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CONTENTS
Labour
market reform
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| Variable | Not Important | Somewhat Important | Important | Critically important |
| Interest Rates | 0% | 0% | 10% | 70% |
| Inflation Rates | 0% | 20% | 40% | 40% |
| Exchange Rates | 0% | 20% | 30% | 50% |
| Economic Growth | 0% | 0% | 40% | 60% |
| Consumer Spending | 0% | 10% | 40% | 50% |
| Average Wages | 10% | 20% | 40% | 30% |
| Good Labour Relations | 20% | 20% | 30% | 30% |
| Overall Stability | 0% | 0% | 30% | 70% |
Issues
The starting point for any review of the labour market should be
to acknowledge that this is unlike other markets. There are four
issues that need to be tackled:
- The solutions for unemployment and weak labour demand do not lie solely in the labour market. A 1998 NALEDI survey of ten large companies found that interest rates, economic growth, and the overall stability of the economy are the most important factors which affect investment behaviour. There is no single strategy to solve unemployment. What is needed is a combination of labour market restructuring, a redistributive investment policy, and a highly developed industrial policy.
- The labour market is, in fact, a number of quite separate market segments. Region, skills levels, occupation, the contingent nature of the work, race and gender segment markets. For example, the market for professional staff is very different from the market for unskilled workers. Workers in the secondary and informal/unpaid segments face the greatest risk, lower pay, less job security and often a lower level of bargaining power than do workers in the primary segments. A look at the different vacancy rates in the primary and secondary labour markets clearly illustrates this segmentation. (see article on page 4).
- There is a strong relationship between low wages and poverty. Approximately half the income of the poorest households comes from wages either through direct employment or through remittances from working. Thirty eight percent of formal sector workers live in poverty. The challenge is to create jobs while assisting those already in low-paid employment.
- Inequality is a central feature of the South African labour market. According to a 1995 NALEDI study, senior managers earn, on average, 36 times what a worker earns. Because this is an average, many companies will have a wider wage gap. This doesn't take into account the 60% 80% benefit portion which is added to managers' packages. Even income distribution and equity contribute more to long-term growth.
The labour market
The South African labour market was the centrepiece of apartheid's
mechanisms for social control. It comes as no surprise that this
area remains an intense site of struggle. The predictable alignment
of social forces in this struggle, does not, however, mean that
the debate is simple and clear.
In this issue of the Policy Bulletin, we discuss the possibility of a labour market review, and identify some of the central areas such a review should focus on. Five years into democracy, unemployment, poverty and inequality remain. However, many of the laws to unravel 'apartheid's centrepiece' have been put in place.
While some positive results are being felt, unemployment is rising. What is to blame for this? Conservatives say that 'inflexible' labour is chasing investment away. However, the NALEDI research presented in this issue completely refutes this claim. It shows that the reason for weak labour demand lies outside the labour market. Furthermore, many of the labour laws have not even been implemented yet!
The flexibility debate will not go away and neither should it. There are many segments of the labour market that are 'too flexible': domestic workers, so-called 'independent' contractors, and casual workers are good examples. A discussion on linking necessary workplace restructuring to job security might also help to make enterprises effective without shedding jobs.
Ravi Naidoo
Director, NALEDI
Workers' pain, capitalists' gain
by Fiona Tregenna
When jobs are shed and wages fall, do shareholders also feel the pinch? NALEDI set out to examine the mining and manufacturing sectors and came up with some surprising answers! The graphs compare employment levels, wages, profitability and dividends on a quarter-by quarter basis from the first quarter of 1996 to the last quarter of 1998 (the most recent data available).
Mining
The chart shows changes in employment (the solid line, to be read
off the left-hand axis) and real aggregate wages in 1995 prices
(the dashed line, to be read off the right-hand axis). Employment
drops dramatically during this period. There is also an overall
decline in gross real wages. These trends provide an interesting
contrast to changes in net profits after tax and dividends paid
(both as a percentage of turnover) over the same period. While profitability
and dividends paid vary considerably, both rise substantially over
the three years. Dividends paid to shareholders rise more than nine-fold
from 1,8% to 16,34%!
From the fourth quarter of 1997, both employment and wages fall
steeply. Although dividends and profits also fall in the first quarter
of 1998, from then onward they rise spectacularly to their present
highs! Was the massive retrenchment of mineworkers last year really
necessary, or was it done to provide windfall profits to mines and
their shareholders?
Manufacturing
The manufacturing sector also showed a significant fall in employment,
while real gross wages rose somewhat. This could be the result of
greater union power in securing wage increases, rather than in protecting
jobs or in influencing workplace restructuring. Despite an overall
decline in profitability, dividends paid to shareholders rise over
the same period.
These comparisons raise critical questions for sectors and the economy
as a whole is it workers who feel the pain while shareholders
gain? The analysis also points to the need for redistribution to
go beyond closing the wage gap, and to focus on profits and productive
assets.
Fiona Tregenna is an economist at NALEDI. The data in this article is drawn from Statistics South Africa.
Beyond flexibility
by Claire Horton
Supporters of labour market flexibility argue that it will
lead to more jobs. This however, ignores the fact that labour markets
operate within an economy characterised by structural problems that
depress employment and efficiency. There are three main forms of
flexibility:
- Employment or numerical flexibility refers to the ease with which employers are able to lay off workers. In recent years, employment flexibility has increased and there has been an increasing use of temporary and casual employment.
- The need for wage flexibility stems from the view that wage demands act against full employment. However, an ILO study found that few employers see wage determination and sectoral wage agreements as reducing employment.
- Work-process flexibility refers to the way in which production and grading is organised. For employers, it refers to the ease with which they can shift workers between activities, alter hours of work and work practices.
If we are to solve the unemployment problem, we need to address the conditions that affect the supply and demand for labour. Increased investment in human resources, improved training systems and lowering the cost of living through the supply of wage goods such as transport and social security are some of the measures that affect the supply of labour. Sectoral shifts in investment, which favour labour absorbing sectors and the introduction of labour intensive techniques, are some of the changes that will increase the demand for labour.
Proponents of labour market deregulation tend to ignore the segmented character of the South African labour market. The extent of regulation varies greatly amongst workers in the primary, secondary and informal labour markets. For workers outside of formal employment, virtually no labour laws apply.
Greater labour market flexibility will have a disproportionate impact on workers in secondary labour markets, who already face greater risk and competitive pressures. We need, instead, to improve job security in the secondary labour market, and counter apartheid-era inequalities.
Vacancy rates give some idea of the differences between primary and secondary labour markets. The table below lists the vacancy rates (the number of vacancies as a percentage of total jobs) in various occupations.
Vacancy
rates
| Primary Labour Markets | |
| Medical practitioner | 19.1 |
| Director/superintendent | 17.3 |
| Engineer | 21.2 |
| Secondary Labour Markets | |
| Construction worker | 0.5 |
| Kitchen worker/tea maker | 1.4 |
| Machine operator | 1.1 |
Secondary labour markets have lower vacancy rates. This is the result
of greater market pressures, a higher degree of competition and
less bargaining power, since workers in secondary markets are easily
replaced.
There is little evidence to support the idea that labour market regulation hampers employment creation. In fact, it is those sectors with the poorest labour standards and weakest legal protection for workers, such as agriculture and domestic work, that have been least able to generate employment in recent years. By contrast, those sectors operating within a strong regulatory framework, such as manufacturing and formal services, have seen employment growth.
There is a real danger that labour market flexibility will erode conditions of employment, with increasing numbers of people falling into the category of the working poor.
Claire Horton is an economist at NALEDI
Take up the challenge
by Liesl Orr
The Minister of Labour announced recently that minimum wages
will be laid down for domestic and farm workers. Debates on this
subject have tended to focus on the most appropriate level at which
to set the minimum wage and the effect this will have on employment.
From a labour perspective, the most important challenge is how a
minimum wage, can be used to build domestic worker organisation.
Domestic work "represents, in one sector, the most challenging problems facing the union movement gross class exploitation, widespread racism, the extreme oppression of women, and an isolated and increasingly casualised workforce." (Rees, 1998:3).
Domestic workers may also experience sexual harassment and the threat of violence. Domestic work is socially defined as 'women's work' and is underpaid (domestic workers currently earn between R150 to R600 per month), undervalued and regarded as unskilled. There is a close link between domestic work and unpaid work, which is largely invisible, despite the fact that it is of immeasurable social value.
The need to organise
The introduction of a minimum wage for domestic workers is long
overdue. However, it raises a host of problems, including difficulties
with enforcement, implementation and dealing with possible disemployment
effects. There are no simple answers to these difficulties. In the
absence of central bargaining or organisation, wage determinations
rely on the involvement of leadership or experts.
An alternative approach is to use the minimum wage as a campaign to organise domestic workers. Workers themselves should take the lead. In the words of a domestic worker, there is still time to say "We will listen to domestic workers...not minutes, but a whole day to hear what domestic workers want" (Rees, 1997:9).
The fact that this sector is difficult to organise is no reason not to confront the challenge. The very fact that domestic workers represent the most marginalised and exploited sections of the labour force, and the fact that they are predominantly African women, requires that COSATU takes up this challenge.
A
greater challenge
The minimum wage also poses the challenge of real and fundamental
economic transformation. A minimum wage is insufficient unless we
have an economy which is focused on development and based on principles
of redistribution and meeting basic needs.
According to Makgetla et al (1994:10) as long as there is continuing discrimination in the labour market and high levels of unemployment, enforcement will remain difficult: "Generally, enforcement will improve if the democratic government succeeds in stimulating economic expansion and improving the conditions for labour generally, including raising the social wage, expanding employment and enhancing skills."
A fundamental shift in approach is needed to put the most vulnerable workers at the centre stage. While the challenges are great, this shift in priorities could be one step out of the isolated backyard for domestic workers.
Liesl Orr is the co-ordinator of the Women and Work project at NALEDI.
Casualisation and fragmentation
by Bridget Kenny
South African retail companies continue to 'restructure' in order
to compete for market share. In a sector with very low profit margins,
such restructuring is characterised by consolidation into a few
large companies. The need to reduce wage bills has led to an increase
in casual labour.
According to government statistics, between 1987 and 1997 full-time average employment in the Wholesale, Retail and Motor Trades fell from 88% of total employment to 81%. Part-time and casual employment increased from 11,8% of total employment to over 19% in the same period. Independent research points to casualisation rates as high as 45% in some regions.
'Casual labour' is defined as working less than, or up to, three days per week. It is a form of 'flexible' labour known as numerical flexibility, which allows employers to bring workers on and off shift according to demand, without paying non-wage labour costs. In South Africa, casual labour increased as consumers pushed for store hours to be extended.
Who
are casuals?
Research suggests that casual workers are more likely to be black,
young and female than full-time, permanent workers. Casual are paid
lower wages and no benefits. They have little opportunity to move
into permanent positions, despite the fact that many have worked
as casuals for years.
They are also more vulnerable to dismissal without recourse than permanent workers. A casual worker explains: "When (employers) deal with permanents, they demand so many things. We casuals, we just go".
A
union challenge
Increasing casualisation has reinforced divisions between groups
of workers and poses serious challenges to unions. In 1993, SACCAWU
negotiated a job security and flexibility agreement with Pick n'
Pay. Certain casuals were given permanent status and gained access
to some benefits. The union has, however, not been able to persuade
other companies to sign such an agreement.
This has led to disillusionment amongst members. Some workers are not interested in the union anymore. They say that "only permanent workers are represented". On the other hand, permanent workers are antagonistic towards the casual workers. One permanent worker said that "We worry about our own jobs, as these casuals may take (them)".
Research suggest that both casual workers and permanent workers come from the same communities, and, in some cases, the same households. These kind of divisions should ring alarm bells for the labour movement.
Unions must actively struggle to represent more marginal workers. Their marginal status may require new organising strategies, which will allow casual workers to voice their concerns. Strategies such as community organising, where workers from different workplaces come together, may encourage casual workers to participate in unions.
Legislation alone will not protect permanent, unionised workers from the threat of job 'flexibilisation'. Only a united working class will have the strength to resist further attempts to cheapen the cost of its labour.
Bridget Kenny works for the Sociology of Work Unit (SWOP), at Wits
University. This article is based on ongoing research on casualisation
and subcontracting in the retail industry.
SADC labour markets
by Liv Tørres
Internationally, Southern Africa is often portrayed as the region of poverty and hunger, drought and instability. Too little attention has been given to the functioning and characteristics of labour markets as areas and agents for change in this region.
As recently as 1994, Southern Africa was nothing but a theatre of endless wars and conflicts. Yet, by the mid 1990s, democracies were established in most of the region and economic developments had turned for the better.
While these developments raise hopes for the future, there are also worrying trends. All the countries in the region are currently experiencing harsher economic climates, due to liberalisation and cuts in tariffs. Structural Adjustment Programmes have been implemented in most countries.
Regional integration also contributes to insecurity. Finally, the social indicators are worrying. Poverty is worsening and the wealth gap is getting larger. More than a third of the population does not get enough to eat. Living standards have been eroded and real incomes are declining.
Labour
markets
Fafo's data indicates that less than a fourth of the labour force,
and only one tenth of the population, is actually in formal sector
employment in Southern Africa. The rest are either unemployed, or
engaged in informal activities, subsistence farming or in unpaid
family labour none of which give a stable, secure, decent livelihood.
The UNDP and ILO estimate that 76% of the population are employed in 'non-wage' employment (1997:15). At the same time, a large portion of those within the formal sector earns less than poverty wages. People generally live on subsistence farming, exchange economies and on remittances from family members who are lucky enough to have a job.
Most SADC countries, except for South Africa, Zimbabwe, Mauritius and Swaziland, have no real industrial sector. In Tanzania, Mozambique, Angola, Malawi, Zambia, the Democratic Republic of the Congo and Zimbabwe, more than 70% of the workforce is employed in agriculture.
Because the formal sector cannot provide an adequate income, the informal sector has exploded over the last ten years. More than five million people work for small and micro enterprises in Southern Africa. To make things more difficult, millions of migrants move around within the region, a rough estimate of 30% of the labour force is HIV-positive, and millions of children are engaged in labour activities.
Sustainable
growth
Unemployment and underemployment rates are increasing rapidly. The
majority of school leavers are unable to find jobs. Women are over-represented
amongst the unemployed and poor working population.
Sustainable growth in Southern Africa requires that the challenges of employment and labour market restructuring be addressed. We must look at long-term strategies for restructuring and capacity-building, as well as short-term poverty alleviation programmes. Successful poverty eradication is only done through co-ordinated strategies and action at the regional level.
Restructuring of labour markets, including programmes for improved education and the development of incentives, credit facilities etc. for the informal sector also has to be done at the regional level.
Co-ordinated strategies need to be put in place to minimise the costs of migration to both the sending and receiving countries, as well as to protect the interests of the migrants. Co-ordinated strategies around HIV may, similarly, maximise gains. Last, but not least, successful labour market restructuring requires co-ordinated strategies to improve labour relations and labour standards, in order to avoid standards being used for social dumping. Again this could well be facilitated at the regional level.
Institutions
Labour markets in Southern Africa are already integrated to a large
degree. What is needed are institutions to regulate their content
and dynamics in a desirable direction.
The labour movement organises about 40% of formal sector workers in Southern Africa. Labour is also better organised at the regional level than any other social or political grouping. It is well positioned to take this process forward.
Liv Tørres is managing director of FAFO, South Africa.
This research round-up lists recent NALEDI research and highlights forthcoming work.
Women's
Leadership
The proportion of women in leadership in COSATU is generally low,
despite a number of resolutions committing the federation to confronting
this challenge.
This report, which was commissioned by COSATU, provides updated figures on women's representation in national and regional leadership structures in the unions. It will enable the federation to review progress and to set targets for women's leadership, as resolved at its 1997 Congress.
The figures since 1994 show that only a few unions have made progress in increasing women's leadership. The proportion of women regional office bearers across affiliates was 9% in 1994, 15% in 1996, and 18% in 1998. At national level, the average was 6% in 1994 and 1996, increasing slightly to 10% in 1998.
The unions which have recorded the most progress are those which have a conscious commitment to developing strategies and mechanisms to promote an enabling environment and to overcome barriers to women's participation.
The Women and Work Programme at NALEDI intends to conduct further research which will expand on the quantitative data available and also explore the qualitative aspects in other words, women's experiences of leadership.
Budget Reader
The national budget is a central instrument in transforming society.
If they are to hold government accountable and be able to assess
government performance, citizens need to understand the budget.
Most of the information which is available on the budget is not
accessible.
COSATU has commissioned NALEDI to produce a Budget Reader. The Reader is aimed at shopstewards and community organizations. It provides information on the budget process, identifies the key issues facing unions and presents alternatives to current practices.
The Reader starts off with an explanation of why budgets are important and how to evaluate them. It then looks at the medium term budgeting process and the annual budget cycle. This section ends with the presentation of an alternative budgeting system.
The second section examines provincial budgeting and 'fiscal federalism'. The last section provides a labour perspective on social delivery. Government Employee Pension Funds and interest rates are also examined. The Reader is designed so that it can be used in union workshops and seminars.
Public
sector
In 1996 the state (as employer) and the public sector unions signed
an agreement on conditions of service. The agreement was guided
by the need to transform the public service labour market. Popularly
know as the 'Three Year Agreement', it covered salary improvements,
right sizing, pension restructuring and non-wage benefits. It also
set out to reduce the wage gap in the public service and to match
personnel to service delivery.
This NALEDI research report examines the impact of the agreement on the public sector. In the first section, the agreement is summarised.
Section Two provides a statistical analysis of movements in wages, non-wage benefits, voluntary severance packages, affirmative action and occupational distribution of personnel.
The final section outlines key challenges in public sector collective bargaining. A key finding of the report is that employment within the public service has decreased by 13,3% since 1994. Most of these job losses have occurred in the lower ranks, with some filling of posts at the middle level.
NALEDI undertakes labour and economic research. Its main focus is policy research which will build the capacity of the labour movement to engage effectively with the challenges of our new society.NALEDI is an initiative of COSATU, but is controlled by an independent board.
NALEDI's main focus areas are labour markets, economic, trade and industrial policy, union organisation and women and work. Our activities include the production of research reports and policy memos, facilitating workshops and training and library facilities and resources.
Contact NALEDI at:
6th floor COSATU House, 1 Leyds Street,
Braamfontein, Johannesburg. PO Box 5665
Johannesburg 2000
Tel: (011) 403-2122
Fax: (011) 403-1948
email: naledi@naledi.org.za
website:http://www.naledi.org.za
