There is no need for job creation. So long as there are unsatisfied needs there are jobs for all. Understanding unemployment requires us to know why people wanting to sell labour arent dealing with people wanting to buy it. There are obvious and less obvious explanations. The most obvious is that buyers do not value the labour as much as sellers want to charge. In other words, supply exceeds demand. Why would people want to charge more for a service than the value placed on it by buyers? The answer is that people who sell labour have alternatives they prefer.
Less obviously, and more commonly, there are forces beyond their control preventing workers accepting jobs they want from employers who want to employ them under mutually agreed conditions. At first, that seems bizarre and it is. What could prevent the unemployed from accepting jobs available to them? Incredibly, it is primarily laws that are supposedly for their protection; a multiplicity of labour, industrial safety and related laws that make it prohibitively costly and risky to give people jobs.
If workers have rights at all, their most fundamental right should be the right to work the right to take whatever job they wish as emancipated adults, chosen in preference, according to their personal and informed judgement, to whatever other alternatives may be available to them. However, patronising laws presume to know better than the unemployed themselves what they should do with their lives.
This may seem a harsh judgement on unintended consequences of labour laws, and it is. In truth, labour laws are not concerned with the unemployed. Indeed they ignore the unemployed, protecting workers with jobs at the expense of the unemployed. Marginally employed workers lose their jobs when it ceases to be in the interests of employers to employ them when laws intended for their protection made it too costly and risky. The eminent pro-labour British economist Joan Robinson noted that labour laws protect workers by throwing them out of jobs!
With all the much-vaunted concern about unemployment in South Africa it is time for the right to work to be established as a fundamental human right. All decent people should agree to stop obsessing about people who have jobs and the firms who employ them and turn their attention to the unemployed. The first and most humane thing to do for them is to let them decide for themselves what jobs to accept, and under what conditions. Needless to say, all decent people are also concerned about the opportunities this creates for exploitation, which has come to mean inappropriately abusing workers by paying them starvation wages or employing them under unsatisfactory conditions. The choice we face in reality is between allowing workers to decide for themselves, which implies risk for them, or forcing them to be unemployed against their will. Right to work laws should, in a democracy with emancipated citizens, not compromise the right to work under any conditions.
That does not mean that society and government should turn a blind eye to the real risk of extreme exploitation. There are a few surprisingly simple ways of protecting workers from abuse without having to compromise their right to work. Firstly, they should enjoy the full protection of common law, which almost everyone in the discourse on labour policy seems to forget. South African common law has elaborate and adequate provisions to protect workers from almost every abuse. The common law of contract and fraud, for instance, provides adequate protection to ensure that the conditions of employment to which they agree will be enforced and upheld and they will not be misled by false or misleading promises. Common law relating to work-place safety provides adequate protection against dangerous conditions. The common law of master and servant provides workers with adequate rights to leave employment without penalty when they have performed their contractual obligations or subject to reasonable penalties if they decide to leave in breach of contract. Rights of assembly, expression and the like, provide workers with adequate opportunity for expressing their individual or collective will, including picketing, demonstrations and strikes.
If it is this simple, why did anyone bother to impose costly and cumbersome labour law on workers and employers? Primarily because enforcing common law rights through the courts became excessively costly and cumbersome. The solution should not have been an entire new set of institutions such as labour courts and the CCMA, but to improve the civil and criminal justice system to perform its function expeditiously and affordably.
Another method of protecting workers from abuse is, again, elusively simple. It is probably the single most important thing that can be done not just for the unemployed but also for the so-called labour aristocracy (people fortunate enough to have jobs), and society in general. Increasing demand for labour turns a buyers market, in which there is more supply than demand for labour, which is to the advantage of employers, into a sellers market in which employers have to compete for labour by offering ever-improving wages and conditions of employment, such as shorter working hours, higher over-time pay, earlier retirement, better benefits, and so on.
Increasing the demand for labour is not only the most effective thing that can be done for the protection and benefit of workers, but it is the one aspect of the discourse on which there should be complete consensus amongst unions and employers, and left and right wing intellectuals. It is hard to imagine a case against wanting to have conditions where there are so many people in business, and businesses are doing so well that they want to employ more and more workers to the point where there is a labour shortage and workers and their unions are in the strongest possible bargaining position.
This leaves a simple question with a complex answer: how to improve demand for labour? The answer is complex only for people who dont yet know that there is no longer room for informed debate about how to promote growth in labour-absorbing businesses, and economic growth in general. The evidence in recent years has established with as much certaincy as is possible in social science that job opportunities with rapidly improving working conditions and high rates of economic growth, development and prosperity generally, are created when, and only when, there is more economic freedom as defined by internationally recognised criteria. The most sophisticated of a number of published indices measuring economic systems is Economic Freedom of the World (www.freetheworld.com), published annually by an international network of policy institutes.
The solution to South Africas unemployment problem therefore is to establish the unambiguous right to work for all South Africans, and to protect them from abuse by the effective enforcement of their common law rights on one hand, and increased demand for labour on the other. Finally, the Free Market Foundation has anguished over the years about what the government can do within the limits of South Africas political and labour realities to ameliorate the plight of the unemployed until sustainable solutions are implemented. In Jobs for the Jobless we suggest that workers who have been unemployed for six months or more should be issued with Special Exemption Certificates, exempting them from the labour laws and allowing them for a period of two years to contract with SMMEs at any wage and under any conditions of employment they find acceptable.
The never-ending debate as to whether or not the labour laws keep people unemployed can be easily settled by empirical evidence. Choose an area such as Soweto. Issue exemption certificates to all qualifying jobless people in the area, and see whether they can find jobs when they have the right to decide on their own working conditions.
Author: Leon Louw is the Executive 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 authors and are not necessarily shared by the members of the Free Market Foundation.
FMF Feature Article/ 23 August 2005, Policy Bulletin / 20 October 2009
Publish date: 30 October 2009
The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.