and of those who might be disposed to employ him.”

South Africa has got itself into a terrible mess. Its poor education and training system ensures that millions of the unemployed lack the skills to warrant their being paid prescribed minimum wages. They face a future of permanent joblessness and poverty.

Yet the labour law which perpetuates their plight is protected by a powerful coalition of government, unions, labour law practitioners, much of business, and the National Economic Development and Labour Council (Nedlac). This combine has the support of plenty of academics, journalists, and human rights lobbyists opposed to “exploiting” the jobless poor by paying them low wages.

The proposed exemption certificate is only a partial solution. Requiring unemployed people to apply for certificates to allow them to enter into employment contracts is to impose a burden upon them. They would have to queue up somewhere and would be at the mercy of bureaucrats (whose numbers would have to increase in order to administer the exemption system). The certificate is in fact a permit by another name.

The certificate is nevertheless quite a clever idea in that it does not frontally attack South Africa’s labour regulation regime, but seeks instead only exemptions from it. Nor, according to Mr Davie, would it affect the “statutory rights of the employed”. As he wrote in his original proposal, it would “disturb the existing labour dispensation as little as possible”, so making it more “politically saleable”.

He and the Langeberg forum are confident that the introduction of their job seekers exemption certificate would see “rapid” declines in unemployment. If so, the political compromise would have justified itself.

* John Kane-Berman is a policy fellow at the IRR, a think-tank that promotes political and economic freedom. Readers are invited to take a stand with the IRR by clicking here or sending an SMS with your name to 32823. Each SMS costs R1. Ts and Cs apply.