Nine million people in South Africa need real radical economic transformation (RET) to eradicate the failed economic policies that have condemned them to unemployment and severely retarded South Africa’s growth. South Africa’s archaic labour policy is a major reason that this country has one of the world’s highest rates of unemployment and low economic growth. Historically, South Africa’s labour regime is marked by restrictive labour policies aimed at suppressing broad-based labour market engagement. South Africa needs no more of the same. It needs radical economic transformation for which a radical and fundamentally different approach is required. One that the Free Market Foundation (FMF) has been advocating for decades.
Popular public and media discourse says government needs to ‘create’ jobs. Government cannot create jobs nor should it try. Instead it should stop introducing policies and measures that separate people with jobs to offer from people who want them. The role of government is to create an environment in which business and entrepreneurs are free to get on with the task of developing business opportunities that create further need to hire yet more employees.
Like any other commodity or service, labour, too, has a value – a price, and that price is wages. Prices inform the market price mechanism. People buy less of what costs more. Policies like a national minimum wage price many low skilled and mainly young people out of the market. FMF executive director, Leon Louw, says “All benefits have costs, and the cost of making things better for people with jobs through protectionist labour laws is that things are made worse for people without jobs.” Legislation like the Basic Conditions of Employment Act and the National Minimum Wage make it more expensive to hire people especially for small and emerging businesses.
Mandated ‘minimum’ or ‘living’ wages for some subject others to zero wages and destitution; one person’s minimum wage is another’s zero wage. The choice for low-skill workers is not between high pay and low pay, but pay and no pay. In other words, as American economist Thomas Sowell says, “the real minimum wage is always zero, regardless” of what the law says. The introduction of a minimum wage is not radical because South Africa has had minimum wages in some form or another since the first half of the previous century. What would be radical, and truly transformative within South Africa’s context, is to give workers and employers the necessary freedom in their relationships, whereby employers are given certainty, and workers given opportunity.
Contrary to President Zuma and ANC declarations, there has been considerable transformation in South Africa since the end of apartheid but much of this is due to the achievements of ordinary black South Africans rather than a result of government economic policy, a fact that government tries to deny.
Louw says, “There is a curious tendency to understate what has been achieved, especially by ordinary black South Africans taking advantage spontaneously and independently of their newfound liberty. A paradigm has emerged whereby only what is done for blacks by policy initiatives is acknowledged and the much greater and more impressive accomplishment by blacks doing things for themselves is virtually ignored.”
To achieve radical economic transformation in employment, the FMF advocates for two specific interventions that will lead to more jobs: the creation of a Job Seekers’ Exemption Certificate (JSEC) whereby individuals who have been unemployed for longer than a determined period of time can be exempted from the application of restrictive labour policies and accept work on whatever terms they agree to; and the establishment of Special Economic Zones (SEZ) close to urban centres where ordinary South African labour law does not apply.
Note to the Editor
This media release is 4b in a series of 10 in which the Free Market Foundation (FMF) will provide alternatives to the various policy discussion planks of the African National Congress’ 2017 National Policy Conference.
Previous media releases in this series:
ANC Conference must adopt real radical economic transformation – not more of the same paternal statism
ANC Conference must reject ICT White Paper and Hate Speech Bill for South Africa to drop Apartheidesque communications policy
Radical economic transformation means South Africans keep and control their own money
For radical economic transformation in energy, adopt the 1998 White Paper
You can access more in-depth documentation regarding the above on the FMF’s website:
FMF submissions and articles and publications
Submission: High Level Panel on Special Economic Zones ACT
Submission: National Development Plan – ECONOMY AND EMPLOYMENT
Article: Exempting the unemployed from the labour laws
Article: Black advancement in South Africa
Book: Jobs, Jobs, Jobs
Monograph: Jobs for the Jobless
The FMF will be hosting a media briefing on 21 June 2017, which will provide an overview of the FMF’s alternatives as well as our vision for Radical Economic Transformation.