Allowing mass unemployment to steadily increase is not only cruel but unnecessary. All that is necessary is to exempt the unemployed from all, or the most onerous, sections of the Labour Relations Act, and give them exemption certificates that allow them to enter into employment contracts with employers on any conditions they choose. Give the power to the jobless. Give them back their right to contract. Give them the freedom to make their own decisions about their own lives. Give them the advantage of a document that harms no one but gives them a 100% better chance of getting a job.
Mass unemployment can be overcomeCritics of SA’s labour laws, with good reason, blame the laws for keeping 8.2 million potential workers unemployed. Job seekers, for their part, cannot understand why they are unable to find jobs. Given the fact that they are constantly turned away, they conclude that potential employers will not employ them at any price, not even it they are prepared to work for transport and food just to get work experience.
Under the right circumstances nobody should be unemployed except those who do not want to work. Potential employers should be able to explore ways to co-operate with job seekers in mutually beneficial activities. Excessively onerous regulations and requirements currently prevent the formation of innovative and creative enterprises that would absorb available labour.
Minimum wages during apartheid
The author of South Africa’s War Against Capitalism, economist Walter Williams, described how minimum wages were used to exclude blacks from jobs during the apartheid era: ‘… white unionists argued that ‘in the absence of statutory minimum wages, employers found it profitable to supplant highly trained (and usually highly paid) Europeans by less efficient but cheaper non-whites.’ One South African union leader said, ‘There is no job reservation left in the building industry, and in the circumstances I support the rate for the job (minimum wages) as the second best way of protecting our white artisans.’
Those unionists were clear and open about their objectives, which is unusual. Most often, the call for minimum wages is disguised as a method to assist low-paid workers and reduce poverty.
Most of the cases coming before the CCMA are for alleged wrongful dismissal and of these, the great majority involve small businesses. This is not surprising as the procedural requirements demand careful study of the legislation and meticulous attention to detail – skills that are not generally found in small firms.
Being kept unemployed by laws that would protect them from dismissal if they were ever employed is what some economists call a ‘negative benefit’ for the jobless. If unemployed people realised that the unjustifiable or wrongful dismissal provisions constitute such a major barrier to their employment, it is likely that the vast majority of them would readily forego this doubtful privilege in exchange for the right to contract freely with potential employers.
SMEs and employment
Given the power of SA’s labour unions, government is prevented from adopting conventional methods for reducing unemployment, such as exempting SMEs and individual employers from the more onerous aspects of the labour laws. Yet SMEs are important suppliers of jobs in enabling employment environments.
According to the European Commission 2014/15 Annual Report, EU SMEs were responsible for 71.4% of the increase in employment in the non-financial business sector. The sector employed almost 90 million people, 67% of total employment. Significantly, 93% of SMEs are Micro SMEs employing fewer than 10 people.
The SA government has not given sufficient attention to removing obstacles that retard the development of micro businesses. It is these small firms that have the potential to absorb millions of the unemployed. Owners cannot afford to spend a large percentage of their time on studying, properly applying and dealing with labour laws, especially the Labour Relations Act (LRA). In other countries it is possible to exempt Micro SMEs with fewer than 10 employees from onerous labour laws, but as experience has shown, the adoption of such a policy is likely to be strongly opposed by the labour unions.
Allowing the jobless into the labour market
SA needs to create a labour dispensation that will not reduce the high level of job security of the employed, and particularly the labour union members, and yet open up the job market at the entry or small business level to give the unemployed the opportunity to secure jobs. Most people would say there is no such option, yet there is, and it should be considered given the crisis proportions of SA’s mass unemployment.
What the labour dispensation needs to tap into is the latent demand that is currently not being filled at Micro SME level, the potential employers who do not want to deal with the LRA, minimum wages, SARS and other laws and regulations that they currently avoid by not employing people.
Job Seekers Exemption Certificate (JSEC) Proposal
JSECs should be given on application, as of right, to unemployed people who have been jobless for 6 months or more. They should be available at municipal offices and be valid for at least 2 years to increase job mobility. Written contracts containing basic conditions agreed to by the parties should be entered into. The employees would have all the protections provided by the common law available to them.
Author: Eustace Davie 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 FMF.