EVERYONE knows about the monster of unemployment that will swamp us all one day, but no one is doing anything about it.
No, actually it sometimes only looks as if no one is doing anything about it, probably because we haven't really made much progress.
However, in his budget review in March Finance Minister
Pravin Gordhan made a number of relevant proposals. They didn't attract much attention at the time, but now, after the 2010 FIFA World Cup, they will probably end up at the top of the country's agenda.
This was in fact the first time that the budget review gave such prominence to unemployment and job creation. Most of the proposals had been put forward before, but it's important that this time they came from the finance ministry and the treasury.
The old complaint by the business sector, which the other role players in the labour market now no longer pay any attention to, is that the labour market is too unadaptable and inflexible.
Sanlam policy analyst Elias Masilela said in a viewpoint document that the attitude shown in the budget speech makes him hope ful that the government is prepared to listen to these debates with an open mind.
The complaints about unadaptability in the labour market have in the past conveniently been used by different schools of thought to support their viewpoints, and often even their ideologies.
"Because of extremely intensive debates in the post-1994 period, this concept has been reduced to price flexibility, in particular, wage flexibility. This caused considerable dissatisfaction and unhappiness in the trade union movement," he said.
That's putting it mildly. Trade unions and even academic researchers on trade unions have built up resistance to the misuse of proposals about flexibility over the years. So much so that it will be difficult to convince them that steps to make the labour market more efficient are not disguised attempts to get trade unions to agree to labour abuses by employers.
Flexibility in the labour market involves much more. "It concerns all phenomena that make the labour market function efficiently – that is, that enable the labour market to adapt rapidly to economic cycles," Masilela said. That includes matters like recovering quickly from the 870 000 jobs that were lost last year in the recession.
A glance at the chapter on job creation in the budget review gives one a good idea of what Gordhan sees as factors that limit labour market efficiency.
He points out that 73% of the economically active population younger than 35 is unemployed – in all respects a shocking figure. In Limpopo, only 29% of the adult population of working age (18 to 60) have jobs. Employment in rural areas and for young people is therefore essential.
The employment coefficient – the rate at which employment grows versus the economy – was 0.66 from 2003 to 2008. Therefore, for every 1% that the gross domestic product grew, the labour market grew by 0.66%.
According to data from the International Labour Organisation, this is fully in line with trends in other parts of the world. It therefore looks as if we have shaken off the phenomenon of "unemployment growth" in the 1990s.
What Gordhan wants to do about itGordhan points to an old truth economists like to quote. Real wage increases, in other words, wage increases that are higher than inflation, must be accompanied by higher productivity, otherwise they will inevitably reduce competitiveness and ultimately lead to labour cuts.
"There may be a role for government to work with business and labour to explore ways of aligning wage-setting with productivity growth," Gordhan said in the review.
He suggests that the tax system should be used to encourage the employment of especially young people, by means of a wage subsidy aimed at labour-intensive sectors. "Exempting employers from making social security contributions for young or lower-skilled workers (with government providing these contributions directly) could also boost job creation."
He doesn't think labour laws should be adapted, but "job creation for young work-seekers without experience would therefore respond positively to a relaxation of protective legislation during probation".
Red tape for small businesses must also be reduced. Part of this is the extent of collective wage agreements imposed on small firms. "Such reforms would also improve the economy's resilience to shocks and allow a smoother reallocation of resources away from unproductive activities to more productive ones."
These are some of Gordhan's proposals. Actually, little of this is new. However, that they are mentioned in the budget review is highly significant.
It looks as if we're heading for a fight that has long been postponed. The truth is catching up with us, and luckily there are people in the right positions who realise it.
- Fin24.com