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This is an edited version of an address by Ebrahim Patel (SACTWU Assistant General Secretary) to the Annual Labour Law Conference, in Durban on 2 July |
When 2 000 delegates and advisers from governments, labour and organised business met in Geneva a few weeks ago at the annual Conference of the ILO, they endorsed a Report entitled 'Decent Work'.
The Report noted that the primary goal of the ILO is to improve the situation in the world of work. Contrast this with the sustained call in the media, from economists, from some in the corporate world and from academics for labour market flexibility. These commentators claim that many of the challenges society faces, from joblessness to low rates of economic growth, are caused by, or at least not helped by, labour market 'inflexibility'. On the other hand, worker organisations say that the labour market is currently very flexible, perhaps too flexible. In this they are supported by the ILO.
Two contradictory positions. How do we find the truth?
Many a search for the truth starts with a journey. I wish to take you on six short journeys.
My first journey is a journey into words, what they mean, and what we want them to mean.
I consulted my trusty Concise Oxford Dictionary on the meaning of the word, 'flexible''.
Flexible is defined as:
So, the word 'flexible' has two very distinct and different associations and meanings, and this explains why there are two very different conclusions on the question: is the South African labour market flexible.
Well, is the labour market flexible? At this early stage of our journeys, a tentative answer is suggested.
YES in the sense that it can adapt, it permits variation, it is supple.
NO in that it does not lead to a workforce which is docile, submissive or in a mood to surrender.
The second journey is a return to the past.
Apartheid was built not simply, or primarily, on beach segregation but on a set of political and labour controls over the black population, directed at extracting the maximum value from them for the benefit of white South Africa.
In the heyday of apartheid, wage inequalities were widespread. Black workers were, until the Wiehahn reforms, not covered by bargaining councils. There was no protection against unfair dismissals. The system was a dream of flexibility, the flexibility founded on low standards, hire and fire at will, and dismissals of striking workers.
The Reconstruction and Development Programme in 1994 recognised this, and argued that a programme of transformation was needed to move the economy into a high skill, decent wage growth path.
The labour market had to be changed. The programme of labour laws: the Nedlac Act to give a voice in social and economic decision-making, the LRA to set out the rights of unions and employers, the BCEA to establish a floor of rights for workers, the EEA to remove discrimination and overcome the legacies of the past, the National Skills Act to improve the skills base each of these laws separately gave expression to this new direction, and collectively, they constitute a decisive break with the past.
It is true that there are many business people who have accepted these changes, and have retooled their businesses to operate under these new conditions. They accept trade unionism, and participate in collective bargaining at all levels, including sectoral bargaining. They train their workers. They attempt to improve wages and working conditions.
But there are some who profited from the old system, who built their businesses on cheap labour, who are profoundly unhappy with the new direction of policy. They are "the guts to fight back-ers" who yearn for the past. Their call is for a return to lack of standards and a flexibility which is transparently intended to promote cheap labour and the human misery which goes with it.
Now let us go on our third journey, a field trip into the labour market.
To match perceptions and realities, we start the journey with visits to clothing factories.
Nomusa Malebo is a learner sewing machinist who lives and works in Botshabelo. Her wage is R138 per week. After protracted negotiation by her union, her wage will now increase to R178 a week. For the statistician, it is a 30% wage increase. For the economist, it is a rigidity which the union is introducing to the employment contract. For Nomusa, it is still too low a wage to feed her family on.
Nkosazama Shabalala works in Newcastle, and her wage is R144 per week. Her counterpart, Fatiema Isaacs in Cape Town earns R323 per week. For the same job of learner machinist, there is a 124% wage difference between these two workers.
The bottom wage in the clothing industry for a sewing machinist, in an ununionised factory in Qwa Qwa, is about R70 per week for a learner, and R120 for a qualified machinist. The top machinist wage, in Durban, is R400 per week.
So in this allegedly very rigid labour market, we have very wide and very worrying wage disparities indeed.
In the Western Cape, the clothing industry bargaining council grants an automatic exemption from the agreement to employers with fewer than six workers. Two hundred and seventeen companies were granted such exemption.
Are these examples representative of the overall reality?
The ILO thinks they are. In 1996, it published a comprehensive study of the South African labour market, which concluded that the labour market was very flexible. This year, the ILO concluded that South Africa's regulatory environment in respect of certain labour market standards does not appear particularly stringent compared to other middle income countries. It catalogued a range of flexibilities in the legislation and labour market practices.
Some commentators argue that a sign of a flexible labour market is found in growth in labour productivity. Provisional figures made available by the Reserve Bank shows a growth of between 3,2 and 5,3% per annum in labour productivity since the democratic election in 1994.
Increased casualisation and the growth in camouflaged employment relationships such as 'independent contractors' are further indications of flexibility in the labour market.
I turn briefly to a view of our labour market mechanisms:
The new Labour Relations Act came into effect in November 1996. At its heart is a system of self-regulation by the two key economic actors, through collective bargaining. Centralised bargaining is promoted, and each agreement needs to have provision for exemptions. In short, it is an empowering Act, which gives ample scope for unions and employers to reach agreements suitable to their circumstances.
The BCEA was implemented in December 1998. It does not prescribe a national minimum wage, but allows for interaction between economic realities and the standard setting process.
The new laws need to be given the time and space to work as intended. The chronic jobless problems of the economy, which by far precede these reforms of the labour market, cannot ,with any sense of truth, be blamed on the new labour laws.
It is time now to go on a foreign journey.
Proponents of labour market flexibility cite the international experience in support of their contention that market deregulation equals economic growth and high standards of living.
The Economist magazine, a supporter of flexible markets, two months ago ran a special feature on the American economic model. It set out to examine the contention that the US is, in its words, 'the clear winner in the world's economic beauty contest'.
It compared the US, Germany and Japan over the most recent ten-year period, from 1989 to 1998. The US is described as the flexible labour market economy, while Japan is noted for its system of lifelong employment, and Germany for its restrictive labour markets. So, the conclusions should be that the US should beat those economies in GDP growth, GDP per capita growth, productivity growth and job growth. Right?
Well, the results are rather interesting.
During this period, Germany and the US have the same GDP growth. Germany's GDP per person grew faster than the US and Japan. In productivity growth, German performance is twice that of the US, and even Japan beats the US. Japan has, over this period, the lowest unemployment rate.
Second, The Economist comments that "it is often asserted that America has traded higher income s for faster growth; yet over the past decade, average incomes have risen by similar amounts in all three countries.
But we should not only visit rich countries. In East Asia, during the recent economic crisis, Indonesia, a country with one of the world's most flexible labour markets, with bitterly low wages, few real unions, no protection against unfair dismissals, no extension of bargaining council agreements, markets did not 'reward' flexibility. The country was punished by the flight of capital and the depreciation of the currency. One in four jobs in the formal sector of the economy was lost, and an extra 20% of the population now live in poverty.
The conclusion of this journey is that countries with flexible labour markets do not necessarily outperform those with good labour standards, and that deregulation is no guarantee that an economy will not suffer severe damage in periods of global economic crisis.
When SA Breweries listed in London, they were required to disclose the pay of top earners, a requirement many companies were able to avoid for many years in South Africa. And what did it show?
Graham Mackay, the CEO, earns a package of about R7 million a year. That is R135 000 a week. Abraham Marimba, who loads the beer onto the trucks, earns a package of R33 280 a year . This means that Marimba has to work for four years to earn what the CEO gets in one week. To put it another way, if Abraham Marimba works his whole adult life, from age 20 to age 65, he will earn the equivalent of what Mr Mackay gets in 11 weeks.
The final journey is into the unexplored territory: the alternatives.
For organised labour there is indeed a better journey than walking the road of deregulated labour markets.
We seek through social dialogue and negotiation, to forge a common platform for job creation, economic growth and social equity. There are important voices in the business community who share this view, and with whom we are ready to negotiate. In this, we recognise that negotiation is not a replacement for strong and solid organisation, but an essential part of securing the fruits of organisation for our members, for the working poor and for the unemployed.
Our vision of a functioning economy and a caring society requires a coherent set of economic policies monetary, fiscal, industrial, trade, labour market and land reform integrated with strong social policies housing, health-care, education, social welfare, wages directed at increasing the quantity of decent work in the society.
Macro-economic policy should be strongly co-ordinated with the imperatives of job creation this includes a change in the direction of monetary policy which currently does grave damage to the productive sector of the economy, with punitive real interest rates of 10% to 20%.
Our system of financial intermediation is prohibitively costly and inefficient.
Consider: if John lends money to the bank, he may get 12% interest. If Jabu borrows money from the bank for his small business, he pays about 20%. So the bank keeps a margin of 40% for lending John's money to Jabu's small business. This huge margin represents the cost of our banking system.
Our vision embraces a national productivity and equity accord, entered into between labour and business, with real targets for productivity growth, and real commitments to job security, job growth and private sector investment. This could become a major engine which drives economic growth and development in South Africa.
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Macro-economic policy should be strongly co-ordinated with the imperatives of job creation |
It is one with an active industrial policy, geared at expanding the labour intensive sectors of the economy through investment incentives and disincentives, and a more measured and where appropriate, slower tariff reduction policy. This should go hand in hand with expanding domestic demand and the size of the domestic market, together with the current focus on export markets. Domestic savings would be encouraged as the key pool for investment. Effective regulatory systems would be put into place to address volatility in capital flows.
We support a land reform policy directed at permitting many unemployed people access to productive land and a public works programme aimed at securing basic public infrastructure in rural and urban areas.
It is the new labour market policy introduced since 1996, with an emphasis on speeding up the skills development programme embraced within the collection of new laws, improving worker participation, removing the legacies of past discrimination, continuing to modernise our industrial relations system and improving the flows of information.
Woven together, these elements are the basis of a set of agreements which could quicken the pace of creating decent jobs. They offer a coherent and effective riposte to calls for a deregulated labour market.