Could a South African idea resolve France’s labour impasse?

Back in 2003 SA’s Free Market Foundation think-tank published an idea that provides an ideal solution to France’s divisive unemployment problem. The idea is contained in a booklet titled Jobs for the Jobless: Special Exemption Certificates for the Unemployed.

South Africa’s official unemployment rate of 26.7%, not even to mention the real rate of 38.8%, which includes the poor souls that have given up looking for work, makes French unemployment look almost respectable. Economists describe the appallingly high level of unemployment as ‘structural’, which the savvy layman would interpret to mean ‘caused by unwise labour laws.’ France’s unemployment has the same cause as South Africa’s: labour laws that provide high levels of job security to those with jobs, in the process making many people unemployable and keeping them unemployed, especially if employers are expected to pay them wages that exceed their potential labour productivity.

Under high job security conditions, which prevent employees who perform badly or not at all from being dismissed, employers are averse to employing people who may turn out to be unsuitable, such as young people with no experience. It is then no surprise that the largest problem lies with unemployed French youth. However, according to reports it was the privileged university students who were at the forefront of the demonstrations against the changes to French labour laws. The changes would have allowed employers greater latitude in dismissing young employees and the idea of becoming a deserving employee obviously does not appeal to the privileged students.

South Africa’s labour union members who have jobs, and French students who are confident of getting jobs in a protected environment, do not hesitate to brush aside the rights of the unemployed, employers, and long-suffering consumers in order to preserve their special privileges. In SA it is the unskilled, old, young and otherwise disadvantaged who can’t get jobs and remain the victims of unjust labour laws. In France, it is the unskilled and less educated young people. The jobless people in both countries do not have a cohesive political voice and politicians are therefore generally able to ignore their plight. However, large-scale unemployment erodes the otherwise stable fabric of society and can lead to civil unrest.

A simple answer to the problem of high unemployment was proposed in Jobs for the Jobless: allow unemployed people to decide for themselves what level of job security, conditions of employment, and wages, they are prepared to accept. The government could do this by giving the unemployed, on application, exemption from the labour laws to allow them to enter into mutually agreed contracts with employers. The SA proposal contained the following important conditions:

The job security of existing employees should not be reduced.

No change should be made to the labour laws except for a small section creating an exemption certificate (possibly called a Special Exemption Certificate or Job Seekers’ Exemption Certificate) that exempts the unemployed from the laws and determines the conditions of the exemption.

Anyone who has been unemployed for six months or more should be entitled to an Exemption Certificate as of right.

The Exemption Certificate should remain valid for at least two years to allow the unemployed person to find a job, change jobs, and build up an employment track record before the ordinary labour laws become applicable to them.

No restrictions should be placed on the type of contract that Exemption Certificate holders may conclude with employers and there must be no prohibition on the inclusion of terms of dismissal.

Employers and Exemption Certificate holders should be required to enter into basic, simple, written employment contracts so that there is no uncertainty about the terms of the agreement.

The exemption of the employee from the labour laws should automatically provide exemption to employers in respect of any exempted persons they may employ.

Surely no humane person would object to granting the proposed exemption to young unemployed French people. And surely many prospective employers would be prepared to employ the young people, knowing that the conditions of employment are mutually determined and not bureaucratically imposed. Also, there must be thousands of young unemployed French people who would be very happy to negotiate their own terms of employment with willing employers.

Maybe, just maybe, if the French government implements the idea, the SA government will recognise its merits. What other option does either government have for allowing its luckless and jobless citizens to find jobs without bringing out hordes of protestors?

Author: Eustace Davie is a director of the Free Market Foundation and author of Jobs for the Jobless: Special Exemption Certificates for the Unemployed. 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/ 18 April 2006