South Africa’s current headlines are dominated by the ongoing power crisis, which has a crucial impact on the country’s economy. However, while the power crisis is undoubtedly significant, it is crucial not to forget the ticking time bomb of the country’s unemployment crisis. The two crises are inherently linked, as less power means fewer jobs. But, even if the power issues are resolved, the unemployment crisis remains a severe issue that demands attention. This article delves into the root causes of the unemployment crisis and explores why labour market reform is urgently needed to empower individuals to make their own decisions and negotiate contracts that suit them. Read more below.
Allow employees the freedom to negotiate
By Mpiyakhe Dhlamini
Over the past few months news headlines have been dominated by the power crisis, while this is understandable given its fundamental importance to the economy, we should not lose sight of the unemployment crisis. In fact these two crises are related, less power means less jobs. However, fixing the power issues will just bring us back to where we were in the mid 2000’s, in the 3rd quarter of 2005 we still had an unemployment rate of 23.5% and in the 3rd quarter of 2022 this had gone up by 40% to 32.9%.
While the energy crisis has exacerbated this, we still have a ticking time bomb of an unemployment crisis. What do we mean by ticking time bomb exactly? Consider the riots in KZN in July 2021, these saw looting of businesses, the security forces were helpless to stop it and ordinary citizens had to step in and defend themselves and their businesses. These were largely limited to KwaZulu Natal due to the unique political dynamics of the province with the arrest of former President Jacob Zuma, but the former President was just the excuse or spark but the people who did the looting were likely driven by a sense of desperation.
The elephant in the room when it comes to the unemployment crisis are government attempts to interfere in the labour market. South Africa has a variety of legislative instruments such as the Employment Equity Act, Labour Relations Act, National Minimum Wage Act, Basic Conditions of Employment Act and their associated regulations that are meant to improve the lot of workers in the country but these interventions increase the risk of hiring new employees especially if these employees are inexperienced and unqualified.
We see this in the data, in the 3rd quarter of 2022, 9.6% of South Africa’s unemployed were graduates or holders of other matric qualifications. This means that more than 90% of the unemployed have a matric or less. The unemployment crisis disproportionately affects the unskilled.
The need to reform the labour market which means removing government interference has never been greater, the fact that our economic issues are so much worse makes this more urgent. At the root of the issue is that employees and employers are not free to negotiate an employment contract that suits both parties, employment contracts in this country are required to conform to the whims of government.
The most obvious example is the National Minimum Wage, no matter what salary an employee is willing to accept, this act takes this out of their hands. It forces the employee to only accept offers above a certain level even if the employee has no offers at or above the arbitrary level. No matter what model is used to argue that minimum wages will lead to minimal job losses (this is not true, just look at what has happened to domestic workers since the National Minimum Wage was passed), the basic fact is that an employee cannot accept a wage which suits them even if it’s their only offer unless it meets a government requirement.
And the National Minimum Wage (NMW) Act didn’t introduce minimum wages to this country, we already had various sectoral determinations. What the NMW did was set a wage floor below which no employee was allowed to accept a salary regardless of sector or personal circumstances including skills. It is an immoral policy, it infantilizes the poor unskilled person as it confines them to poverty living on the government living on government grants.
If by some miracle this individual is able to overcome the minimum wage, they still have to deal with collective bargaining under the Labour Relations Act which removes their ability to negotiate on their own as an individual and forces them to negotiate via a ‘majority’ union. This of course does not usually apply to the highly skilled professions because of the lack of unions in those fields but in the low-skilled professions. So our entire labour regulations edifice is used as a weapon to deprive the poor and low to unskilled workers of their right to negotiate contracts that suit them.
Unsurprisingly these are the people who bear the brunt of our unemployment crisis. The labour regulation reform South Africa needs is not incremental reform that allows labour unions to hold on to some privileges at the expense of South Africa’s poor unemployed. We need reform that fully empowers these individuals to make their own decisions, to choose to accept or reject a contract, including pay, working conditions etc The public sector as the biggest employer in the country can keep these laws and regulations as a matter of contract if it wants but imposing them on everyone else via legislation should end.
*Mpiyakhe Dhlamini is a libertarian, writer, programmer, and contributing author to the Free Market Foundation. The views expressed in the article are the author’s and not necessarily shared by the members of the Foundation.