Unemployed versus Unions: Getting the Priorities Right

More than 6 million South Africans are unemployed and unionised members are becoming more cautious about their union engagement. Union membership is on the decline, and this trend has been exacerbated by the decline in the labour market, which according to Stats SA lost 191,000 jobs since the global recession hit in 2007. The number of registered unions has decreased by 39 per cent from 485 in 2001 to 198 in 2009 and union membership decreased from 35.2 per cent of total employees in 2001 to 24.6 per cent in 2009. The largest membership decline occurred in the finance and utilities sectors.

A decrease in the labour union membership and number of registered unions was to be expected. The private service sector, which is less unionised than other sectors, has grown, and there has been a general proliferation of non-unionised small businesses. The union movement expansion from 1994 to the mid-2000s has been one of the contributing factors to the loss of jobs in the SA economy, especially in the highly unionised manufacturing sector. It was pointed out in a 2008 study conducted jointly by the department of economics at the University of Cape Town and the Southern African Labour and Development Research Unit that increased inefficiencies within the country’s unionised dispute resolution mechanism, including loss of earnings due to strikes, has caused some employees to leave unionised firms for those that are less unionised.

Some employers in the union-dominated sectors prefer to remain small rather than to expand and face unions with their sometimes unrealistic demands. Peter Moll, writing in 1996, predicted that labour market constraints, including union activity, would increase unemployment by causing employers to substitute capital for labour in the short-term and in the long-term invest in more capital intensive technologies. Despite the dire situation in the SA labour market with many people out of jobs and no light at the end of the tunnel as far as potential increased employment is concerned, no tough decisions are being made that are likely to open up the jobs market. The employment outlook in the third quarter shows that there is likely to be yet another increase in unemployment. The ANC-led government has labour union COSATU as its alliance partner and this alliance forces the government to attend to demands of unions at the expense of the unemployed.

One can logically conclude that the ANC-led government will continue to put the institutional interests of unions ahead of those of the unemployed. Instead of trying to get the majority of South Africans to work, the government keeps many people out of jobs by increasing social grants that reduce their incentive to work and increase the dependency trend that has developed among the unemployed. According to Stats SA’s general household survey (2010), 28.4 per cent of individuals in SA depend on social grants. Alarmingly, in certain provinces like Limpopo and Eastern Cape about two thirds of the individuals depend on such grants. The high percentage of social grants correlates with high levels of unemployment in these provinces.

Nationally, 44.6 per cent of households received at least one grant. Limpopo and Eastern Cape contained the largest proportion of beneficiary households (57.9 per cent and 55.4 per cent respectively) while Gauteng and Western Cape contained the smallest proportions. The majority of grant beneficiaries were black African (32.2%), followed by the coloured (21.9%) and Indian/Asian (12.6%) population groups. Only 5.9 per cent of the white population received grants.

According to the Heritage Foundation, unions in the US make businesses less competitive and discourage investment. This reduces jobs growth. US studies show that jobs fall by 5 to 10 per cent at newly unionised firms compared to growth in employment of about 4 per cent in identical non-unionised firms. This is similar to SA findings that the industries with less unionised members are more productive than those that are unionised. Productivity is substantially reduced by the high number of man days lost in highly unionised sectors. According to the Wage Settlement Survey Quarterly Report (2009), a total of 2.9 million man days were lost as a result of strikes in 2009 alone. The sectors that lost the highest number of man days were the textile industry which lost a total of 666,000 days, closely followed by the local government sector with 500,000 days lost.

It is not surprising that union membership is on the decline in SA and that unionised members are now less interested in strike actions as recently witnessed during the municipal unions strike. Traditional collective bargaining seems to be less attractive to many workers. As the private sector becomes more competitive, the role of union’s decreases and unions can do little on behalf of workers. Macun identified in his 1997 study that the increased cost of collective bargaining and inefficiencies in the collective bargaining process were the main factors making union membership less attractive to workers. During periods of increased unemployment, such as is currently being experienced in SA, many workers prefer to do their jobs than to risk losing them because of union activity. Unlike 2009, when the average wage increases awarded in wage settlements was 9.3 per cent and inflation was 7.1 per cent, the 2011 wage settlements reveal that workers have been accepting below inflation wage settlements.

The good news for SA is that big labour unions are discovering that workers will not continue to follow them blindly in dealings with employers. Though workers want a say in their workplaces, they are becoming increasingly aware of labour union limitations in serving their best interests. This was evident from the mass boycott of the municipal union’s strikes in Gauteng and other provinces. Workers for the first time pointed to widespread corruption and lack of accountability on the part of union bosses as the main reason for their stay away. Private sector unions have little power to raise their members' wages, while employers have learned that respecting their employees makes good business sense.

Those SA unions that are in alliance with the ruling government will not go down without a fight. They are lobbying the Zuma administration to protect their interests in return for future support in elections. Government is caught between having to protect the interests of its unionised alliance partners or choose to protect the interests of the majority of South Africans and particularly those of the unemployed.

A decision to put union interests first will lead to more suffering for the unemployed. The government can learn from the decreasing union membership that the rights of the majority of the unemployed are more important than protecting unionised interests at the expense of jobs. Many South Africans would prefer to earn a dignified income from work rather than to depend on government grants. Work for the unemployed would be possible if the government were to focus on unlocking the entrepreneurial potential of the unemployed by decreasing statutory protection for the unions and decreasing labour market regulation. The government could further improve the economic climate of SA through such proactive steps as decreasing trade regulations. This will go a long way towards helping to increase employment opportunities in the country.

AUTHOR Vivian Atud is an economist with 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 author’s and are not necessarily shared by the members of the Foundation.

FMF Feature Article / 06 September 2011


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