Johannesburg - South Africa’s labour regime “has not lived up to expectations”, according to Reserve Bank governor Gill Marcus.
In the keynote address at the 26th annual Labour Law Conference in Johannesburg yesterday, she said: “We have not seen the dynamic growth of small and medium-sized firms one would have expected in a country at the level of development of South Africa.”
While collective bargaining had contributed to labour peace, she said, it had also “favoured big firms at the expense of smaller ones” and had raised barriers for new labour entrants because of relatively high starting salaries and steep retrenchment costs.
Marcus identified a related problem: the inability to more closely link pay to productivity growth. She said that when the Labour Relations Act of 1996 was passed, the intention was for collective agreements to serve as a framework within which companies would negotiate company-specific agreements linking increases to productivity gains.
“In practice, this is the exception rather than the rule,” Marcus said, noting that company-specific agreements were possible “within the existing legal framework”.
Andrew Levy, an independent labour analyst, predicted that strike activity would increase over the next year and strikes would last “radically” longer – in other words, there would be an increase in the number of days lost to strikes.
Levy sent a message to the unions: “You cannot increase wages unless you find ways of sustaining that increase through more efficient production.” He stressed that increased productivity did not have to mean job losses.
“The way to make a society richer and get benefits to everybody is by lifting skills and productivity,” he said.
Marcus made a similar point. “Globally, work has become more skills-intensive and the rates of return to education have been rising in most countries, meaning that skilled workers are capturing a larger and larger share of wages in the economy.
“Education, training and the retraining of workers are essential to maintain long-run competitiveness and ensure higher levels of employment.”
She spoke of the need to import skills: “It is estimated that for each high-skilled immigrant who comes into the country, between four and eight low-skilled jobs are created.”
Talking of labour market reforms, she distinguished between protecting workers and protecting jobs.
“This is a subtle distinction, but a significant one. Policies such as unemployment insurance, training vouchers and placement assistance can help workers who have lost their jobs find alternative opportunities. Policies that limit the ability to downsize or restructure are seen as inefficient,” Marcus said.
Responding to a suggestion from the floor that tariff barriers could protect local jobs, she said this policy had been tried in the past. The outcome had been protection for inefficient companies that had passed on their high costs to domestic consumers and had been unable to compete on the export front.
Discussing the role of the central bank, she said: “The conventional view is that monetary policy can affect cyclical employment but it cannot determine the longer run potential output.
“Our task is to provide a stable environment for balanced and sustainable economic growth to occur; to ensure that investors can take a longer-term perspective and that the value of earnings and savings are not eroded by inflation.”
She pointed out that, while the wealthy could protect themselves against inflation, the poor could not and, therefore, were the primary victims of rising prices.
“High inflation contributed significantly to widening inequality in the 1970s and 1980s,” Marcus noted. - Business Report
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