At 17 Anele Nehese supports Pravin Gordhan’s two tier labour system. He also supports his grandmother,
sister and younger brother.
At 17 Anele Nehese supports Pravin Gordhan’s two tier labour system. He also supports his grandmother,
sister and younger brother.
Nehese may not know the correct terminology, but he has an idea of what the implications of this new system might be. For him, lighter labour regulations means he may one day be able to work in a “real shop”, like the Mr Price his vendor table sits outside.
He has been selling luggage on High Street since 2007, and his “R50 on a good day”, is split between him and his dependants.
Because this is the casual labour market, Nehese’s employer cannot guarantee work tomorrow, and there is no set wage or basic working conditions.
South Africa’s unemployment rate is at 24.3%. This figure may understate unemployment, because it only accounts for those still seeking work.
Minister of Finance Pravin Gordhan’s new growth plan, announced in the recent Budget, is based on a two-tier labour market.
The idea is to relax labour regulations for workers aged between 18 and 25 and offer state subsidies to employers to reduce the cost of employing them.
The perception is that for a developing country, the cost of hiring is incredibly expensive in South Africa. Labour disputes and dismissals are slow and burdensome, raising costs and perceived risks to employers.
Firms are reluctant to hire inexperienced workers when it is costly to dismiss poor performances. Eugene Repinz, owner of Redwood Spur is one of those who believe this to be the case.
“Twenty years ago, it was much simpler. Hiring was easy and if employees didn’t perform, they were dismissed.” Repinz said that it is important for employees “to earn your right to keep a job”.
All in all he sees it as a big positive that regulations might be eased. Terry Bell political and economic
commentator and labour columnist for Business Report disagrees.
“Because a set amount of labour is required to complete a set amount of work, a twotier system for employees implies doing away with the concept of the rate for the job; it is the entry-point to a lower wage economy to which I am wholly opposed”.
On regulation, Bell believes that “our labour legislation strikes a reasonable balance between the rights and duties of employers and employees”.
In response to subsidies proposed in the new labour system he argues, “Subsidised employment? No. Subsidised training? Perhaps”.
Bell believes training (such as apprenticeships), if properly organised and monitored, can also be used as a means of lowering the cost of labour.
But he cautions that great care should be taken. To quote Gordhan on subsidising youth employment in his Budget speech, it shouldn’t be a “free for all”.
Bell feels that rather than subsidies there could be “properly organised, longer term, public works programmes incorporating training in skills that are required by the broader economy”.
Labour federation Cosatu president Sdumo Dlamini expressed Cosatu’s discontent with the proposals, calling the movement towards a two tier labour system a “recipe for disaster”.
Allowing for a degree of hyperbole by Cosatu, Bell agrees. “It may not be a disaster, but it would certainly lead to a lot of industrial unrest as well as to a general lowering of wages at a time when, courtesy of Gordhan’s increase in fuel tax and Nersa’s deal with Eskom, the lot of working people is about to become even harder.”
David Fryer, a Senior Economics Lecturer at Rhodes University, also disagrees with the proposed two tier system. He believes that South Africa already has a de facto two tier labour market.
The two tier labour system “is likely to alienate Cosatu” he argues. “It is not clear whether or not the policy has been subjected to consultation.”
Fryer is also unsure as to whether a well designed two tier system would be able to bring about the required changes in unemployment within South Africa.
The two tier labour system has however worked in other countries, such as Sweden. This was due to the high levels of central wage bargaining between the main employment federation and the unions.
By contrast, in South Africa there is a low level of central collective bargaining. Other issues are the poor levels of education, large levels of low-skilled labour, cheap imports and the absence of export opportunities.
The issue of the two-tier labour market, then, is more complex than it appears. There is clearly support among some members of the general populace for a two-tier labour system, and for deregulation of the labour market.
However, there is room for scepticism about whether the measures proposed by the Finance Minister will have the intended effect, or whether they will simply exacerbate labour unrest.
