The Congress of South African Trade Unions warmly welcomes today's cabinet statement which confounds speculation that South Africa's labour legislation might be relaxed.
Spokesperson Jimmy Manyi said government wants to place on record that the Labour Department was the lead department on all labour matters and that the only labour law amendments being considered at the moment were those being processed by Labour Minister Mildred Oliphant through the National Economic Development and Labour Council processes.
"Cabinet," he said, "reiterates that South Africa's labour laws are in compliance with the International Labour Organisation".
This follows a worrying statement on August 15, in which Finance Minister Pravin Gordhan suggested South Africa might have to relax its labour laws in certain cases to ensure employment of young workers. "Laws might also have to be relaxed," he says, "to allow young people to enter the workplace and gain skills and experience at lower wages, but not at the expense of people who already had jobs... Unless such changes were made, we will not be able to make the breakthrough we need to create jobs in South Africa".
These comments came amidst a concerted right-wing campaign to blame ‘inflexible' labour laws for the high levels of unemployment and to try to use this to justify rolling back gains workers have achieved since the dawn of democracy.
"Job creation," wrote Jonathan Yudelowitz, joint managing director of consulting firm YSA, on 2nd August 2011, "is stymied by well-meant but inflexible labour laws, illustrated by the fact that despite growing, the economy continues to shed jobs, never mind create permanent work that fits Cosatu's definition of decency".
Then Pick n Pay Chairman Gareth Ackerman on 18th August 2011 said that the labour intensity of production for SA had fallen by 16% since 1994 and the solution to this decline was ‘labour flexibility'. It is this, perhaps more than anything, which will create sustainable and decent jobs".
These reactionary views, which have been widely published and repeated ad nauseam in the media, are based on statistics contained in the World Economic Forum's 2010-2011 Global Competitiveness Report (GCR) which claimed that out of 139 countries, South Africa ranked:
- 97th in labour market efficiency;
- 135th for the country's inflexible hiring and firing practices;
- 131st for a lack of flexibility in wage determination by companies; and
- 132nd for poor labour-employer relations
Yet labour law expert, Professor Paul Benjamin, has cast serious doubt on this ‘evidence'.
"Each year," he says "its publication is used [to] either triumphantly hail the country's ranking as a competitive economy or mourn its decline. However, what is seldom if ever disclosed is that 70% of the questions on which the GCR is based are drawn from the WEF's Executive Opinion Survey. While GCR reflects what some business executive think about their country's economy, the WEF punts it as the definitive economic survey.
"Nor does the WEF highlight the small number of business executives who complete the survey. In 2009, the much publicised ranking of South Africa's economic competitiveness was based on the views of 39 private sector business executives...
"The WEF has been criticised for basing its studies on subjective data even where hard data exists, yet they have a massive impact on public perceptions. The WEF appears to have a deliberate policy of presenting executive opinion as if it were proven fact in order to influence debate and policy-making...
"Representatives of business who favour massive labour market de-regulation repeatedly claim that South Africa's labour laws are virtually the strictest in the world. Many journalists and editors uncritically reiterate this mantra.
"How does this compare with surveys that are based on empirical data rather than the views of some business executives? The most authoritative comparative assessment of labour laws is by the OECD. Its report on employment protection laws dealing with hiring of permanent and temporary employees and collective dismissals allows South Africa's labour laws to be compared with those of the OECD's 29 members, which include the world's most developed economies.
"Since 2008, the OECD has been analysing employment laws in South Africa as well as six other associate members: Brazil, China, Estonia, India, Indonesia and Russia. The OECD study concludes that South Africa's employment protection legislation is more significantly flexible than all of these countries."
But, concludes Paul Benjamin, "The repetition of the misleading ‘worst labour law in world' statistic leads to the perception that our labour laws are the major (even the only) cause of unemployment and that repealing labour laws will automatically lead to greater employment... Presenting opinion as fact does not promote that debate and repeating opinion does not turn it into fact."
So is there indeed a link between labour laws and high unemployment? The answer is yes, but in exactly the opposite way to that suggested by these advocates of weaker labour laws.
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The increasing shift towards labour market flexibility in Europe during the mid 1990s and early 2000s meant a critical shift away from an active labour regulatory environment. While questionable short-term gains may have been achieved, the state of labour markets in many European countries suffered shocking setbacks as the impact of global financial and economic crisis took its toll.
A number of examples on the introduction of labour market flexibility reforms can be cited. Spain implemented a flexible labour market policy, together with financial liberalisation and tight fiscal policy during the early and mid 2000s[1].
In contrast Germany took a more cautious approach to labour regulation and employment[2].
These diverse approaches provide today, a very different economic and employment impact.
Statistics of comparative economic growth, using annualised GDP data for 2006 to 2010, indicate that Spain performed better than Germany. However there is a stark difference in unemployment during the pre-crisis and the crisis period. In 2006 Spain had an unemployment level of 8.5% compared to Germany's 10.8%. However in 2010 German's unemployment level peaked at 7.7% in contrast to Spain's 20.1%!
Spain has faced similar employment trends to South Africa, particularly during the financial and economic crisis. While SA growth tracked fairly close to the global growth, its unemployment levels during the economic crisis remained dismal.
Significant number of jobs disappeared in agriculture, trade, construction, services and some manufacturing sectors - largely considered as having poor employment security and high levels of labour flexibility (excluding manufacturing). These types of jobs reflect the deep structural problems of our economy that perpetuate inequitable growth and unsustainable employment.
This is exacerbated by an already high level of labour market flexibility characterised by growing employment insecurity, underemployment and declining wage income relative to aggregate income.[3]
Given that unemployment, underemployment and inequitable income remain a constraining factor for inclusive growth, a decent work programme is an important strategy for raising living standards, improving equity and strengthening social cohesion and must be at the centre of a long term growth path.
A short-sighted approach of introducing greater labour market flexibility to achieve short-run gains is likely to be more costly to the economy and poor households during cyclical dips, when increasing levels of protection and social security are required to mitigate recessionary impacts.
The only real way for the South African economy to create more decent jobs is to restructure the economy, which is still based on the fault lines inherited from colonialism. Instead of joining the right-wing chorus against labour laws, the government should put in place appropriate macroeconomic policies to ensure speedy transformation of the economy.
They must introduce redistributive tax measures and allocate more resources for public investment in infrastructure, including a safe, reliable, affordable and integrated public transport system and to support IPAP2.
These are some of the interventions we have been calling for, yet the minister calls for weakening labour laws and introducing a youth wage subsidy which will result in wage depression, worker displacement and increased exploitation of workers, contrary to the commitments and mandate of the ANC government.
In COSATU's view the biggest problem with our labour laws is that in reality millions of workers are not protected nearly enough. Their jobs have been casualised or outsourced to labour brokers and they suffer extreme exploitation, poverty pay, no benefits and no job security and the labour laws for them are irrelevant.
This is why no amount of blackmail, based on phoney ‘surveys' about ‘inflexible' labour laws causing unemployment, will deter workers from fighting to defend their right to be treated with respect and to be protected from unfair dismissal, poverty pay and super-exploitation.
That is why among many campaigns COSATU adopted at its Central Committee (CC) in June 2011, was the living wage campaign, a decision grounded in the real problems workers face, not the perceptions of a few international business executives.
While executives continue to laugh all the way to the bank, with massive remuneration packages, millions of workers continue to earn starvation wages, from which they are forced to support more family members due to high levels of unemployment, and have suffered massive casualisation, including through intensive usage of labour brokers as a clear strategy by companies to circumvent progressive labour laws.
We will never let them get away with making these laws even more ‘flexible' to allow even higher levels of exploitation.
Statement issued by Patrick Craven, COSATU national spokesperson, August 25 2011
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