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Media Centre | COSATU Speeches
Speech to Industrial Relations Association of South Africa by Kenneth Creamer, COSATU Parliamentary Office on a Labour Perspective on Job Creation
3 November 1998, Breakwater Campus, UCT
Employment in South Africa is at its lowest point in sixteen years, with certain official measures indicating an unemployment rate of over 30%. Employment trends in different sectors of the formal economy from June 1996 to June 1997 show that all sectors have lost jobs, with the exception of wholesale/retail trade and financial services.
Historical trends in job destruction from 1990 to 1996 indicate significant losses, with the manufacturing sector suffering a 9,1% loss in jobs, construction 21,3% and mining 27,5%. If planned budget cuts are implemented, the public services will face job losses in the near future, despite a record of job creation.
These trends and figures speak for themselves, unemployment in South Africa is at crisis levels. Effective steps need to be taken to address the problem, but what are these steps?
Most people agree that jobs will be created if there is an increase in the level of investment in the South African economy; both foreign and domestic private sector investment and public sector investment.
The key question is: "How do we create conditions which will stimulate increased investment; job creating investment?" This is where the debate really begins.
Some people argue that the 'magic job-creating formula' entails creating an investor-friendly environment through weakening the trade unions, reducing real wages, limiting the impact of collective bargaining agreements, cutting-back government spending, exposing the country to increased competition through accelerated tariff reduction and rolling-back elements of the recent wave of labour legislation reform.
Others argue that sustainable job creation requires another 'formula' that will move the economy onto a new growth and development path: a genuine commitment to human resource development by both the private and public sectors, a national consensus on a 'bed-rock' of acceptable labour standards upon which we plan to build the economy, a commitment to contra-cyclical job creating public sector investment, particularly in infrastructure, employment-sensitive industrial policy measures, and strong progressive trade unions and other civil society groupings which are capable of effectively representing workers needs and articulating the interests of workers and their communities in the formulation of economic policy.
These two point of view are not always neatly juxtaposed and often disagreement is over details rather than over principles. What is useful about this summary is that it assists in highlighting key issues which are presently foremost on various political and social agendas, many of which came into sharp focus during preparations for last week's Presidential Job Summit.
Impact of the Job Summit
Without commenting in detail on the outcomes of the Presidential Job Summit, it is worth noting that the dialogue stimulated by the Summit has helped to change the tone of South Africa's economic debate. There is less 'finger-pointing' and a greater forward-looking commitment to negotiating a consensus with regard to strategies for economic development and job creation.
From labour's perspective the potential for such a consensus did not exist for as long as GEAR remained 'non-negotiable'. Instead of attempting to ram 'non-negotiable' economic policies down distrusting throats, the Job Summit has introduced the kind of 'open door', 'let's talk-through-our-problems' approach to economic policy matter which delivered so much during the political settlement of the early 1990's.
Talk of a post-gear consensus, emerging from the Job Summit, has in no small measure been as a result of this new consensus-building attitude.
Critics may argue that because of a range of conspiring factors government had no choice. These factors, include, the failure to reach GEAR's stated growth, employment and deficit targets, the international financial crisis, the down-turn effecting major trading partners, and the pressures of the forthcoming election. But, at least the new 'openness' and a willingness to negotiate policy with an open mind is better than a defensive reaction where parties dig themselves deeper and deeper into the hole of 'non-negotiability' and 'no compromise'.
The Job Summit has had the positive effect of bringing the social partners closer on a range of important policy questions. In a sense, the Job Summit also provided an opportunity for government departments to come together and generate some synergy between their various development and employment stimulation programmes. As a result, it is not only the case that there is greater consensus amongst government's social partners on job creation, but the Summit has been a useful in encouraging co-ordination and consensus within government itself.
The Job Summit has been correctly characterised as the 'end of a beginning' and much detail is still required in giving specific content to any 'new consensus' which may be emerging from Summit and through the post-summit processes which have been outlined.
Key Pillars of Job Creation
In addition to support for the specific agreements and projects outlined at the Job Summit, such as a new focus on rental housing, special employment programmes, accelerated human resource development and provincial projects; for Labour, some of the key pillars of a job creation strategy include the following:
Firstly, the economy needs skills, skills and more skills. Therefore, the effective implementation of the new skills bill, and associated skills levy, is a matter of absolute priority. But, this commitment must be taken further to include adequate resourcing of the education system (including, university and technical education). It is worth noting that the de-emphasizing of higher education in favour of basic and primary education, in developing contexts, is increasingly considered to have been a flawed aspect of the rapidly receding 'Washington consensus'.
Secondly, it is vital that investment promoting measures, such as, spatial development initiatives and tax holiday concessions, are employment sensitive. Industrial policy measures should be designed to include incentives for employment creation and disincentives for the favouring of capital over labour intensiveness (for example, tax holiday schemes could favour relatively labour intensive investments), and 'employment audits' should form an integral part of mid-term and final reviews of investment promotion programmes. As part of the commitment to basic labour standards, there should be a continuation of the firm policy position that investment will not be attracted by offering investors lower labour standards. Rather than entering such a 'race to the bottom' investment promotion should focus on attracting new investment through the provision of high quality technical and social infrastructure and through effectively functioning labour relations and dispute resolution mechanisms
Thirdly, while all parties agree that South Africa should aim at becoming an internationally competitive economy, there should be greater emphasis on achieving this through properly sequenced introduction of supply-side measures, including increased skills training and policies promoting R&D, rather than simply reducing tariffs in order to expose enterprises to the 'chill winds' of competition. Therefore, there will be a close analysis of the effect of accelerated tariff reduction on employment levels in key sectors, such as clothing, with the possibility that accelerated tariff reduction will be halted in these sectors. Also there needs to be an ongoing improvement of the effectiveness of customs control and anti-dumping prosecution in order to protect jobs from the effects of illegal imports.
Fourthly, mechanisms should be put into place to stem the shedding of existing jobs. For example, retrenchments should be more tightly regulated and, with the implementation of the new Competition Bill, the employment impacts merger activity should be more effectively taken into account. Mechanisms should also be put in place to see to it that social plan procedures, aimed at re-skilling and alleviating the problems associated with industries in decline, do not become standard justifications during retrenchment proceedings.
Fifthly, more appropriate and developmentally-oriented macro-policies should be adopted. The consensus around a commitment to fiscal discipline should not have the effect of neutralising fiscal policy, as in times of down-turn state expenditure should be used more effectively as a counter-cyclical tool. Macro-economic policy should provide for the adequate resourcing of expanded housing, infrastructure and public works programmes and should provide for 'right-sizing' – and not simply 'down sizing' - the public service. Such 'right-sizing' would entail that expenditure be guided by targeted teacher pupil ratios rather than these ratios simply being determined – devoid of reconstructive vision - by expenditure levels. In the short-run, increased resources for this programme could be sought through a restructuring of the state's public sector pension funds.
Yesterday's announcement of adjusted fiscal targets by Finance Minister Trevor Manuel – including the delayed implementation of the reduction of the deficit to 3% of GDP and the increase in the revenue target to over 26,5% of GDP up to the year 2000/1- combined with government's firm commitment to social expenditure and infrastructure delivery is in line with the Job Summit's commitment to a 'counter-cyclical package to compensate for the effects of lower growth and the current international crisis'. This approach should continue in order to see the adoption of a macro-economic policy stance capable of creating jobs and moving the economy onto a new growth path.
The great fallacy of labour market flexibility and the myth of the 'labour elite'
You will not be surprised that in Labour's vision there is no reference to the wide spread view that job's will be created by increased labour market flexibility or by pushing down wage levels. The avoidance of this approach is not just driven by self interest, but it is backed up with sound economic argument.
Firstly, getting rid of labour standards today does not simply lead to job creation tomorrow. Investment requires that investors will have a market in which to sell their products, this requires that for most products there is a sizeable population with sufficient disposable income. Investment requires stability and productivity, this is facilitated not undermined by a well-regulated standards-based labour market. Factors such as markets access, interest rates, access to credit, access to skills, crime levels and many other factors feature time and time again as more important determinants of investment than labour legislation.
A favourite hobby-horse of those of those lobbying for increased labour market flexibility is that, as promised in GEAR, the Minister of Labour should be given greater discretion in terms of the LRA in deciding whether to extend collective bargaining agreements to non-parties. In reality, this is a marginal issue which, even though it is of little real consequence, has become a rallying-cry of those pushing for greater 'flexibility' in the labour market. Research shows that industrial council agreements cover only 10% of South Africa's workforce and that only 1% of this 10% work for employers who have agreements imposed on them through extensions. No one can seriously argue that this is a prime cause of unemployment in South Africa.
Instead of quibbling about labour laws, a new economic consensus should include a commitment to implementing the newly legislated five year programme of post-apartheid labour law reform, rather than trying to chip away at it. Other societies made bold decisions at critical stages in their development to build their economies on the basis of a stable floor of worker and social rights. But. in SA we are seeing a cynical attempt to try and weaken government's resolve to improve conditions for the poor and working people and try and weaken the unions in a way that could not be done under the former government.
Secondly, and with reference to this conference's them of 'Societal Transformation and Industrial Relations' it is fitting to respond to arguments that the unions represent an 'elite' blocking the employment opportunities of the unemployed.
This is a misguided argument in that it fails to recognise that the transformation of the apartheid labour market, characterised by segmentation, inequality and exploitative relationships, is an important aspect of broader social transformation.
It is an uninformed argument as it fails to understand the nature and character of South Africa's progressive trade union movement which has historically understood the link between the interests of workers as workers and workers as members of the communities from which they come. For example, an analysis of Labour's proposals to the Job Summit shows a clear intention to assist in community upliftment beyond the shop floor, for example through restructuring of the public sector pension funds to release resources for development when a more narrowly self-interested union movement would have campaigned for the fund to be fully-funded regardless of the social consequences, the campaign for prescribed assets and for the improved use of union investment funds in boosting real job creating investment. Also the commitment to a campaign for one days worth of wages to be donated for job creating projects and proposals for a more effective social security system are cases in point.
The argument about a 'labour elite' is also a mischievous as it attempts to mobilise 'the unemployed' against 'the workers'. This is a dangerous and divisive ploy which smacks of the classic divide and rule tactics of the true elite. Furthermore, it fails to recognise that about 71% of unemployed people live in homes where there is at least one regular income earner. Therefore lower wages for workers may actually increase poverty for large sections of the unemployed as they depend on these wages. Those who are today cleverly trying to mobilise the unemployed against workers are likely to find that in the not to distant future the unemployed will tend to side with the demands of workers, as it is irrational to bite the hand that feeds.
Finally, in the aftermath of the Job Summit it is my assessment that we have taken another important step in a long journey towards accelerated job creation. Labour, together with business, government and other political and social formations, is integral to that process and will continue to contribute vigorously to this life and death debate.