Hope for the unemployed – at last!

It is high time that the unemployed receive special consideration. South Africa promised to be a land of hope and opportunity for all its inhabitants when apartheid disappeared but the huge number of unemployed tells us that there are too many dashed hopes and too few opportunities.

As the ANC discussion document tells us, race was used to create the ‘insider-outsider divide’ during apartheid, with laws that differentiated in favour of whites, resulting in a ‘dual economy’. It then lists means of differentiating if government wishes to create a more favourable statutory dispensation for job creation. More flexible labour laws, it says, can be applied on a basis of age of worker, geographic area, special zones, nature of industry, or firm size.

What is inferred but not explicit in the document is the reason for the insider-outsider situation that currently exists (the employed being the insiders and the unemployed the outsiders). It is, without any doubt, the high level of job security provided to the employed. Given the political sensitivities, the ANC’s reticence is understandable.

In the booklet Jobs for the Jobless: special exemption certificates for the unemployed, I explained why such high statutory protection enjoyed by the employed keeps so many people unemployed. I also discussed the problem of labour union opposition to greater labour law flexibility, which is also understandable. It is the task of the unions to protect the interests of their members – that and nothing else. It is government’s job to look after the interests of the unemployed.

Naturally, when the labour unions are an integral part of government the situation becomes awkward. Are the members of government who do not have labour union connections expected to stand by and watch the unemployed and their families sink deeper and deeper into a morass of poverty without lifting a finger to come to their assistance? Once it is determined what the fundamental source of the problem is, will they not exert every effort to remove or at least reduce its effect? For a responsible government to turn its back on its most vulnerable citizens in such circumstances would be unconscionable. Clearly, the ANC wishes to find a solution to the problem.

In writing Jobs for the Jobless I considered the political problems involved in changing from our current high job security labour market to one of less security but more opportunity. Many issues related to labour are crystal clear: the utter hopelessness, poverty, and defeatism of the unemployed, the reactionism of the labour unions who see any relaxation of the labour laws as being the beginning of the end of worker protection, and the reluctance of the ANC to tackle what is obviously a political hot potato of the first order. What is to be done? There is no easy solution.

All that people of good will can ask is that in their deliberations the parties keep the unemployed at the forefront of their minds. Perhaps everyone who is going to play a significant role in the deliberations should first visit ten families whose potential breadwinners are jobless and hear directly from them why they cannot get jobs. When the negotiations are over, they should return to those poverty-stricken people and tell them – face to face – what role they personally played in trying to make it easier for the unemployed to get jobs: not make-work jobs, real long term jobs.

The ANC appears to favour increasing the flexibility of labour laws affecting young people. If that is done, it will make a considerable difference. However, it will still leave the not-so-young and otherwise disadvantaged out in the cold. I would therefore urge that long-term unemployment be used as another measure to identify a group that deserves the benefit of greater flexibility. I suggested in my booklet that those who are unemployed for six months or more should, as of right, be entitled on application to an exemption certificate exempting them from all or part of the labour laws for a period of two years. The only requirement should be a simple written employment contract stipulating the conditions of the contract.

The discussion document is correct in identifying small firms as a critical part of the solution to the unemployment problem. Studies have shown that in most countries they employ the largest percentage of the total workforce. Two-thirds of all jobs in the EU and Switzerland, for example, are in SMEs (small and medium enterprises) employing 0 – 249 employees. By contrast, SMEs employ only 33% of the workforce in Japan and 50% in the USA.

Over the past decade, between 60 per cent and 75 per cent of annual employment growth in America has come from small businesses, the U.S. Department of the Treasury recently reported. By some estimates, small businesses generate 52 per cent of the gross domestic product (GDP). Patents by small firms were cited in subsequent patent applications 28 per cent more often than patents by larger firms.

If they are over-regulated and subjected to high taxes, however, small firms do not perform their vital economic role. Compliance costs per worker have been shown to average 60% more for small firms than for large firms, which is a substantial disincentive to employment and constitutes a very good reason to lighten the burden of regulations on small firms.

Opponents of the labour-related proposals contained in the ANC discussion document are being incredibly short-sighted. Those youth leaders who have been quoted in the press as being opposed to change do not appear to appreciate what benefit their compatriots could derive from greater labour law flexibility.

There is a world of difference between laws that shut some job-seekers out of the job market altogether, as they do now, and labour laws that allow young people to decide for themselves what working conditions and wages will be acceptable to them.

Anyone doubting what dispensation the country’s youth will prefer should ask those who are unemployed. However, the question must be clearly phrased.

Would you prefer to have high job security when, or if, you have a job some time in the future, remaining unemployed now for an indefinite period? Or would you prefer to have the option of getting a job now, perhaps starting at low wages and under poor working conditions, with the possibility of being fired if your employer decides for some reason you are not suitable for the job?

I know what my response would be if I was unemployed: “I want a job and I want it now!”

Author: Eustace Davie is a director of the Free Market Foundation and the 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/ 17 May 2005, Policy Bulletin / 12 May 2009