Labour unions founded on voluntary association are free market entities

The FMF has no problem with labour unions and business organisations, as private parties, engaging in collective bargaining through bargaining councils. That S 32 of the Labour Relations Act (LRA) 1995 prevents the Minister of Labour from exercising discretion in the decision to extend such bargaining council main agreements across entire sectors to all parties, including those who did not participate in the wage negotiations, subject to criteria regarding majority representation is the problem.

It is unconstitutional and unconscionable that, currently, the Minister, compelled by a decision by private parties (fundamentally big labour and big business), “must” extend wage and conditions of employment agreements without paying any regard to the wider socio-economic consequences, such as closure of small businesses and loss of jobs by their employees because of the excessive costs imposed on them. The FMF’s well-known legal challenge to the LRA is to amend just one word in S 32: to change “must” to “may” will restore ministerial discretion to the pre-1994 basis.

If the Minister, having regard to all the circumstances, should conclude that to impose a particular Bargaining Council agreement upon non-parties would cause unemployment and great hardship, it is essential that the Minister should have the right to decline to extend such agreement. This would apply, especially, to small firms that do not have the capital to buy expensive machines and rely heavily on labour-intensive methods of production. The very kind of firm that government should be looking to for increased job opportunities and the reduction of unemployment. It would also apply to firms located in country towns where wages and living costs are lower than in the cities. To impose city-level conditions on these businesses would tend to force their closure with attendant job losses.

Statements to the effect that the FMF is opposed to labour unions and collective bargaining are false. Labour unions, if their activities are based on voluntary negotiations and agreement, are free market entities. Not tolerated in Communist regimes, independent labour unions should and do operate freely in free economies.

Author: Eustace Davie is a director of the Free Market Foundation and the author of Jobs for the Jobless. 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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