Labour brokers provide deserved breaks

ONE of the spin-offs from the recent #FeesMustFall campaign was the #EndOutsourcing campaign, which is premised on the dubious idea that outsourcing condemns workers to "slave wages" and in effect amounts to "human trafficking". The inherent contradiction between the two campaigns seems to have been lost on most students — the reason universities outsource some functions is because it is cheaper for them to do so, which means they can charge lower fees.

Consider an extreme example from your own home. When you require bread in the morning, you don’t have a baker on demand and you almost certainly do not grow your own wheat and mill it yourself. Similarly, you don’t teach your own children — you outsource that job to schools and universities. When your car breaks down, you don’t fix it yourself, you don’t pump your own water, you don’t generate your own electricity and you almost certainly did not build your own home.

You outsourced all of these jobs, not because you couldn’t do any one of these activities yourself, but because you specialise in the things you do best; earn an income and purchase services from others who specialise in their respective fields of expertise. This not only saves time but money. If you tried to do all of these things and more every day, you would not get far in life.

The division and specialisation of labour is an integral part of a market system, without which we would be relegated to a miserable subsistence livelihood and, to paraphrase Thomas Hobbes, life would be "nasty, brutish, and short".

Apart from the economic rationale for not doing any of these activities yourself, SA’s labour laws are so restrictive that labour brokering has emerged as a way of lowering an organisation’s expense of acting as an employer. A labour broker or "temporary employment service" is defined in Section 198 of the Labour Relations Act as a person who, for reward, provides another person to a client to work for that client for remuneration. Section 198 also provides that the temporary employment service (the "labour broker") is regarded as the employer of the worker in question. Thereby, the labour broker, not the client, is the employer of the worker.

This system allows the clients to outsource all their labour requirements (including labour law problems) to the labour broker. The reason this roundabout way of doing business has developed is due to our existing labour legislation. Laws meant to protect workers create such an unnecessary burden on employers that they prefer to pay labour brokers a fee to administer their staffing requirements and problems. Labour brokering has become increasingly common in South African society and is responsible for about 1-million South Africans employed on any given day. It is the single biggest and most effective channel for introducing never-employed black youth to the labour market.

Labour brokers provide valuable employment for those who voluntarily seek out their services rather than face the bleak alternative of being unemployed. It makes no sense to ban them. If — as the unions and students demand — every employer is forced into having a fixed, permanent workforce whose employees can be dismissed only with difficulty, not only will employers think twice before hiring new workers, but this will lead to higher prices for their goods and services. The obvious, unavoidable consequence of this will be an increase in unemployment and more expensive goods and services.

If the South African government wishes to resolve this country’s unemployment problem, it must allow citizens to be adults and to have the freedom to negotiate their own terms of employment. Legislating people into employment cannot solve the unemployment problem. Banning labour brokering and the outsourcing of labour will just worsen SA’s unacceptably high and rising unemployment problem and make everyone worse off.

• Urbach is a director of the Free Market Foundation

This article was first published by the Business Day on 05 January 2016.


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