Empty purses, clenched fists and the hands that help

The most recent statistics from the first quarter of 2016 show that South Africa’s official unemployment rate reached its highest levels (at 26.7%) since the financial crisis in 2008. This new pinnacle follows from 355 000 net job losses compared to the same time last year. South Africa’s brittle economy therefore has to regain private investor confidence to ensure sustained job creation.

Moody’s rating agency’s recent decision to maintain the country’s sovereign debt rating above junk status is – despite the many challenges still faced by the economy – a signal that the window for improvement has not yet closed. However, how ready is the economy to address the constraints of high post-apartheid unemployment, while simultaneously defending a living wage?

The problem

The rise in unemployment will likely raise household poverty. With household purses under increasing pressure, it is no wonder that workers have taken to decisive public action (such as illegal, unprotected strikes) to voice their hopelessness. The most vulnerable (who often remain unprotected by union representation) are often the worst affected, without many options to voice their difficulties: notably, 43 000 employees of private households (such as domestic workers and gardeners) were fired in this quarter.

Why do people strike? How does it work? And is it effective?

Section 23 of our Constitution guarantees that every worker has the right to form and join a trade union; to participate in the activities and programmes of a trade union; and to strike. Are trade unions effective? Do they provide benefits for their members?

Some say that unions have a negative impact on the economy and that they contribute to unemployment (as opposed to their primary task of promoting the rights of workers). In 2014, 670 working days per 1,000 employees were lost to strikes which placed pressure on affected firms. South Africa’s industrial relations are ranked as the worst in the world, with strike action contributing to a negative investment climate. On the other hand, the right to strike is essential to ensure that households’ well-being is defended. The Basic Conditions of Employment Act of 1997, the Labour Relations Act of 1995 (“LRA”) and the Labour Relations Amendment Act of 2014 and the Employment Equity Act of 1998 were drafted after the democratic transition and serve to protect workers from historical discrimination. These laws also entitle trade unions to protect their members.

The Labour Relations Act of 1995 and the Labour Relations Amendment Act of 2014 regulate strikes and lockouts. Strikes can be placed in two categories: protected and unprotected strikes. If a strike is protected, the employee is protected from any civil action an employer may wish to institute and he/she may not be dismissed for striking as contained in section 67 of the LRA. Unprotected/hostile strikes refer to strikes that are not embarked on in accordance with the Act (section 64 of the LRA) and are regulated by section 68 of the LRA. An unprotected strike constitutes a breach of contract, an action for which the employee may be interdicted, dismissed or sued for compensation by the employer. The greater prevalence of unprotected strikes in the recent past serves as an indicator of workers’ discontent with the status quo.

Unions play a big role in protecting their members. Although some feel that their intentions are strictly of a political nature, research shows otherwise. Unions have been key role players in improving pay levels as well as job security. Read more here. Strike action may, therefore, play an important role in ensuring the socioeconomic rights of employees. Industrial action is, on one level, important for households, despite its supposedly adverse effect on investor confidence, output and employment creation.

The minimum wage factor

Many employed South Africans form part of a large cohort of the working poor – in other words low-paid workers who do not earn wages below the poverty line. Proposals for a national minimum wage are being investigated. In the current economic climate, the idea of a nationally applicable minimum wage remains controversial. Will this move promote fair remuneration and social justice, or will it, quite simply, increase unemployment and contribute to poverty? Existing sector-specific minimum wages have, surprisingly, not had uniform employment-reducing effects that are commonly associated with their implementation. Read more here. On the other hand, wage increases of better paid unionised workers have played their role in the rise of unemployment (see http://www.econ3x3.org/node/340). A careful balance between better pay levels and potential job loss remains central to the formulation of such policies.

Conclusion

Unemployment remains a dominant problem in South Africa. Additionally, many workers who do have a job remain poorly paid, sustaining South Africa’s extreme levels of inequality. An inherent trade-off between these problems is often feared: if low wages are propped up (through either industrial action or minimum wages), will the rise contribute to even higher levels of unemployment? It is important to acknowledge the impact of various role players (such as unions) in promoting socioeconomic rights. However, they also contribute to job destruction in some instances. Current legislative developments must therefore take cognisance of the trade-offs involved. Ordinary South Africans can become socially aware of the gross inequalities and levels of poverty in our society, and play a role in defending the socioeconomic rights of vulnerable individuals.