Shopsteward,+05-06,+PROPOSALS+TO+WEAKEN+LABOUR+LAWS

From: The Shopsteward (COSATU), June 2005
=Proposals to weaken the labour laws=

Labour laws passed since the transition to democracy in 1994 give all workers the right to organise and bargain with employers, provide for minimum conditions and ban unfair dismissals.

The new labour laws have faced continual criticism from sections of business, the IMF and the World Bank. They argue that the law now gives workers too many rights, and that – as under apartheid – business should have the right to fire lower-level workers on the spot, refuse to negotiate and pay whatever they like.

In May, the ANC published a discussion document for its National General Council (NGC), which agrees with business that the labour laws should be weakened.

It is critical that we engage on these proposals, so that we do not lose important victories won with the transition to democracy.

Every COSATU member must discuss the proposals for the NGC in their locals, in Socialist Forums, and in their ANC branches. We cannot let the proposals go to the NGC without challenging them at every level.

What does the ANC discussion document propose?
The discussion document starts with the argument that South Africa incorporates two economies, and should have different labour laws for the two different sectors. In particular, it proposes weaker labour laws for:

Young people

Workers in enterprises employing less than 200 workers (that is probably about 90% of all workers)

Workers in export processing zones

Workers in labour-intensive industries, including clothing, tourism and personal services such as hairdressing.

The discussion document also argues that:

Centralised bargaining should not cover smaller employers;

Minimum wages set by wage determinations (for instance for farm, domestic, security and taxi workers) should provide slower pay increases; and

It should be easier to dismiss workers.

The discussion document justifies its arguments by saying that South Africa has a dual economic structure, and should therefore have two sets of labour laws.

It says there is a ‘first economy’ comprised of the formal sector – commercial agriculture, mining, manufacturing, retail, financial and related activities – which is technologically advanced and dynamic. In contrast, it says, South Africa also has a ‘second economy’ where people are unemployed, underemployed, and engaged in informal and subsistence activities.

The discussion document agrees that growth in the ‘first economy’ has not improved conditions for the unemployed and underemployed. It argues that a major reason is that the labour laws impose high costs on employers, so that they cannot create new jobs. Since unemployed and underemployed people can’t get paid work, they remain marginalised in the ‘second economy’.

The document suggests that the labour laws impose high costs on employers by:

Requiring them to abide by agreements negotiated in bargaining councils

Setting minimum wages through wage determinations that include annual increases

Making it harder to fire workers without going through proper procedures

Making employers pay more for overtime and Sunday work.

In short, the discussion document argues that some people should accept weaker rights, less security, lower pay and longer hours just to get a job.

These proposals have already been rejected by the ANC Youth League and the ANC’s Economic Transformation Committee (ETC). Despite the criticisms from the ETC, the document was given to the media with no changes whatsoever.

Dual labour laws will undermine development

If there is one thing that apartheid proved, it is that we cannot build the economy based on the outright exploitation of workers. Even today, the sectors that have grown slowest include industries where the labour laws and unions are weakest – especially the informal sector, farm and domestic labour.

Under apartheid, different laws applied to different groups of workers. Black workers had fewer rights than white workers. Lower level black workers, domestic and farm workers as well as miners had even fewer rights. They could be fired on the spot. Employers could refuse to allow union organisers in the workplace. These workers often had no minimum wages, no contracts, no paid leave, pensions or overtime pay.

This system meant employers had no interest in improving workers’ skills or productivity. Instead, many bosses concentrated on holding down wages and conditions as the main way to make a profit. That approach blocked both economic and social development.

The discussion document suggests that a dual labour market would somehow overcome the dual economy. But workers’ experience under apartheid proves that dual labour laws entrench differences, discrimination and exploitation.

The experience of the informal sector also shows that undermining workers’ rights will not lead to job creation. In informal enterprises, such as spaza shops and backyard garages, almost all employers ignore the labour laws. But for the past five years, official data show that employment in informal enterprises has grown more slowly than employment in the formal sector. Thus, the evidence shows that the labour laws in themselves cannot be a major factor slowing down growth.

The Constitution guarantees that “Everyone shall have the right to fair labour practices,” including the right to organise unions and strike. It does not say that only older workers in urban areas, employed in large companies shall have rights. This is precisely because it aimed to end apartheid practices.

The labour laws do not impose excessive costs on employers

There is no evidence that the labour laws impose excessive costs on employers. In fact, South Africa’s labour laws are the same as those found in many other countries that have much lower rates of unemployment.

The sad reality is that since 1994, employers’ profits have risen much faster than workers’ pay. Profits increased from 26% of the national income in 1993 to 31% in 2004. Meanwhile, workers’ incomes dropped from 57% in 1994 to 52% in 2004. These figures make it difficult to understand how anyone can claim the labour laws impose excessive burdens on employers.

Bargaining Councils
The attack on centralised bargaining assumes that most workers are covered by centralised agreements, and that these agreements impose uniform conditions on all employers.

To start with, well under 20% of private-sector workers are covered by bargaining councils. This is why COSATU argues that unions must work harder to establish centralised bargaining. But the limited number of workers covered by councils means that bargaining councils simply cannot have a major impact on employment.

Bargaining councils generally provide smaller employers with exemptions from agreements. They grant more than 80% of applications by small enterprises for exemption. In other words, it is just not true that bargaining councils impose high wages on small companies.

Furthermore, the vast majority of councils negotiate only for specific areas, mostly for municipalities. Even the national councils set different wage rates for different regions. It is not true that the bargaining councils impose universal wage rates across the country.

Finally, and regrettably, bargaining councils often set very low minimum rates, especially for rural areas. For instance, the minimum wage for clothing workers in small towns is still under R1000 a month. Wages for retail and filling-station workers are also unacceptably low. Again, it is impossible to believe that these wages are so high that they cause unemployment. Rather, the union movement must still fight to ensure a living wage for all workers.

In short, although the law permits centralised bargaining, we have not succeeded in implementing it for most workers. Moreover, the councils lean over backward to ensure that wage agreements favour smaller and rural employers.

Wage determinations
Under the Basic Conditions of Employment Act (BCEA), the government can set minimum wages for vulnerable workers.

The process of setting minimum wages through wage determinations requires negotiations between business and labour representatives. Moreover, the Department of Labour conducts extensive research to ensure that the minimum wage will not result in job losses.

This process means wage determinations set only very low wages. In farming and domestic work, the minimum wage is between R500 and R1000 a month. The wage determination for taxi workers starts at R945 for collectors and goes up to R1350 for drivers.

Some wage determinations include annual increases of 7%. This is higher than the inflation rate. But the actual monthly increase is small because the basic wage is so low. Moreover, if productivity is increasing, employers can raise wages faster than inflation and still increase their profits.

More fundamentally, evidence from around the world shows that higher minimum wages usually lead to more employment in the long run. This is because

Workers who have higher pay can buy more, providing the basis for economic growth.

Employers adjust to higher wages by finding ways to improve productivity and develop skills. Instead of just squeezing workers, they have to look for more sustainable ways to grow.

Overtime
The ANC discussion document explicitly proposes that young people be exempted from overtime provisions. The BCEA limits the amount of overtime workers can be compelled to work. Moreover, it requires that most workers get a 50% increase in pay if they work over 45 hours a week. Employers with under ten workers may pay only 33% more for overtime.

It is odd that this proposal targets young people. After all, the youth are the source of future productivity and growth. To relax the overtime laws would undermine their health and safety – hardly the way to build the nation.

Dismissals
Employers often argue that it is so hard to fire workers that they won’t hire new ones. But how true is this?

Every union member knows that retrenchments often take only a few weeks. Employers usually pay only the minimum package required by the BCEA – that is, one week’s pay per year of service. For most workers, this comes to less than three months’ pay. Most of the retrenchment package is the pension payout, which is not a burden on the employer.

Dismissals for disciplinary reasons or low productivity also don’t have to take much time. Under the LRA, to fire a worker for low productivity, the employer only has to demonstrate that they made a serious effort to help the worker. If that effort failed, the boss can dismiss the worker without even a formal hearing.

The real problem is that it remains too easy and cheap for employers to retrench workers. As a result, employers still want to solve all their problems by cutting jobs. Given such high unemployment, this is an unacceptable approach. COSATU wants to make it harder to retrench people, so that companies will do more to explore other solutions.

The countries in East Asia that have grown most rapidly in the past 50 years make it almost impossible for large companies to dismiss workers.

What policies do we need to address joblessness?
The fundamental problem with the discussion document’s proposals is that the labour laws are not a major cause of unemployment. The real reasons for unemployment are that:

The formal sector remains focused on heavy industry – minerals production, auto assembly and heavy chemicals. These industries cannot create jobs on a large scale. But the government has done very little to push companies to invest more in light manufacturing and services, which could create much more employment.

Apartheid deprived our people of the opportunity of setting up their own enterprises. It ensured that most Africans do not have the capital, land, access to credit and markets, experience or skills to earn an income on their own.

Mass poverty in the former homelands means that more and more people are moving to the metropolitan areas looking for work. They can only find informal housing far from city centres. That makes it even harder for them to earn an income, and the vicious cycle of poverty becomes worse.

The RDP argued that we should address these conditions by pushing business to invest in new industries. In addition, it said the state would help poor families earn an income by providing land, infrastructure, skills and access to credit.

Instead, government’s economic policies have focused on encouraging exports, irrespective of whether they created jobs or not. Land reform, access to credit and infrastructure, and support for new industries has remained very limited.

Meanwhile, in the past two years the overvaluation of the rand has undermined both manufacturing and mining. That has further reduced the economy’s capacity to create decent work in the long run.

At COSATU’s Central Committee in August, we will develop more detailed proposals for an industrial strategy that can create employment on a massive scale. COSATU has called for rolling mass action over the coming year to support its demands that business and government do more to save jobs and create employment.

The way forward
If adopted by the NGC, the proposals to weaken the labour laws would cause very serious damage to the economy and to the democratic movement. These proposals have no basis in reality. Instead, we should recognise them for what they are: a renewed attack by capital on workers and on the rights that underpin our democracy.

For this reason, COSATU has called on every unionist, every democratic activist and every ANC member to study the proposals in the ANC discussion documents and be prepared to engage in the run up to the NGC as well as at the NGC itself.