Big Government and Big Labour: the unholiest of alliances

10 December 2014
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Labour unions have played an important economic, political and social role in the transition from apartheid to democracy. When black South Africans were barred from political participation during the apartheid years and the apartheid government explicitly and forcefully denied black South Africans a voice, labour unions effectively assumed a decidedly political role in the broader anti-apartheid struggle.

In post-apartheid South Africa, labour unions continue to play an intricate role in the political makeup. But, given their role – to represent vested interest groups, namely the organised employed – and considering the chronic unemployment problem in South Africa, is their on-going participation in the tri-partite alliance justifiable?

According to the latest quarterly labour force survey (QLFS), approximately 5.151 million working aged adults were officially unemployed. This equates to an official unemployment rate of 25.4%. However, a further 3.285 million did not actively search for work in the month prior to the survey but indicated they would work if there were jobs available. If we include these discouraged work seekers, the total number of unemployed increases to 8.436 million and the unemployment rate shoots to the more sombre but realistic rate of 35.8%.

The rise in number of people who have been unemployed for a year or longer is worrying. Where in 2008 there were 2.6 million people, in 2014 there are now 3.4 million people who have been unemployed for a year or longer. The greatest increase has been in the number of people who have been looking for work for more than five years - 1,0 million to 1,5 million.

A common sight on street corners and construction sites in South Africa is the number of young unemployed black people looking for work. That these young people are free to travel around the country, enjoy voting rights, use public amenities, and are not subjected to the cruelty and abuse of race laws enacted under apartheid is thanks, in part, to the labour unions and, specifically, to the Congress of South African Trade Unions (COSATU). Paradoxically, the fact that they are out of work and thus prevented from really being able to fully enjoy the freedoms that this country’s constitution guarantees to each individual is also, in large part, thanks to labour unions. In this respect, the labour unions have turned into a double-edged sword for the millions of poor South Africans.

With labour unions forming such an integral part of our society, one can easily lose sight of their primary role – to raise the wages and improve the working conditions of their members relative to equally productive workers in an identical, competitive, non-unionised sector. For instance, if there is a high demand for a particular job performed by a few people, these people will have a relatively large amount of market power and they will be in a position to determine their own pay and working conditions. In this instance there will be little need for these workers to be unionised.

However, if many people become engaged in this activity then the individual’s bargaining power will be diluted and each worker could be substituted for another relatively easily and thus their market strength is lost. In this scenario there is scope for a union to enter the market, sign up the individuals as members, bargain collectively on their behalf, and protect them by blocking the entry of anyone wishing to compete for their jobs.

Trade unions thereby block potential competition. Low-skilled individuals faced with the bleak option of being unemployed and enduring starvation for themselves and their dependants would be willing to accept lower wages and less stringent working conditions. For workers within the unionised sector, wages are secure. For as long as some individuals are protected in this way and earn money whilst others are denied the opportunity to enter the market inequality will increase.

For government to achieve its stated objective of reducing unemployment and stimulating growth, it must carefully weigh how labour market policies affect unemployment and hence South Africa’s prospects for growth and reducing poverty.

But why, in post-apartheid South Africa, does the ruling party continue its relationship with trade unions when there is a clear conflict of interests? The ANC needed labour unions in the 1980s and early 1990s but now it has created an economic albatross. The unions are not fighting for the rights of ordinary South Africans. Their interest is in ensuring that their members (and thus union officials and their salaries) are protected, whatever the implications of that protection may be.

Government officials, even though they are elected democratically, often promote the interests of their political party by securing favours for special interest groups. For example, after trade unions stepped up their call for the introduction of a national minimum wage, at the annual NEDLAC conference in September this year, Deputy President Cyril Ramaphosa said, “The talking time for the [national] minimum wage is over. We must move to how we deal with the modalities.”

Of course, Mr Ramaphosa must know that his argument in support of a national minimum wage will prevent low-skilled individuals from gaining employment. But he doesn’t care: such policies strengthen the party’s power base. Minimum wages are nothing but political power placed in the service of certain political interests in opposition to the general interest.

Minimum-wage legislation protects those that have jobs at the expense of low-skilled individuals who are unable to enter the labour force at the legislated minimum. Such political manipulation is not only unjust; it is morally reprehensible – and made all the more so by the fact that not one in a thousand of its victims understands the true cause of his or her plight. Simply legislating an increase in wages will not lead to an increase in production, will not lead to increased growth, and, certainly, will not lead to an increase in the demand for labour.

The current and the post-election government must start to think once again about ordinary poor South Africans. It will need to weigh the risks of taking on vested interests against those of increasing unrest and disquiet among poor, unemployed South Africans - the latter group is more volatile and unpredictable. The right and smart political thing to do is maximise the opportunities for poor unemployed people lest further and more intensive civil unrest breaks out.

Temba A Nolutshungu is a Director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author's and are not necessarily shared by the members of the Foundation. - See more at: http://www.freemarketfoundation.com/issues/exchange-controls-drain-sa-of-investment-and-skills#sthash.pNTxyFx8.dpuf

 Author Temba A Nolutshungu is a Director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author's and are not necessarily shared by the members of the Foundation.

 


Comments on Big Government and Big Labour: the unholiest of alliances





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12 Dec 2014, 18:20 Rory Short In a democracy the unwritten pact that underpins the democracy is that no matter from which political party it arises, the government of the day will endeavour to deal evenhandedly with all its citizens. The fact is that this is impossible for the ANC to do because it is part of the tri-partite alliance and the union element of the alliance only represents its members who only form a fraction of the total SA population. The ANC should break from the alliance.