Amendments the road to hell?

The cliché has it that the road to hell is paved with good intentions. It just might turn out to be true in the case of government’s proposed amendments to labour legislation presently up for public comment and scheduled for tabling in parliament in the near future.

In an article on Politicsweb Jasson Urbach of the Free Market Foundation last week argues that if instead of creating jobs government wants to kill job creation, the intended amendments are the way to go.

“Legislating people into employment cannot solve the unemployment problem. If the proposed amendments announced by newly appointed Minister of Labour, Nelisiwe Oliphant, at the final cabinet meeting of 2010 are passed, they will exacerbate this unacceptable, economy-killing and soul-destroying situation,” he writes.

"If government wishes to resolve the country's unemployment problem, it must allow citizens to be adults and to have the freedom to negotiate their own terms of employment."

The four bills, the Basic Conditions of Employment; Labour Relations; Employment Equity, and Employment Services Bills also came under attack from other sources, with the proposal to eliminate labour brokering attracting the most criticism.

Echoes of apartheid

One proposed amendment to the Employment Equity Act is reminiscent of some of the attempts at social engineering during the apartheid days and, among others, seems to aim at changing the population profile of especially the Western Cape, the only province not governed by the ANC.

The relevant proposed amendment states that affirmative action should be determined in terms of national demographics, rather than provincial profiles as has been the case uhtil now. In the Western Cape and the Northern Cape, where coloureds are in the majority, the use of provincial profiles has benefited the coloured community. It could also impact negatively on the Indian population of KwaZulu-Natal.

“The fact that the government has made these plans known so shortly before the municipal elections could suggest that it has given up on the so-called coloured vote in the Western Cape,” writes independent political commentator Stef Terblanche in his Monday Briefing of 31 January.

A former Werstern Cape premier, Peter Marais said he would demand a meeting with president Jacob Zuma to challenge the proposed changes and has started a petition to oppose the changes that would have negative implications for the coloured community.

One of the intentions of this amendment could be that it would stimulate further mass migration to the Western Cape from the impoverished rural areas of the Eastern Cape. Over the past 15 years massive migration has already given rise to an enormous spread of shanty settlements in the Western Cape

and, pushed up its unemployment rate – although the lowest of all provinces still high at over 20%.

Further stimulation of this trend can only add to the already immense pressure on housing, services, education, health care and more. “It could also quite easily trigger more racial clashes in the province as has been seen in the recent past between coloureds and blacks over access to scarce housing,” Terblanche writes.

On the question of labour brokers Urbach warns that “we have to be very aware that if the proposed amendments are passed, and the trade unions get what they want, unemployment in SA will skyrocket.

“A labour broker" or "temporary employment service" is defined in Section 198 of the Labour Relations Act (LRA) as a person who, for reward, provides another person to a client to work for that client for remuneration. Section 198 also provides that the temporary employment service (i.e. the "labour broker") is regarded as the employer of the worker in question. Thereby, the labour broker, not the client, is the employer of the worker.

“This effectively allows the client to outsource all his labour requirements (including labour law problems) to the labour broker. The reason why this rounabout way of doing business has developed is due entirely to our existing labour legislation. The laws meant to protect workers create such an unnecessary and intolerable burden on employers that they prefer to pay labour brokers a fee to administer their staffing requirements and problems

“The proposal is that Section 198 of the LRA should be repealed and replaced by the Employment Services Bill. According to a new, stricter definition of 'employer' included in this proposed Bill, no temporary employment service will be able to be the employer of any workers that it places in work, effectively bringing an end to labour broking as we know it.

“How can we let this be when Loane Sharp from Adcorp Holdings says, ’labour broking [is]...responsible for about 1-million South Africans in work on any given day, and is the single biggest and most effective channel for introducing never-employed black youth into the labour market’?"

He also writes that one of the tasks of economics is to explain the forces that affect human decision-making, and a key element of economic theory is that incentives matter. When incentives change, peoples' behaviour also changes. Compelling employers to pay the same wage to employees in the same job is a recipe for disaster and will disincentivise improvements in productivity.

“Government cannot simply legislate improvements in productivity! Businesses are already trying to maximise their workers' productivity in order to maximise profits. Does our government think it knows better how to run a business than those who are in the business of dong business?

“Another budget-busting, ill-conceived idea is the proposal to establish a state employment agency to which every private-sector job vacancy and every new hire will have to be reported. Why create this unnecessary layer of taxpayer-funded bureaucracy when there are thousands of private employment agencies already doing the job quite effectively and which adult work-seekers voluntarily choose to use?

“And scandalous is the proposal that if businesses fail to notify the public employment services agency of any vacancy or new position they will be slapped with a minimum fine of R10,000. Another great incentive for businesses to close down and let the unemployed number grow,” Urbach writes.

The Basic Conditions of Employment Bill  also proposes giving the Minister the power to set minimum increases of remuneration in addition to setting minimum rates of remuneration. “All incentive is negated when wages are determined politically rather than what is justifiable economically or as a result of productivity. The only foreseeable result, yet again, is increased unemployment.

“Government's responsibility is to create an environment that will increase employment opportunities, reduce unemployment, and reduce poverty. The proposed amendments to our labour laws achieve none of these objectives. Allow business the freedom to operate and grow, and the problems of unemployment, low wages and poverty will fade into nothing,” he argues.