SA’s trade unions the biggest obstacle to job creation

‘South African Democratic Teachers Union (may be) dumbing down SA’s youth deliberately to prevent them from competing with established workers’

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Oudtshoorn. 26 May 2012. 18h00.

By Loane Sharp.

SA’s labour market is a shambles. About 8,5-million people are out of work or underemployed. Last year, SA lost double the number of working days due to strikes than at the height of rolling mass action against apartheid. This year, labour productivity fell to the lowest level in 40 years.

Labour’s share of national income is at a 50-year low. Over the past three years, wages have risen by 11,5% a year on average — treble the consumer inflation rate over the period. Growing numbers of employers are using automation, mechanisation and other labour-saving methods as an alternative to labour, with the result that the economy’s labour intensity has fallen sharply — by 8,1% in the past three years alone. It now takes 36,2% fewer workers to produce a given unit of output than it did in 1960.

According to the World Economic Forum, some aspects of South African labour laws are the most restrictive in the world. The International Monetary Fund believes aspects of these laws need to be relaxed, and even the drafters of the 1995 Labour Relations Act have called for reforms. No matter how you look at it, we can surely all agree that labour market outcomes — including the most important, unemployment — demand an urgent rethink of the labour environment.

One thing is certain: we will not get the necessary rethink. Employed people, at 13,5-million, outnumber unemployed people, 8,5-million, by a ratio of nearly 2: 1. There is a great deal of stealth around membership figures for African National Congress (ANC)-aligned organisations, but the most credible figures suggest the Congress of South African Trade Unions (Cosatu) has 1,2 -million members and the ANC Youth League 360000 members — a ratio of more than 3: 1.

The voting calculus — if we assume that the circuitous path of democracy in SA derives its ultimate direction from the voting booth — suggests that established workers will trump the unemployed. Minimum wages, which are supposedly intended to maintain a living wage for workers, are in fact designed to keep young and inexperienced job-seekers out of the workplace. Businesses respond to minimum wages by retaining the workers (mostly older, trained and experienced workers) whose productivity justifies the minimum wage, and retrench the rest.

Opposition to the youth wage subsidy has the same object, namely keeping young people out of work. Young people, having neither practical skills nor prior work experience nor on-the-job knowledge to offer employers, can only compete by offering themselves to employers at lower wages, which in turn tends to lower wages for all workers. Trade unions will not tolerate this.

Wage subsidies have existed since the 1950s in 45 countries around the world, and Cosatu’s fears have not been realised in any of these countries in any period. The prominence given to Cosatu’s idle conjectures is a measure of the dominance of its sheer membership numbers in the ANC’s electoral reckoning. It is high time that we recognise that Cosatu is the biggest single impediment to job creation in SA.

A further impediment to the efficient functioning of SA’s labour market is the government education system. The cost of producing a matriculant in th is system, excluding parental contributions in the form of school fees, is now nearly half a million rand — way higher than the equivalent in private education. This is largely the result of relentless increases in teachers’ and bureaucrats’ wages, but the cost is dispersed and practically invisible since it is largely paid by the taxpayer and non-transparently reported.

Teachers’ and bureaucrats’ salary gains have been the work of the South African Democratic Teachers Union (Sadtu), a Cosatu affiliate with 247000 members out of 386000 teachers, or a unionisation rate of 64%. And while salaries have been rising in government schools, outcomes have been deteriorating. Sadtu is the prime mover in this, too — it has consistently vetoed the government’s proposal to use learner performance as a basis for evaluating teacher performance, and has persistently refused to allow any performance agreements at all.

SA spends 6% of gross domestic product on education, more than Canada, France, or the UK. But the results are appalling. There is a significant negative correlation between education spending per learner and literacy and numeracy performance, meaning that money is being substantially wasted.

For those who enjoy a good conspiracy theory, it is not beyond the bounds of possibility that Sadtu is deliberately dumbing down SA’s youth to prevent them from competing with established workers. The rising cost and deteriorating quality of government education is the biggest single obstacle to long-term equality of opportunity and income between the races: SA’s government schools keep black kids poor, and a lot of people seem to want to keep it that way.

We may summarise as follows: teachers’ unions’ influence over government schools makes black kids unemployable, and trade unions keep black youth who by some miracle become employable out of work. It is high time, in other words, to crush the power of the trade union movement.

We can do so in several practical ways, all of which are consistent with article 23,1 of the Universal Declaration of Human Rights, the so-called “right to work”:

• repeal the “closed shop” laws that compel job-seekers to join a trade union as a precondition for obtaining a job;

• repeal the “agency shop” laws that compel workers to pay union membership fees whether they belong to a union or not;

• require that trade unions ballot their members ahead of a strike, and further require that a two-thirds majority votes in favour of a strike;

• prohibit open ballots and require secret ballots: open ballots lead to intimidation of union members who vote against a strike;

• prohibit employers’ collection of trade union dues on trade unions’ behalf;

• prohibit the automatic extension of bargaining council agreements to entire industries or sectors, so that these agreements are voluntary;

• on a nationwide basis, place an upper limit on wage settlements so that wage increases may not exceed labour’s marginal nominal productivity growth; and

• make unions liable for the loss of earnings that occurs during work stoppages.

Although, as predicted earlier, there will be no rethink of SA ’s labour laws, this would be an opportune time to reassess trade union regulations, because trade unions, viewed as economic entities, have suffered two major setbacks in recent years.

First, union membership has fallen since official records began in 2006, from 3,5-million to 3,3-million members, a loss of 129424 members representing membership dues of R95773760 a year. Second, trade union members’ participation in strikes has been low (on average since 2006, just 1,4% of union members turned out for strike action) and highly variable (ranging from 0%-8,8%, depending on the goals, duration and time of year of individual strikes).

This opportunity to smash the unions and enhance the economy’s long-term job-creatingpotential will be lost, for entirely political reasons. Keeping some of the most senior politicians in power and, by implication, out of jail, means that unholy alliances will be made. The clamour for greater disbursement of taxpayer resources means that populist causes and contradictory promises will grow unchecked, as will the disillusionment that follows. A clumsy and haphazard equilibrium will stay in place until the unemployed outweigh the employed in political calculations, which will occur only in about 20 years’ time, given current rates of population, labour force and employment growth.

We can only hope, in the meantime, that populism, youth radicalism, xenophobic violence, tribalism and service delivery protests — all of which are ultimately manifestations of joblessness — do not erupt into an uncontrollable conflagration.

• Sharp is a labour economist with Adcorp.

Published in Business Day

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