Watching the Americans deal with their jobs crisis, in which about 10% of workers are unemployed, is a spectator sport.
In South Africa, we dream of unemployment this low, but what strikes me is the energy and vigour that the Americans bring to tackling this issue. They have thrown a lot of money at stimulating their economy but the stimulus has not worked and unemployment remains stubbornly high, by their standards.
But there is no shortage of ideas to get the place working again. One solution focuses on the wrecked housing market, in which many mortgages are “below water”, meaning that the mortgage is greater than the market value of the home.
Getting this market working is key to creating jobs as it is served by many relatively low-skilled workers. One idea is to allow new rules so homeowners can refinance their mortgages at lower values.
Homeowners who take up this scheme will then be expected to forgo a portion of their profit should they sell at a later stage. The suggestion may or may not be taken up by the authorities.
What strikes me though is that the Americans know they have an elephant in the room — unemployment — and they’re talking about it and coming up with creative solutions to tackle it. Our own elephant is much bigger than that of the United States.
Do we talk about it? Do we come up with creative solutions to tackle it? I listened to two economists on this subject this week, one centre right and the other far left.
Both pointed out that the bulk of the unemployed, particularly the youth, are hopelessly undereducated and underskilled, so much so that they are, in essence, unemployable. Add minimum wages that require that people be paid above their economic value and the fact that apartheid spatial distortions add high transport costs for many potential workers, and we have a big animal.
But if many people are unemployable, what about the one million-odd people who have lost their jobs during the recession? Can we not get them back to work?
Perhaps we should be issuing some kind of moratorium on closing the Chinese-run clothing factories in Newcastle in which workers, who earn just R250 a week, R140 less than the minimum wage, are appealing for the factories to stay open so that they can keep their jobs?
The wages paid there are below the agreed industrial council rates. This system allows the extension of agreements to non-parties, meaning that the Newcastle firms have to pay the minimum wages agreed on by their competitors.
The proprietors of the firms are pleading poverty, saying they cannot pay higher wages. The New York Times reported this week that workers climbed on tables to protest vociferously against an attempt by the sheriff to close the operation down.
One woman said she needed the wages to help support five siblings and their children. The newspaper further said that, although some of the factory owners drove upscale cars, others lived in a single room in their factory.
Contrary to widespread opinion, the International Monetary Fund meanwhile finds in its latest report on South Africa that the job market is not inflexible. This observation is drawn from the response of employment in both the upswing (2000- 2007) and downswing (2008-2009) in which South Africa showed the highest employment growth among the G20 countries.
“A look at measures of employment protection legislation, such as that compiled by the OECD [Organisation for Economic Cooperation and Development], also does not point too much by way of policy-induced obstacles to hiring and firing.
South Africa has the fourth lowest score among G20 countries and the lowest score among G20 emerging markets,” says the IMF. But it says that wages have proved much stickier. “As economic growth slowed and turned negative during 2007-2009, wage growth remained strong.”
Average wage settlements in the private sector reached 9.3%, led by public-sector increases of 11.2%, significantly outstripping inflation and productivity gains. The IMF staffers say “consequently, unit labour costs increased 16% in the past two years, one of the highest among a range of countries.
The strong wage growth that continued during the recession looks to have contributed to the substantial job losses. In the staff’s view, this suggests that the wage bargaining framework is not sufficiently flexible.”
I see Cosatu referred to by one writer as being in an abusive relationship with its alliance partner, the ANC. This appears to miss the fact that one of its key constituencies, the public-sector workers, who are 98% unionised, have managed to grow their wage bill by R100-billion in the past four years from R190-billion to R290-billion.
We are in the strange situation of having shed more than one million jobs but the people with
jobs have been winning inflationbusting wage increases. There was a herd of elephants in the convention centre in Durban where the ANC held its national general council. Did anyone notice?
The ruling party produced a 38-page report, of which two pages are devoted to economic transformation.
The document says, inter alia, that there is a need for a new job-creating and more equitable growth path, that the (curiously named) Ipap2 industrial strategy be resourced, that black economic empowerment be made more broad-based, that pupils be encouraged to take up vocational training (which is already available but little publicised), that minerals beneficiation be promoted, that a state bank and a state mining company (which we have already) be set up and that nationalisation as an economic strategy should be further investigated.
The word “jobs” is mentioned twice. That is one less than the three mentions — “Jobs, Jobs, Jobs” — it got on the 1994 election posters. Overall, the two pages reflect a holding pattern, a kicking for touch on key issues.
If unemployment is a crisis that needs urgent attention, it is not reflected in the document. Moderates wi thin the ANC regarded their role as one of holding the ANC Youth League’s nationalisation proposals at bay rather than emerging from the conference with a set of practical proposals that could be implemented with urgency.
If you are wondering what these might be, check the Centre for Development and Enterprise’s website to see the list of ideas it has come up with. The centre’s Ann Bernstein says that nearly 5.5-million South Africans — one out of every six adults — is out of work.
She says that on the basis of a careful survey of domestic and international experience, the CDE’s jobcreation proposals include tax breaks, special economic zones, vocational training linked to apprenticeships and large-scale public works schemes. The policies should target the youth and women and should be crafted by employer bodies and unions.
Bernstein says the only way to discover exactly how these policies will work is to try them out. “Complacency and sticking to what has not worked in the past should no longer be an option. Every year, hundreds of thousands of young South Africans enter the labour market.
If current trends continue, most of them will not find work. It’s time to have a much more urgent, practical and frank conversation.” If you ignore the elephants long enough, they could start a stampede.
There is a sign in the ANC’s pack of resolutions that it is preparing for this possibility. Resolution 157 says: “There is a need for ANC branches to ensure the protection of councillors as they are the first victims in service delivery protests.”