Give the poor unemployed a break

It is beyond dispute that the unemployment situation has reached national crisis proportions. As with any national crisis, bold, creative and, in many cases, unpopular decisions have to be taken. When one confronts a crisis of national magnitude it is sometimes helpful to ask whether one is dealing with a manifestation of structural faults and then to implement the necessary corrective measures. One must muster the audacity to forge ahead, despite incurring the wrath of vested interests, knowing that in the long term the benefits will come through.

The ability to take unpopular decisions when they are necessary distinguishes statesmanship from myopic politicking, which focuses solely on the short-term pros and cons and at times is tantamount to playing to the gallery. Hard decisions may require a paradigm shift. Persistent unemployment has serious implications. It excludes a vast section of the adult population from productive participation in economic activity and the country is the poorer for that. Unemployed people are desperate people and desperate people may be tempted to turn to crime in an attempt to meet their needs. The cost, in terms of the mental and physical health of the unemployed and their families, is enormous. What is to be done?

In his booklet, Jobs for the jobless, Eustace Davie propounds an ingenious solution that can contribute to the alleviation of poverty and generate employment, especially for the unskilled, thereby helping to salvage what little self-respect the unemployed have left. The definitive feature of the proposal is its point of departure. It is predicated on the current reality of the country’s labour legislation. Davie proposes that labour legislation should be left as it is. He proposes that a special certificate of exemption be instituted, in terms of which exemption from the provisions of labour legislation should be granted to people who have been unemployed for a period of over six months. Importantly, the exemption is for the unemployed and not for the employer.

The employee, counselled by a designated labour department official, applies for and is granted a Special Exemption (SPEX) Certificate. This certificate allows a certificate holder to enter into an employment contract with a prospective employer on any conditions they find mutually acceptable.

The special exemption certificate would be applicable to employment in small, medium and micro enterprises, as they account for the greatest slice of job creation. It should be borne in mind that small and medium enterprises and informal businesses are vital points of entry into the labour market for both skilled and unskilled people, at both entrepreneurial and employee level. The SPEX certificate would be valid for a period of two years only. This provision is designed to safeguard against businesses that might want to take advantage of the certificate by sacking their employees and rehiring them on a SPEX basis at a lower rate.

The SME sector, including the informal sector, in most countries is the primary job creator according to Enterprises in the European Community, Office for Official Publications of the European Communities, 1990. The EU study shows that SME’s account for a very large percentage of the jobs in the following countries: Spain (91.9%); Italy (82.8%); Portugal (80.3%); Luxembourg (75.7%); Belgium (71.5); Great Britain (70.0%); Germany (64.2%); Netherlands (61.3%); and France (60.9%). A further study in 2002 revealed that more than two-thirds of all jobs in the EU are provided by SME’s employing 0-249 employees, 93% of them in firms employing 10 or less people.

Vested interests will cry ‘exploitation!’ In dealing with this criticism it is important that we confront the stark reality that what is worse than being exploited is not being exploited. It is indeed very sad but a reality that many unemployed people are confronted with stark options: to work for what many of us might regard as exploitative wages, to starve, or to rely totally on employed relatives. Sticking our heads in the sand, thinking that if the unemployed are prevented from accepting low wages they will somehow find another means of earning an income, or that the problem will simply go away, will be of no help. Unemployment in this country is already a calamity. If it is not seriously addressed the danger is that the situation will escalate out of control.

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 Free Market Foundation.

FMF Feature Article/ 06 June 2006