Unemployed men inJohannesburg wait on a street corner for work for part-time work. Photo: Naashon Zalk/Bloomberg/Getty Images
The creation of decent employment, as defined by the International Labour Organisation, is a fundamental policy objective in all of South Africa’s development plans. It is drawn from constitutional socio-economic imperatives and global best practices. But certain policy stakeholders such as the Democratic Alliance (DA), the Free Market Foundation and the Institute of Race Relations have undermined this policy goal in several ways.
The DA’s recent court application challenging new employment equity regulations exemplifies its attempts to undermine or resist the creation of decent work within the country’s labour markets. This perspective is largely based on incorrect assumptions about labour market trends in South Africa and free market ideological biases. There are three flaws that I want to challenge in the free market attack on decent work.
The first relates to a sweeping generalisation about the country’s labour markets being too rigid. Advocates of this view argue that they are not flexible enough and this discourages employment creation and investment.
The assumption is incorrect — various research reports illustrate that South Africa’s labour markets are not rigid. There are different categories of workers and types of employment, highlighting high flexibility levels in the workforce.
For example, some employees are permanent and employed directly by a company while others are on precarious short-term contracts or hired through third parties such as labour broking firms. This flexibility is created by companies’ attempts to lower labour costs using non-standard or atypical employment contracts. Consequently, the union density stands at 23% and it largely represents workers in permanent full-time positions with full access to labour rights.
A second myth advanced by the DA and its supporters relates to high wage costs in South Africa. Leaders suggest that wage rates across the economy are too high and policymakers should introduce laws to constrain wage growth.
This proposition overlooks empirical evidence illuminating how the share of wages in the national income has declined over the past years. This is in line with alarming trends across labour markets globally, especially in the Global South.
Wage disparities in the country equally show how race and gender inequalities still play a significant role in determining how much workers earn. In simple terms, we still have racialised and gendered wage income hierarchies in labour markets. This trend is alarming because wage disparities account for a significant portion of overall inequality in society. In addition, wage suppression limits the amount of demand in the economy which is central for attaining higher growth levels.
The third flaw in the DA’s cheap labour thesis is the total rejection of employment equity legislation and regulations. This is based on an erroneous argument about race quotas being unconstitutional, creating unnecessary burdens for small medium and micro enterprises and distorting labour markets.
South Africa’s government has a constitutional obligation to address racialised and gendered inequalities in labour markets. Thus, it cannot be unconstitutional to pursue this mandate using different policy instruments. Furthermore, our labour legislation prescripts exempt certain employers from regulatory laws, such as those concerning minimum wages and employment equity. The rationale behind these exemptions is to actually decrease burdens placed on small, medium and micro enterprises. This counters the assertion that the country’s labour laws are too cumbersome for all types of enterprises.
Employment equity enforcement is essential for addressing long-standing inequalities in labour markets. It does not only focus on race but factors in gender inequalities, as well as workers living with disabilities. Section 27 of the Act deals with the wage disparity problem highlighted in previous sections, which is at the centre of the country’s general socio-economic inequality.
Several companies have fallen short of meeting employment equity targets for years while benefiting from state procurement. Some of these companies score high on environmental, social and governance indexes yet they maintain some of the worst wage disparities. The department of employment and labour is correctly introducing a regulatory mechanism to address this long-standing challenge.
Similarly, recent amendments to the Companies Act (2024) make it obligatory for both state and private companies to disclose pay gaps between employees. This is commendable and should be implemented effectively across the economy.
All these measures are crucial for increasing demand-led growth through the use of wage disparity reduction and opening pathways towards a national incomes policy.
Dr Khwezi Mabasa is a part-time sociology lecturer at the University of Pretoria and economic and social policy lead at Friedrich-Ebert-Stiftung South Africa.