Assist school leavers to find work

With the around 500,000 successful matriculants starting to push and squeeze their way into the job market, we have to wonder how many will succeed in finding jobs and how many will end up joining the ranks of the long term unemployed. South Africa’s unusually high level of unemployment is no freak accident. It is the direct consequence of some very poor legislation that is intended to protect workers, but which instead creates a barrier that ensures that many of our new job seekers will never find employment and, therefore, ironically, will never require its protection.

Employment legislation in SA is a huge barrier to entry into the job market for young people. If you swop the roles of the worker and employer according to SA’s labour legislation today, can you imagine a worker never ever being able to resign unless the employer does something really bad but the employer can give them a month’s notice for no reason at all? For an employer in SA, taking on a new staff member is, in many ways, a more daunting arrangement than marriage. And we all think twice when it comes to getting married. Employers, when employing a new worker, are virtually entering into a lifelong commitment with a complete stranger.

In Switzerland, they still have the very even-handed arrangement where any employment relationship can be ended by 30 days’ notice being given by either party. When the consequences of a worker’s contract are of lifelong duration and so one-sided, no wonder South African employers have become reluctant to enter into them and have been protecting themselves by drastically cutting down on their numbers of staff and avoiding having to employ any additional staff if they can possibly help it.
Small businesses generate between 60 and 70 per cent of jobs in most economies. The onerous and unfair employment legislation in this country contributes greatly to our 25 per cent unemployment rate. This may be hotly disputed in some quarters, but the apologists are hard pressed to explain SA’s unique and disastrous unemployment rate.

A particular unintended barrier to employment which confronts school leavers is the minimum wage law. The reason for this law, ostensibly, is to stop wicked employers from exploiting vulnerable workers, but, in reality, it reduces the opportunities for young inexperienced workers to gain skills and knowledge while working in return for a wage a potential employer is prepared to pay.

The minimum wage law has entered debate recently in the form of the trade unions’ “decent jobs” policy. My understanding is that the trade unions do not actually care what anyone does as long as the pay is “decent”. Unfortunately, most young school leavers do not have the skills or the experience to command jobs that will give them decent pay. They are faced, therefore, with the formidable task of getting a very reluctant employer to give them a job. Given our employment conditions, employers look for a track record of good behaviour and job experience. The minimum wage laws often result in the newcomer earning a wage very similar to that paid to staff members who have been working for 20 years or more. Indeed, most youngsters face an impossible task as the unemployment rate testifies.

A way in which youngsters can enter the job market and “immediately” command a “decent wage” is by obtaining a university qualification. I emphasise “immediately” because, as we all know, this requires a sacrifice of income for up to seven years and expense for the family while the necessary knowledge is gained.

Times have been tough before and employment hard to come by. I have a letter my Grandfather wrote to my Grandmother in 1922, describing his attempts to get my uncle employed by a leading professional firm. It discusses how much my Grandfather would have to pay in order for my uncle to be able to work at this firm. In 1922, a father had to pay a monthly fee for his child to get trained in a decent job. My uncle went on to qualify as a professional man and have a long and successful career. Does this mean he was exploited by his employer? Like any parent who sends his child to university, my Grandfather was well pleased with the results of this arrangement. The minimum wage law would have been greeted with astonishment by both parties and my uncle would never have become qualified.

The Free Market Foundation has long advocated that anyone who has been unemployed for six months or more should be given a certificate of exemption from the labour laws, including the minimum wage laws, for a period of two years. Young people could be given such certificates on leaving school. Surely it makes sense for a youngster to take a job at a minimal wage while they learn the skills that will equip them to perform a “decent job” for the rest of their lives. With the government targeting 5 million new jobs, the plight of young school leavers who will not be studying further should receive serious attention.

Government does not actually have to do anything to make the situation better. All it needs to do is remove the artificial barriers and the market will do the rest.

Author: David Davie is a shareholder and director of a small business. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author's and are not necessarily shared by the members of the Free Market Foundation.

FMF Feature Article / 08 February 2011