By Herman Mashaba

IF the government does not remove the obstacles that prevent willing buyers of labour from employing willing workers on mutually acceptable terms, events elsewhere warn us that we can expect trouble. If idle people get too desperate, they will find something destructive to do.

The government and the labour unions have to recognise, once and for all, that certain provisions in the labour laws contribute to unemployment and have to change. Minimum wages, hiring and firing laws, centralised collective bargaining and bureaucracy costs are huge deterrents to employment, especially when the potential employers are individuals and SMEs. Unemployed people must be allowed to make their own decisions about their own lives, and the labour laws must change to accommodate their decisions. They must not be turned away by potential employers because labour laws create a barrier between them.

In comparing South Africa with other countries, we have to start by asking what labour laws are appropriate in a country where 7.5 million people, 36% of the potential workforce, are unemployed. There is no point comparing South Africa’s labour laws with those in wealthy countries. South Africa’s unemployment is four times higher than their “panic” rate, which means obstacles to employment must be removed, fast!

Russian author Leo Tolstoy must have had something similar to our labour laws in mind when he wrote: “I sit on a man’s back, choking him and making him carry me, and yet assure myself and others that I am very sorry for him and wish to ease his lot by all possible means – except by getting off his back.”

Those who talk about “decent” jobs and “exploitation” are the ones who “sit on the backs of the unemployed”, choking them and telling them how sorry they are for them . It is time to get off the backs of the unemployed.

It is really unfair to blame the labour unions for the plight of the unemployed. Union officials have the task of looking after the interests of their members. Union members have every right, as long as they do not use violence or violate anyone else’s rights, to object to changes in legislation intended to make it easier for the unemployed to get jobs if they believe such changes might have detrimental consequences for them.

Members of parliament of all parties must take full responsibility for the labour laws and any influence they have in preventing the unemployed from getting jobs.

The decision-makers owe this to the millions who cannot get jobs and to the entire nation to avoid the potential calamity that continued mass unemployment threatens to bring about.

Many of us have, in the past, worked for wages that would not have been considered “decent”. We did it because something is better than nothing, being active is better than being idle, and you do not learn skills by sitting at home.

Loss of existing and future jobs happens when a government attempts to use a minimum wage to increase wages above what employers are paying or are capable of paying. Minimum wages generally do not differentiate between high-income and low-income employers, which results in the “Newcastle effect” and the loss of jobs, for instance, by domestic workers employed by low-income families.

The dispute between clothing factories in Newcastle in KwaZulu-Natal and the industry bargaining council, which last year again hit the headlines, provides evidence of the loss of jobs as a result of increases in minimum wages. At its peak, Newcastle’s clothing industry employed about 16000 workers. By June last year, that had declined to between 6000 and 7000 and is set to decline further as a result of the forced implementation of minimum wages set by the bargaining council at above the wages agreed between employers and employees – and above what the employers say they can afford to pay, given the competition they face from foreign competitors.

In a town and district where unemployment is estimated at 60% and people are prepared to work for less than the statutory minimum, there appears to be no justification for interfering with the wishes of the workers who regard a poorly paid job as better than no job.

Minimum-wage laws are not the only culprit among the causes of unemployment. Professor WS Siebert of the University of Birmingham, in Investment, Employment and South African Labour Laws, cites the Labour Relations Act of 1995 and the Basic Conditions of Employment Act of 1997 as increasing the cost of employing labour.
Analysing the effect of strict job-security laws and especially provisions that increase the difficulty of dismissals, Siebert points out that the real level of strictness and the cost increase significantly when there are strong labour unions, such as in South Africa, to monitor the application of the laws. In South Korea, where there are strict job-security laws but weak unions, labour compliance costs are lower. Higher job security translates into lower cash wages for workers and greater difficulty in accessing jobs. Most cases coming before the Commission for Conciliation, Mediation and Arbitration are for alleged wrongful dismissal, and, not surprisingly, most involve small businesses.

Small firms in South African employ about 65% (almost nine million) of the total number of employees. South Africa should adopt policies to take account of the potential that SMEs offer to reduce unemployment. Small firms employ people who would be difficult to place with large firms – the young, old, long-time unemployed, inexperienced, low-skilled and otherwise disadvantaged jobless. It is in small firms that many receive training that allows them to later access jobs in large firms.

The Sunday Times’s idea of Each One Hire One becomes a significantly practical proposition when potential employers are seen to be millions of individuals, including homeowners and small firms, mostly micro firms. However, the hiring will not happen under the current dispensation. Policies and laws will have to change to make it worthwhile for SMEs to hire more people.

A static analysis will probably suggest that unemployment reduction in South Africa cannot be carried out rapidly. Dynamic ideas tell a different story. For instance, the European Union’s SME statistics reveal that the overwhelming majority of new jobs are in firms that are less than five years old. The government has to devise policies that will markedly increase the demand for labour. The most potent way of improving the hiring capabilities of SMEs would be a drastic reduction in minimum wages and compliance costs involved in hiring and retrenching, which raise the total cost of hiring job applicants above their productive value. For the sake of 7.5 million people, Mr President, tear down these barriers to employment!

Herman Mashaba is chairman of the Free Market Foundation; Chief Executive Officer of Leswikeng Minerals & Energy (Pty) Limited. Mr Mashaba founded Black Like Me Limited and he holds a BSc (Engineering, Hons).