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Opinion: Defend the dignity and freedom of employees and the jobless

By Zakhele Mthembu and Martin van Staden Time of article published May 25, 2020

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JOHANNESBURG -  The Constitution commits South Africa to an open and democratic society underpinned by freedom, dignity, and equality. 

Such a free society allows people to make decisions that others disagree with. 

Siyabonga Hadebe writes in Business Report (“Is South Africa in a drive to forcibly suppress wages?”, 20 May 2020) that the Free Market Foundation (FMF) has a problem with labour laws ostensibly being biased in favour of employees, and wishes to tilt the balance in favour of employers.

This is not merely a misrepresentation of the FMF’s position, but it also betrays a lack of understanding about what is transpiring in the South African economy. Employees, particularly potential employees, and not employers, are by far the biggest victims of the labour law regime we have in South Africa.

The majority of South Africans, already disadvantaged by apartheid policies, required a free market in labour to spur economic and job growth, but were instead regimented, drip by toxic drip, starting with the Labour Relations Act in 1995.

In fact, many larger businesses prefer this, because they know small businesses – their competitors – can never hope to comply with what government demands of them. The big corporates can do so comfortably.

The FMF position on the labour policy environment is clear: employees must decide; not the employers, and certainly not the government. The employees – and particularly the 10 million+ potential employees who had no jobs, even before the economic devastation of COVID-19.

Employees may make decisions that upset the political elite and the social commentariat watching from on high in their ivory towers, but employees’ must have a right to make their own choices. These are adults, and they must be respected. The FMF’s flagship proposal in this regard is the Job Seekers’ Exemption Certificate (JSEC). Some political parties have adopted in JSEC in different forms, not necessarily in a form we would endorse.

The JSEC idea, which would allow the jobless to be exempted from South Africa’s irrational labour laws, is simple.

If you have been unemployed for six months, you automatically qualify for a certificate. The six-month gap ensures that employers do not ask their employees to resign and then get a JSEC to exempt them from labour law protections.

The certificate is obtained from institutions, like municipalities or labour department offices, that are accessible countrywide. This is not a traditional application system. Officials will have no choice but to issue the JSEC if you qualify for it, and you will not be liable for any fees.

The JSEC covers all labour laws, except the common law of labour. This means that you will no longer be kept out of a job simply because your potential employer cannot pay you the minimum wage. But the protections of employees that have been long recognised as a matter of legal principle will remain unaffected.

The JSEC will be valid for at least two years. If the period is too short, the employees will not be able to gain the very experience and skills necessary to enter the highly regulated job market with sufficient bargaining power. Also, getting the certificate doesn’t mean you will immediately get a job, or that you will work for the same employer for an extended period. Two years, or perhaps longer, should give employees enough time to find employment that suits them and then grow in that job.

Finally, the JSEC would require a simple, written employment contract between the certificate-holder and the employer, to ensure that the terms are clear to both parties and to fulfil labour requirements. These contracts should be short, but contain all the conditions of employment that will apply in the relationship. 

These certificates will go a long way to ending the unemployment crisis that has gripped South Africa for so long, by lessening the effect of central planning on individual employees. Indeed, South Africa’s unemployment rate is proof that centrally planning labour affairs, like minimum wages, leads to harmful outcomes.

The price of labour is largely determined by scarcity – supply and demand – and any attempt to override this fact with arbitrary government diktats can only produce misery.

And this deleterious effect of minimum wages is borne mostly by unskilled, relatively unexperienced workers, the most vulnerable among us. It follows logically that the moment someone’s wage is artificially raised above what someone else is willing to pay them, they will lose their job or not be employed in the first place. Employers who might have taken a chance on people with no experience have now largely banished the thought, because in South Africa’s labour market, that is a very risky gamble.

Any artificial imposition of an ‘objective’ valuation at which every employee, irrespective of the scarcity of their skills should be paid, is absurd. The absurdity is manifested in the real world by having a supply of labour in the market that can never be fully satiated since those who demand such labour do not value it at government’s defined price. The effect is unemployment. It is unfortunate that to the supporters of the minimum wage and other irrational interventions, no loaf is better than half a loaf. We know that South Africa’s jobless do not agree with this privileged, academic sentiment.

It is an injustice for any third party to interfere, uninvited, in the mutually beneficial agreements between two or more persons. It has effectively been made a criminal offence for an unemployed person to accept a job on terms with which elite politicians do not agree. This is a perversion of law and has no place in a free society based on freedom, dignity, and equality.

A contract is an agreement between two or more persons whereby for validity voluntariness is assumed. Yet South Africa’s labour laws seek to invalidate employment contracts not for a lack of such voluntariness, but that, based on the calculations of some academic who did a model, the wages are too low. The advocates of our system of labour law would rather have the poor receive no income at all, than for them to receive so-called ‘exploitative’ wages. It is a sad reality indeed that what qualifies as ‘exploitation’ is today determined by academics in air-conditioned offices and not by those who would voluntarily enter into agreements acceptable to them, if they were not prevented by law from doing so.

The FMF has a long history of fighting actual exploitation. Founded in 1975, we opposed apartheid and worked to ensure that the deleterious consequences of government interference in the economy are minimised. To this end we succeeded in the 1980s of convincing government to finally allow black home ownership in so-called white areas, to deregulate the taxi industry in the Transkei, and to end state monopolies like South African Airways that strangled any economic or job growth in the market.

Today arguably the biggest crisis in South Africa, exacerbated by government’s response to COVID-19, is joblessness. The FMF will continue the fight for the freedom and dignity of all South Africans, particularly those who have lost all hope of finding gainful employment.

Zakhele Mthembu and Martin van Staden are jurists with the Free Market Foundation. The views expressed in this article are the authors’ and are not necessarily shared by members of the Free Market Foundation.

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