Unemployment: it’s a moral issue, not a "time bomb"

John Kane-Berman says SA's labour market policies are cruel and wicked

Times without number in the last couple of decades, politicians and pundits have warned us all that unemployment is a “ticking time bomb”. The figures are horrifying. They were horrifying even before this year’s Covid-19 lockdowns made them even worse.

Nor does the South African Economic Reconstruction and Recovery Plan issued by Cyril Ramaphosa last week create much confidence that his government is serious about combating joblessness.

On the official definition, which excludes “discouraged” people who have given up looking for work, unemployment rose from 1.99 million in 1994 to 6.66 million last year. If discouraged workers are added in, the rise over that same period is from 3.67 million to 10.23 million. The last of these figures translates into an unemployment rate of 38.5%.

Looking at a shorter period of time, and at only one segment of the jobless millions, the number of black African workers classified as “discouraged” rose from 1.47 million in 2001 to 2.56 million last year.

There is plenty of protest in South Africa, some of it orchestrated into violence. Incidents of public violence of various types have been rising over the past decade, but so far the ticking time bomb has failed to explode. Certainly, the bomb threat doesn’t bother too many members of the ruling elite, or they would not have introduced or threatened to introduce policies that impede labour markets and deter investment.

It is therefore time to inject some different ideas into the debate, to switch away from sounding warnings to unceasingly beating the drum against the sheer cruelty and wickedness of South Africa’s labour market policies. One consequence of these policies is likely to be that a large proportion of domestic servants and others laid off during the lockdown are unlikely to get their jobs back, or to find other jobs.

The starting point for new ideas should in fact be the old ones that Adam Smith set out in 1776 in The Wealth of Nations. He wrote: “The property which every man has is his own labour… 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.”

What flows from this moving passage is that without capital or education, the poor have nothing to exploit but their own willingness to work. Yet South Africa’s industrial relations system denies them this opportunity. We condemn slavery because we don’t think any man should be able to confiscate another man’s labour. But we then pass laws restricting his right to sell his own labour. Either way, he earns no money. This is because our labour market has been configured to protect organised labour and big business to the detriment of small business and the jobless.

The South African constitution purports to guarantee just about every right anyone could wish for. Missing is what should be near the very top of any list of human rights: the right to embark upon employment free of restrictions laid down by trade unions, employer organisations, or labour ministers. The ruling party is guilty of violating all sorts of rights: among the worst violation is all the legislation that erects artificial barriers which keep poor South Africans out of labour markets and so prevent them from earning money and providing for themselves and their families.

A big part of the problem is the National Economic Development and Labour Council (Nedlac), which the Institute of Race Relations (IRR) opposed from Nedlac’s inception in 1994. Dominated by government, organised business, and trade unions, it institutionalises the injustice and unfairness of our industrial relations system. And it epitomises what is wrong with the whole notion of “social compacts” favoured by President Ramaphosa.

But Nedlac is merely the tip of an iceberg: below it are numerous bargaining councils in various sectors which operate to favour organised business and labour to the disadvantage of small business and the unemployed. One of their main powers is to prescribe minimum wages, often at levels that price unskilled and other workers out of labour markets. The minima bind not only the signatories to particular bargaining agreements, but are also extended to employers and workers in the same sector who have not signed them and have no wish to be bound by them.      

The power of these institutions to lay down minimum wage rates for anyone other than their own signatories should accordingly be removed. So should the powers of the employment and labour minister to determine what a “decent” wage might be. The various other laws and practices which discourage employment should also be discarded.

The guiding principle of a new industrial relations system should be that individual employers and employees have the right to enter into private voluntary contracts without the intervention of third parties. This right should be added to the list of rights for which opposition parties, non-governmental organisations, and the media, are willing to agitate. Replace threats about time bombs with the language of justice, fairness, and rights.

* 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.