Mass unemployment gathers many social ills

Eustace Davie is a director of the Free Market Foundation and author of Unchain the child. 

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This article was first published by City Press on 15 June 2023 

Mass unemployment gathers many social ills

Mass unemployment in South Africa has far-reaching socio-economic ramifications, the effects of which are felt by almost half of the country's population if not more. As a result, unemployment has been one of the most serious human rights issues in South Africa for several years.
In the matter of mass unemployment, the SA Human Rights Commission (SAHRC) has been a serious disappointment. It is one of six state institutions included in the Constitution to “strengthen constitutional democracy”. Having taken no visible steps to investigate, and address, the human rights components of unemployment (according to the International Labour Organisation, currently the highest in the world) the SAHRC has not carried out its share of the constitutional functions expected of it.
Minimum wage legislation has destroyed jobs
The cause of the greater part of the unemployment is simple to explain.
It results from the implementation of first the sectoral wage determinations and now the National Minimum Wage Act. In their recommendations to government, some of the economists who urged the introduction of the minimum wage in South Africa predicted at the time that an increase in the minimum wage would lead to reduced unemployment and higher rates of employment. Among the factors not considered was the considerable differences in the functioning of rural and urban economies and small towns and cities.
The United States government made a similar error when it imposed the same minimum wage on American Samoa as was being paid on the US mainland. The minimum wage was hastily withdrawn when it was discovered that the increased minimum wage was destroying American Samoa’s tuna fishing industry and causing major job losses.
How many businesses, especially in the rural and poorer urban areas of South Africa are similarly being destroyed by the imposition of the minimum wage?    
Exempt small businesses and jobseekers from the labour laws!
Instead of input on increasing the minimum wage, the Department of Employment and Labour should be seeking advice on how to separate out and exempt the small businesses that face ruin if they are compelled to pay higher wages.
Alternatively, the Department should considers placing the decisions regarding wages squarely in the hands of jobseekers. It is true that thousands of the currently unemployed workers would happily take responsibility for bargaining with potential employers about conditions of employment and job specifications, than to sit around doing nothing.
To make this possible, all the Department of Employment and Labour needs to do is to exempt the unemployed individual, on application, from the labour laws. This can be done by giving the jobseeker a Job Seekers Exemption Certificate (JSEC) – as the Free Market Foundation has long proposed – which would grant the holder the legal power to enter into a labour agreement with an employer of her or his choice on conditions acceptable to the JSEC holder.
Surely members of government do not take pleasure from surrounding themselves with poor, hungry, and helpless unemployed people. They do not need to exempt employers to end the misery. It is much easier and quicker to exempt the unemployed applicants from the chains of the labour laws on conditions acceptable to both parties.

Hayek’s wisdom
Friedrich Hayek, recipient of the Nobel prize in economics, has said:
“[N]ot to be ignored, according to the great economist, are the adverse ‘cyclical’ effects of third-world governments’ attempts to manage their economies on conditions acceptable to both parties, and the ability of these governments to remove employment opportunities from peripheral groups as concessions to established labour interests or misguided social reformers.”
On the same issue, he said: The people are deprived of work opportunities “by monopolies of organised groups of workers, ‘unions’, which create an artificial scarcity of their kind of work by preventing those willing to do such work for a lower wage from doing so.”

Small businesses, together with individual employers, would under different circumstances, provide the best employment opportunities for the unemployed. Yet they face many regulatory reasons for not employing people. For the unemployed to get jobs, individual and small business employers must be set free from the labour laws that discourage them from employing people.
The unemployed need protection, but there is a vast divide between measures that provide protection and those that compromise an individual’s autonomy of choice.
South Africa's unemployed population are not children, and they do not need the law or any other authoritative force to dictate to them who they should work for and who they should not. Similarly, the details of their contract of employment and the terms on which they agree should not be subject to third-party approval.

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