Freeing the unemployed from the poverty trap

Attempts to trace the fundamental causes of unemployment and poverty tend to give rise to a great deal of controversy.

Some commentators contend that final decision-making regarding wage rates and conditions of employment should be left in the hands of job seekers. This would ensure that there is little or no involuntary unemployment. Others contend that job seekers should be protected from themselves; that it is the government’s duty to see that they receive a “decent wage”, and to mandate all conditions of employment. Employees and employers may enjoy freedom of contract in other areas of their lives, but not in employment.

Supporters of the undefined “decent wage” dictum seem undeterred by the high unemployment, poverty and misery in this country. They continue lobbying against allowing job seekers the freedom to make their own decisions about their own working lives.

Labour union opposition to freedom of contract for employees and employers can be understood. Unions vigorously defend the rights and privileges they have negotiated for their members. However, when it comes to government, we have an entirely different situation. Government’s primary obligation is to each and every citizen in the country and it should act totally impartially in dealing with them.

The fact that COSATU is part of a tripartite alliance with the government in South Africa is unfortunate. It means that the unemployed and their families have become innocent victims of an extremely difficult political situation. They are mired in a poverty that does not make sense to them when they observe the relative affluence that surrounds them.

All who are concerned about the poor and jobless must try and broker a deal on their behalf with the tripartite alliance government. In doing so, the well-wishers of the poor, even if somewhat reluctantly, will have to come to terms with the hard facts of South African politics and recognise that, under current conditions, wholesale liberalisation of the labour laws is unlikely to happen soon.

Labour unions have recognised, in the sporadic riots that are occurring in the country, the tinder for large-scale civil unrest. Even the members of the South African Communist Party appear to be wary, at this stage anyway, of fomenting the kind of chaos on which communism has fed in other places and times. These parties to the tripartite alliance, if they wish to avoid a level of civil unrest that will be seriously destructive to their own and the nation’s best interests, will have to consider relenting on their current stance on labour laws and regulations.

Transferring the cost of the labour malaise to the taxpayer in artificial make-work schemes and welfare payments does not solve the unemployment problem. Government infrastructure make-work schemes and welfare drain capital in taxes from the productive real job-creating private sector. They neither give workers long-term valuable skills, nor do they give workers the dignity and job-satisfaction of producing goods and services demanded by consumers.

Author Eustace Davie is a director of the Free Market Foundation. This article is an excerpt from the book Jobs Jobs Jobs published by the FMF and may be published 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 Foundation.

FMF Policy Bulletin/ 6 February 2012