Feature Article: Unlock the labour market for the unemployed

It’s time for South Africans to vote once again. Are the incoming policymakers and leaders going to open their ears to the cry of the millions who have suffered from ill-chosen policies over the last years? Are they going to heed the cry “Just let me work!”

Increased demand for labour from private employers is the only factor that can improve SA’s devastating unemployment situation. Regulatory disincentives, though, make employers avoid, like the plague, taking on young, unskilled, or long-term unemployed people. To encourage and make it necessary for businesses to hire more workers, the efficiency, innovativeness and hiring ability of firms must be increased. This calls for the removal of all the regulatory barriers that interfere with business operations.

Jobs for the 8.2 million unemployed, 3.4 million of whom are under the age of 34 years, will not suddenly appear without a substantial policy change. Government employment, paid for out of taxes taken from the private sector, does nothing to alleviate the situation. One tax-consuming job in the public sector destroys at least one wealth creating job in the private sector. Only jobs in the private sector add to the growth of the real economy.   

Why is it that the large majority of the unemployed in this country are black and young? Are our labour laws not supposed to be designed to be favourable towards black workers; to protect them from unfair treatment at the hands of supposedly uncaring employers? So what has gone wrong? Why has experience not made it obvious to us all that the labour laws are the source of our problem? Why is it so hard for all to see, and acknowledge, that the unemployed would be better off without the “protection” that is preventing them from being able to find jobs?

Some years ago, the FMF put forward a proposal for reducing unemployment in the country. The central argument of the proposal is that the job security provided by the labour laws to people who already have jobs has the inescapable consequence of preventing those who are already, as well as those who become unemployed from getting jobs. Job security for some incurs compliance costs for employers that considerably increase the cost of employing workers and thereby raises the cost of doing business, and in certain cases even causes companies to fold.

Compliance costs, which include time and money spent by employers in the CCMA, for minimum wage, “unjustifiable dismissal” or some other contravention of the Labour Relations Act (LRA), of which small employers are often not aware, cause some employers to rather hire foreign unskilled workers because it has become less risky. Foreign employees personally handle their relations with employers because they generally don’t have access to the CCMA.

What the employment of “unprotected” foreign workers reveals is that if South African job seekers had the same opportunity as foreign workers to enter into contracts with employers without the more onerous aspects of the LRA hanging over their agreement, employers would, without hesitation, employ more people.

The FMF proposed that anyone who has never been employed or who has been unemployed for six months or more should be issued, on request, a Special Exemption Certificate, valid for at least two years, that exempts the job seeker from the provisions of the LRA. An absolute requirement is that written contracts, agreed entirely between the parties, be entered into between employers and certificate holders, (who are the two directly interested parties) clearly setting out the conditions of employment. The six month waiting period is to stop employers from firing workers and taking them back when they have exemption certificates. The two year validity period is so that certificate holders have the flexibility to change jobs until they find one that suits them best.         

US economist Walter Williams explained how during apartheid similar restrictive legislation was introduced to protect white workers without appearing to be racist. He wrote in his book South Africa’s War against Capitalism, that in order to hold onto their jobs, “White South African workers had to enlist the coercive powers of the government through minimum wage, rate for the job, and job reservation laws.”  Note, particularly, that minimum wage laws were used as a mechanism to prevent black workers from out-competing whites for jobs, in other words to keep out the black workers. Minimum wage laws take away the bargaining powers of the most vulnerable job seekers and keep them from getting jobs. They did during apartheid and they still do today.

Employers were constantly pushing the apartheid government to allow them to employ black workers, particularly in the mines and the building industry, which is evidence that black workers could outcompete white workers when allowed to do so. Professor Williams found that, “In 1970, almost 40 per cent of all building construction jobs were reserved for whites only.” By 1977, only 20 per cent of the jobs were protected.

Recognise that if the energies and skills of black South Africans had been fully employed in the economy throughout the country’s history, the economy would have been much stronger than it is now. Restricting black workers from advancing to better jobs was not only a crime against them and their families, but a huge drag on the economy as a whole.

What applied during apartheid also applies now. If anyone is prevented by laws and regulations from employing their talents, skills, capital and energy, peacefully and to the best of their ability, it harms not only the individuals concerned, but the entire economy.

If we do not unlock the labour market for all to participate in it, then we will be overtaken by not only Nigeria, as has happened, but also by other African countries and our economy will shrink to third place on the African continent much sooner that we think.

My prescription is: away with legislation and regulations that cause unemployment; away with barriers to foreign investment and the entry of skilled immigrants who can invest and pass on sorely needed skills to the SA population; away with all measures that stop the SA economy from growing as rapidly as possible so as to absorb the unemployed into the workforce. Rather, let us have measures that give hope where, currently, there is despair, and opportunity where there is hopelessness. Respond to the call of the unemployed: Just let me work!

Source: 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.

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