Vavi,+Labour+Regulation+and+the+Second+Economy



=Labour Regulation and the Second Economy=


 * Message from COSATU, May 17 2005**


 * In the light of the media interest in the ANC Discussion document “Development and Underdevelopment”, the Congress of South African Trade Unions is issuing an input to the ANC ETC Workshop on Labour Regulation and the Second Economy made in April by //Zwelinzima Vavi, General Secretary of COSATU//**

Dear comrades and friends,

Let me start by expressing COSATU’s support for this process. We do not have enough meetings where Alliance members can openly discuss the strategic issues we face. We realise this is ANC ETC meeting, with COSATU present as guests. But we hope that the discussions here will provide a useful input for the Alliance Summit next month.

We are particularly grateful for the chance to discuss an issue near to our hearts – the labour laws. This is a fitting way to commemorate the 50th Anniversary of both the Freedom Charter and SACTU this year. The recognition that the denial of labour rights was integral to the denial of human right sunder apartheid led the following Claus in the Charter:


 * There shall be Work and Security!**

All who work shall be free to form trade unions, to elect their officers and to make wage agreements with their employers;

The state shall recognise the right and duty of all to work, and to draw full unemployment benefits;

Men and women of all races shall receive equal pay for equal work;

There shall be a forty-hour working week, a national minimum wage, paid annual leave, and sick leave for all workers, and maternity leave on full pay for all working mothers;

Miners, domestic workers, farm workers and civil servants shall have the same rights as all others who work;

Child labour, compound labour, the tot system and contract labour shall be abolished.

Comrades and friends,

Before I turn to the questions posed for the seminar, I want to add one, a fundamental question that somehow fell off the table. The critical question for any workshop on labour regulations today, almost exactly ten years after we won our freedom, is this: has the legal dispensation we introduced through the 1990s helped to overcome the oppression of workers that lay at the core of apartheid? Has it helped liberate workers and the working class from the impoverishment, discrimination and systemic violence that most South African workers suffered for hundreds of years before 1994?

To answer the question, we must review the nature of the labour laws under apartheid. What we experienced then were explicitly dual labour laws to match the dual economy shaped by the apartheid system.

Under colonialism and apartheid, the state established a two-tier labour market. White and to some extent Asian and Coloured workers enjoyed the right to organise, protection from unfair dismissal, and defined minimum standards. In contrast, African workers initially had virtually no labour rights.

For black workers, the most oppressive aspects of this system included the following.

First, unskilled black workers had virtually no job security. They could be fired for anything or nothing, including organising the union or supporting the ANC. The employer could throw them at almost no notice out of their work, and in many cases their homes.

Second, most black workers had virtually no prospects of promotion. They could work in the same job for their entire lives, with no hopes that their experience would be recognised or respected.

Third, workers endured on-going discrimination in pay and benefits. Black workers earned less than whites, women less than men for the same work. Many black workers, and especially black women, faced harassment, abuse and even violence on the job.

These conditions went together with oppressive management systems, where workers were treated strictly as a cost of production, to be used when needed, thrown out when no longer wanted, and always paid as little as possible.

The result of this system was massive hostility in the workplace. But it also meant that large sections of the economy relied on low pay, low productivity and poorly skilled workers. They didn’t invest in skills development or greater efficiency – they just tried to make workers labour more for less pay.

Despite the opposition of the apartheid state, from the late 1970s workers were able to form unions, especially in manufacturing, mining and parts of the public sector. As a result, even employers ultimately supported giving us greater rights, as the only way to maintain production. But the state still refused to protect the rights of workers that couldn’t organise, especially on the farms, in domestic work and in the so-called border areas.

Because the oppression of labour lay at the core of the apartheid system, the democratic state moved swiftly to develop non-discriminatory labour laws that would ensure workers’ rights. These laws aimed explicitly to end the dependence on poorly paid, insecure workers, both to stimulate higher productivity and to end exploitation. They also sought to ensure more efficient negotiations and dispute settlement. Finally, the laws provided a framework for worker organisation. In part, this was to reduce conflict in the workplace. But it is equally important to give workers a stronger voice in democratic debates and strategic discussions.

After all, the NDR seeks to simultaneously address three related forms of oppression – the national, class, gender oppression. It does not seek to resolve the class contradictions but it seeks to tilt the balance of forces in favour of workers so as to end the most explicit forms of exploitation.

To achieve these aims, our labour laws, first, set minimum standards of employment in terms of leave, working time and job security. They enabled the government to set minimum wages in specific sectors based on agreement with both organised business and labour. Second, they prevented employers from dismissing workers for organising unions and laid down guidelines for when employers would have to negotiate with unions. Third, they defined forums for negotiations, with the possibility of establishing sectoral negotiations if both employers and unions agreed. Fourth, they set up the CCMA and Labour Courts to support rapid, expert dispute settlement. Fifth, they established an extensive and well-funded structure to support skills development. Finally, they banned discrimination on the basis of race and gender.

In short, the aims of the labour laws were not to cut costs to employers, but rather to contribute to broader development based on investment in our people. In evaluating them, we cannot simply look at the cost of employment in the short run. Rather, we have to ask whether they achieved their broader aims of tilting the balance of forces in favour of workers. Did they contribute to political, economic and social development while improving standards for vulnerable workers?

Have we succeeded?

We have certainly succeeded in improving workers’ rights and organisation. Union membership has risen from around 10% of the labour force in the late 1980s to around 40% today. That alone has meant a huge shift in the political and social balance of power, permitting the development of more progressive strategies and policies across the board.

But we have not succeeded in improving workers’ pay. The share of workers earning under R1000 a month has remained virtually constant even in the formal sector, at about 25%. That is, even in the formal sector, one worker in four earns under R1000 a month. In the unions, half of our members get less than R2500 a month.

Low pay is reflected in the declining share of wages and salaries in the national income. In 1994, workers got 51% of the national income; in 2004, their share had fallen to 46%. That is an indictment of our democratic society. It demonstrates that there is no easy trade off between low pay and jobs – we have got low pay, and we’re still not getting the jobs.

The biggest challenge is that some sectors are still in the low-wage, low skills, low productivity trap set up under apartheid. They cannot develop as long as employers treat their workers as a cost, rather than the key source of productivity and growth. These industries include farming, domestic labour, the informal sector, taxi and private security services.

Yet it is precisely these sectors that some employers – and judging by some of the documentation here and your questions, some comrades in the ANC - want to reduce protection for workers. We have yet to hear how this can possibly support sustainable and balanced development.

Let me now turn to the questions set for this workshop.

//1. Does the labour market dispensation as it currently stands, contribute to marginalisation and lack of employment opportunities in the second economy?//

Not surprisingly, COSATU would answer this question simply: No, the labour laws are not a substantial factor behind mass marginalisation and unemployment. Any other answer must ignore the history of our country and especially the deep-seated structural problems left by apartheid.

The main sources of massive unemployment in South Africa today are: · The historic impoverishment of our people, denying them land, skills, access to markets and finance, explicitly to force them to seek wage labour at any price; and · The domination of growth by capital-intensive sectors, especially mining, heavy chemicals, auto and telecommunications – which both prevents job creation and limits the scope for small and micro enterprise.

COSATU is, of course, aware of the attacks on the labour laws from business, the IMF and the World Bank. But we have yet to see genuine, objective research to back up these views. Employer surveys are hardly reliable – for them, labour is a cost, and like taxes will always be an undesired burden. And the World Bank and the IMF have yet to show us any serious research into the labour laws. For instance, the IMF remains convinced that the Bargaining Councils are a major obstacle to small enterprises. Yet at most the bargaining councils as a whole cover a quarter of private formal workers.

Perhaps the greatest advances in extending rights to the oppressed occurred around employment. For businesses with lower-level African workers, the new laws imposed a steep learning curve in the realities of democracy. Many responded, not by studying the new legal requirements and finding ways to use them efficiently, but by calling for the abolition of workers’ new rights. They simply want to turn the clock back to apartheid.

//2. What is the basis of a progressive, pro-poor consensus on labour market regulation?//

The basis for any consensus must start with agreement on the aims of labour-market regulation. Above all, we seek sustainable employment, equity and growth, with protection of workers’ democratic rights in the workplace and outside of it.

These aims mean that we cannot propose a return to the low-wage, low productivity path we suffered under apartheid. That path did not and will not bring about sustainable economic growth or prosperity for our people.

Moreover, we reject any suggestion that there is a crude trade off between jobs and wages in South Africa. For one thing, virtually all studies show that a cut in pay will not generate a substantial increase in jobs. Most show that a 1% cut in pay will only generate half a percentage increase in employment. To reach our aims of halving unemployment by 2014, this strategy would cut workers’ pay by 40%, to reduce unemployment to 20%. That is hardly a viable solution!

It follows that any pro-poor strategy must seek to continue efforts to end discrimination in the workplace, raise skill levels and improve career mobility, and ensure a strong voice for workers through their unions. And it will only work in the context of much more concerted efforts to restructure the economy to create employment and ensure more equitable access to productive assets.

Given this basic framework, we would obviously be willing to look at concrete problems in the current dispensation.

//3. How can we accommodate the differentiation and duality that currently exists in the labour market?//

This question seems very odd, coming from the ANC. Remember what the Freedom Charter said: “Miners, domestic workers, farm workers and civil servants shall have the same rights as all others who work.” Surely we do not want to accommodate the duality inherited from apartheid – we want to eliminate it?

The Discussion Document for the NGC on Development and Underdevelopment makes some proposals on accommodating dualism. In paragraph 71, the document notes that, “Under Apartheid, race was used to differentiate the applicability of labour laws.” But it seems to suggest that race should be replaced by more relaxed standards:

1. For young people 2. In industrial development zones, for instance in poor regions in the Eastern Cape or KwaZulu Natal 3. In the tourism, textile and clothing, household and child-care and agricultural sectors 4. For companies that employ under 200 workers.

The document points out that all of these options may be criticised for returning to apartheid norms or undercutting workers standards, and may be politically impossible. That is true.

The document does not, however, consider whether they will in fact lead to sustainable employment growth. Three factors suggest serious problems.

1. As we pointed out earlier, the main causes of slow growth lie in the basic structure of the economy and the orientation of key economic systems around large, capital-intensive projects. As long as that remains unchanged, modifications in the labour regime will not lead to substantial job creation. 2. Relaxing the labour laws will reduce the incentives for employers to develop a stable, well-trained labour force. 3. The labour laws were introduced in part to deal with the intense hostility in the workplace. They have succeeded in reducing days lost to strikes. Simply eliminating them for some workers, especially if others in the same workplace have more rights, will certainly reinvigorate divisions and tensions.

Lastly, the ideas in the discussion document show a distressing lack of familiarity with economic realities. For instance, according to the September 2003 Labour force Survey, firms with over 50 workers employed only half of all formal-sector workers. Exempting companies with fewer than 200 workers from the labour laws, then, would mean virtually eliminating the labour laws altogether.

//4.// //How can we build institutions required for the labour market to serve our developmental agenda?//

COSATU would have no objections to a performance review of the institutions that shape our labour markets. Certainly there are important shortcomings in terms of information on skills needs and the availability of work. A critical problem also remains around transport, which raises the cost of living as well as making it hard for many workers to get to work on time. Remember that the unions themselves are a critical labour-market institution. COSATU is committed to building the labour movement, in particular through a massive recruitment campaign as well as our organisational review and development process. We need to discuss how the Alliance can support these important campaigns.

//5. Is it the case that the unintended consequence of labour peace has meant that rigidities introduced may not allow us to expand employment as rapidly as we would like?//

This question is very odd for us. It appears to place a distance between “labour” and the ANC. In the worst interpretation, it appears to be implying that, if labour peace requires workers’ rights, then let us rather smash the unions and permit employers to return to the apartheid days, when they could hire and fire lower-level workers at will.

We are sure that this is not what our comrades meant by this question. We would be grateful for some clarification.

Comrades and friends,

There is no doubt that the main cause of inadequate job growth and high unemployment lies in mass poverty, persistent inequalities, slow growth and low investment. We need to review all government policies to ensure they contribute more to economic development. But no one can argue seriously that the labour laws are a key factor preventing employment growth.

Recent discussions with government have shown great commitment to an inclusive and constructive process of reviewing the obstacles to growth. Now we must discuss as the Alliance how we can do more to improve conditions for workers and overcome the mass unemployment that threatens all our gains.

At the Presidential Working Group yesterday, we were very heartened by the commitment of the government that they have no intention whatsoever to undermine workers’ rights. The review of regulation affecting small business must recognise that because it is difficult to organise workers employed in small firms, they are the most vulnerable workers. Their ANC, which is committed to the elimination of poverty, can never seek to make these workers even more vulnerable

1-5 Leyds Cnr Biccard Streets Braamfontein, 2017
 * Congress of South African Trade Unions

P.O.Box 1019 Johannesburg, 2000 South Africa

Tel: +27 11 339-4911/24 Fax: +27 11 339-5080/6940 E-Mail: patrick@cosatu.org.za**