South Africa’s policy-makers should look beyond the propaganda of business – that improved labour standards prevent job creation. Society as a whole will benefit from new employment laws, argues Vishwas Satgar
SOUTH African economic history has been afflicted with amnesia. The symbiotic relationship enjoyed by monopoly business with the apartheid state has become opaque in the context of policy-making and particularly the transformation of the labour market.
Economic benefits for a few – stemming from the politically engineered migrant labour system, a dualistic and racist industrial relations system for the greater part of this century, fragmented and extremely low non-wage labour standards, the widespread use of scab labour and most importantly low wages – are being forgotten.
Understandably, the protagonist behind the obliteration of this past is business (old and to an extent new “non-racial” business). Wielding simplistic economic theory that propagandistically highlights an inverse relationship between improved labour standards and job creation has allowed business to muster a chorus of voices against the “spectre” of improved labour standards being demanded by labour.
It would be preferable to supply reasons (drawing on some of the current international literature on labour standards) in support of a direction for labour market policy reform that improves labour standards beyond the flexibility that currently prevails.
With this attempt it is hoped South Africa’s policy-makers and new rulers will apply their minds to the Employment Standards Bill more objectively beyond the propaganda of business – that improved labour standards prevent job creation. There are basically 10 reasons to be considered:
1 Through apartheid the socio-economic reality in South Africa was disfigured. Inequalities in living standards and incomes, which largely intersected with race, emphasise labour standards are not “luxury goods”. Actually, improved labour standards are a policy imperative to ensure redistribution and the building of a society where there is a better life for all.
2 Within an enterprise, labour standards become contextually embedded. This means economic adjustment does not have to lead to the shedding of labour into the external market.
Rather, through standards like those that promote training and a reduction in hours, the functional flexibility of the enterprise is enhanced.
Essentially, the internal labour market is able to make adjustments and thus retain and even possibly expand employment.
3 Labour standards are easily perceived as rigidities in the context of price competition. Such predatory market behaviour lends itself to short-term gains at the expense of sustainable and long-run benefits and efficiencies.
In other words, by pushing labour costs and standards downwards, price competition prevents enterprises from finding competitive (or even co-operative) advantages that reside in work reorganisation, efficient management and innovative product development.
4 Coding labour standards merely as costs diminishes its political value. Labour standards are not considered to be norms or rights that are essential entitlements to ensure a durable political order, and in the South African sense a stable democracy.
5 Many benefits of labour standards are indirect, hidden, intangible and difficult or impossible to measure, delayed, and non- local. It is only in the absence, limiting or violation of standards that the extent and effect of damage on workers, enterprises and society at large, come to the surface.
One such example is South Africa where intergenerational deprivation of labour standards, particularly for black workers, has prevented accumulated learning and skills development.
6 It is a misjudgment in micro-economic terms to expect a downward spiral of labour standards to be conflated with overall societal gains and interests.
Actually, the under-valuation of labour inhibits multiplier effects. Essentially, under-valued labour translates into under- consumption, the foregoing of economies of scale and constrained growth.
7 Even in orthodox economics it is acknowledged that worker quality and efficiency are essential to increase output.
This means health and safety standards, hours of work, training and so on, are necessary incentives to improve the quality of output, overall productivity of workers and, in the ultimate sense, growth.
8 Cost-cutting through depressing labour standards merely passes on externalities into wider society. For example, a local community that pursues a strategy of marketing its low labour costs and docile unions will merely attract those firms that would contribute the least to economic revival.
In other words, low labour standards maintain low or even shrink consumption so that the tax base is limited for the financing of infrastructure and public works programmes, for instance.
9 In the context of globalisation, with its new global division of labour, notionally it would seem there are two policy responses for countries of the south.
One is protectionism, mainly through high tariffs, and the other the downward adjustment of labour standards. However, there is a third way, which promotes labour standards through instruments like the social clause and improved national standards, such that foreign direct invest investment increasingly comes to the south, on the labour market policy terms of countries of the south.
In short, comparative advantage based on cheap labour is abolished.
10 In the Southern African and wider African setting, employing the upward harmonisation of labour standards as one of the main policy planks in a response to globalisation, is also about contributing to and advancing the “African renaissance”.
Deflating the “spectre” of improved labour standards is necessary to reveal the real spectre confronting South Africa’s rulers and policy-makers. This is really the spectre of perpetuating the inequalities of the past under the rubric of political reconciliation.
It is time for a policy reorientation that moves away from win-win solutions to policies that vindicate the aspirations of the previously oppressed.
Vishwas Satgar is a policy analyst and researcher at the National Labour and Economic Development Institute