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Traditional labour policies are hurting SA

The country needs a leader who will tell unions that reforms will be short-term, but must – and will – happen.
The consequence of inaction is the thread holding everything together that could break at any moment. Image: Moneyweb

When we learnt that 237 000 people had lost their jobs in the first quarter of 2019, it was an indication of the shape that 2019 would be taking. Things progressed, with bad news all around for the South African economy and workers. Furthermore, the economy remains scaffolded by upper-hand politics, where big talk doesn’t translate into bold policy action.

These dynamics are factored in when rating agencies consider a country’s economic outlook. Based on Moody’s and S&P’s appraisals this month, South Africa just escaped junk status, but a downgrade is inevitable. Unless the low-growth cycle, the rapidly skyrocketing fiscal deficit, the insignificant labour absorption rate and state-owned enterprises’ debt are all magically fixed in the next quarter, I don’t see how a rating downgrade will be avoided.

Read: SOEs’ results proof of massive problems
And: SA outlook cut to negative by S&P amid fiscal woes

Not that politicians and their plans have ever managed to reverse the decline of the economy.

If anything, politics has become an overpowering odour that is worsening the country’s economic conditions.

The consequence is a society that is on a sword’s edge, as many people barely have the necessities and the thread holding everything together can break at any moment.

The law of unintended consequences

What should be worrying our fellow compatriots is that in a span of 18 months of the current administration, no one – the president included – has shown any sign of leadership capable of what was so obvious to French economist Frédéric Bastiat (1801-1850), who, in his essay ‘What is seen and what is not seen’, wrote that “the good economist takes into account both the effect that can be seen and the effects that must be foreseen”.

What our leaders time and again fail to understand is how the current economic slump is ambling the country toward a social crisis that no grand or visionary speeches, themes or plans can fix unless decisive action is taken.

Here is one example: months ago President Cyril Ramaphosa hinted about possible labour reforms to tackle labour market challenges, including the labour absorption rate and productivity predicament. Talks about amending labour laws to create a business-friendly environment to attract more investment were gaining momentum – but the noise has since died down. It began to fade at the first sign of union unhappiness.

It’s time to grasp the nettle firmly

What the country needs is bold action from a leader who will tell the unions that the reforms will be short-term, but they must and will happen, because without such flexibility the economy won’t attract investment or create jobs.

If politicians use evidence-based arguments in their engagements with unions, they would surely point to the 2018 Organisation for Economic Co-operation and Development (OECD) ‘Good Jobs for All in a Changing World of Work’ Jobs Strategy report, which declares that South Africa has the lowest productivity growth rate among emerging economies. Of the OECD’s 36 member countries, only three have negative rates – SA, Brazil and Argentina).

In particular, low productivity performance in South Africa is reflective of  the skills shortage, the high cost of doing business, and the lack of competition in many markets.

How do we change this?

One way is to use flexible labour reforms that respond to the constantly evolving realities of work.

Technological advancement and the interconnectedness of the global economy has redefined work and the workplace. Growth in employment is characterised by trends towards positions that are temporary, subcontracted, casual and precarious. This reorganisation of work will soon spread to sectors that have traditionally offered fixed-term or permanent employment. In other words, as work is reorganised, so is production.

Labour laws that temporarily forego job protectionism and adopt flexibility will enable companies to employ more people as job opportunities are created.

Traditional labour policies have to change and be adaptable to reflect the shifts in work and workplace.

“Hooray!” says the private sector – it means more freedom to fire and hire without the constraints of the labour laws.

Not so fast.

The government must be clear that flexibility in labour laws does mean job insecurities for workers. Reforms must come with a condition and be supported by rules that will enable workers to benefit from protective measures, especially those who are not safeguarded by fixed-term employment.

Self-imposed constraints

The constant shifts in the global economy have resulted in redefined work and will continue to do so because of innovation, technology and new niche jobs that are emerging. Low productivity and inflexible policies that cannot respond to the labour market changes that are unfolding are constraints that we cannot afford.

Read: Quantity vs quality: SA’s job-creation dilemma

Bastiat understood how the present insignificant yet visible ‘bad’ (in this case, the pain of making labour laws flexible and facing union dissent) must be followed by a greater but invisible future ‘good’ (job creation and adjustable labour laws to match the changing world of work without causing economic insecurities for workers; a labour force that can seamlessly move with employment trends).

In short, inflexible policies – and not just those related to labour – may be great for now, but they can have far worse outcomes for the future.

It may be that as you read this, you work in the country’s highest office or know someone who does. Pass the article along and remind them of need to consider the unseen as much as you discuss the seen.

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COMMENTS   24

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“Hooray!” says the private sector – it means more freedom to fire and hire without the constraints of the labour laws.

Not so fast”.

This then begs the question: ” why would anyone want to fire a worker who is productive, a net creator of wealth and an asset to the company”?

You hire/fire for workload, so the most productive are not fired but exploited. Some labour protection is good. Our issue is a skills issue though, labour protection in SAs case is extremely unhelpful to business.

But the most productive exploited worker gains experience beyond his normal duties. They will be in line for promotion. They will have a better CV to apply for jobs in other companies.
Not so?

Oh RTG, I have been released quite a few times from my post, because, although I was very productive, extremely committed, and way too honest. Having become a kind of whistleblower. Setting the standards higher than my superiors. And not taking sides, being rather impartial.
Or simply because one or a combination of colleagues sucked up to the honchos, badmouthed, backstabbed me like anything, and manipulated me out of my post. Jealous on my position, competency and integrity. I am very poor in playing disgusting company, organisational politics.
Typical unscrupulous, narcissistic, jealous bastards.
In other words, your final phrase is not always correct.
But as a whole, the labour climate, work ethics leave a lot to be desired in SA, that is for sure. Too protective of often dishonest or underperforming employees.
We could do with a more Japanese, Chinese attitude to work ethics and discipline.
By the way, the article is dated 28/12/2019, but some of the comments are ONE month old ?
Recycled in the holiday period ?

This will be resolved the painful way. Companies will just go bust or restructure.

It is apparent, the only people to address SA issues is the in the know ANC. They have been successful at it and going strong. The whole world’s advice is incorrect only they know better.
The ANC is not blind, the whole world is dark.

Oh brilliant pseudoscience again from Monweb,

Not a single mention of BEE in SA effecting anything.

Just ignore the elephant in the productivity room..

This type of soft quasi intellectual BS article belongs in fairy-tale magazines like Cosmo or even You.

@LuluAlert …why the insult when you agree that the article is whishy-washy?

Dead right Casi. Also, you can’t have it both ways. You can’t loosen the tight straps of our labour laws, but retain protective measures. The reason is that the lawmakers are making the straps especially tight, exactly where flexibility is required. We are in the situation in which we are, because labour wags the dog around. Business must be rid of any and every law that protects anybody who is too lazy, entitled and clueless. Merit should be the overriding criterion, or we will continue to bleed jobs.

“The real cost of the State is the prosperity we do not see, the jobs that don’t exist, the technologies to which we do not have access, the businesses that do not come into existence, and the bright future that is stolen from us. The State has looted us just as surely as a robber who enters our home at night and steals all that we love.” – Frederic Bastiat 1830

“How do we change this?” By following the labour practices of the world’s most successful economy, the USA and adopting one simple phrase: “You’re Fired!”

After which you pack your stuff up into a cardboard box and either leave the premises or get escorted out. Easy peasy …

ANC will never even consider to do away with unions .They are not that stupid not to realise they will lose votes They are only interested in votes and to “moer” with economy and those ‘fancy’stuff

Whose tradition?? Certainly not Japanese / Taiwanese.

So the moment that the reduced labour force has resulted in the business becoming profitable they start hiring again and go back to square one. Me thinks not….

Our ‘people’do not want work, they want jobs. Why is it that most domestic workers in Cape Town are immigrants? With a workforce that have a bad attitude this country will stay a mediocre country.

this stuff is all Western ideas. ANC = Socialism….oops that was also a Western idea by Marx.
Africanism (apologies Absa) – Keep them unschooled and poor to be able to manipulate for votes

As the unions control the economy and the ANC is both dependent on, and intimidated by the unions, nothing will happen, other than further increases in unemployment rates.

I don’t think the unions control the economy. They only help to influence it negatively.

A good article.

The unions have much political influence – with little political accountability. The split in the ANC has to happen but pres. CR does not have Mandela’s guts.

The USA with it’s “quick hire quick fire” policies creates many more jobs than for example the EU where hiring is seen as adoption.

The question remains: Does Ramaphosa have the balls to do that? The answer is a resounding no!

Again, it all boils down to property rights.

If you say to me that someone has a right to a job, that the position belongs to him, that he needs to have job security, then, by definition, you are saying that the employee has a right to the property, or assets, of the owner of the business. Very few level-headed people will agree that an employee has a right to the assets of the business, yet the idea to use the law to protect job-security is quite popular.

An investor has to buy shares in a company to the value of R12 million if he wants to earn an income of R20 000 per month is the dividend yield is 2%. The salary earned by any employee is similar to the “yield” on capital invested by the business owner. The value of a job that pays R5 000 per month, is a capital investment of R3 million at a 2% dividend yield. When the labour laws enable militant unions to enforce job-security and unproductive wage growth, then the law expropriated the capital investment that pays the salary. The value that pays the wage was taken away from the owner and handed over to the employee.

South Africa has the most destructive and militant labour unions in the world. They are enabled and protected by one of the most socialist governments in the world. Therefore, we have the highest unemployment and inequality in the world. This is the result of the confiscation or expropriation of the capital that is meant to fund the wages. Nobody will invest his capital to start a business when the government expropriates it utilizing populist labour laws.

A worker has the right to sell his labour in the open market wat a price the employee is willing to pay for it. This way, everyone has ownership over his property. Nobody is plundered, abused or exploited. They cooperate freely to their mutual benefit.

The problem that we have in SA is not so much the change in jobs and the change in technology but rather the rampant birth rate – and the poor state education system. We are producing far too many poorly educated unemployable people who are going to financially drain the fiscus and turn the country into a basket case

I reserve the right to laugh until i collapse!

End of comments.

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