Unemployment crisis: South Africa must ease restrictive labour laws and focus on job creation

19 August 2021

As our country continues engaging with the process of rebuilding after some of the worst violence and looting in our democratic history, we cannot lose sight of the role played by poverty, hunger, unemployment and bleak future employment prospects in contributing to the anger, desperation and devastation witnessed.

While official statistics reflect an expanded unemployment rate in South Africa of close to 50%, most economists estimate the level of unemployment, namely the persons who seek employment but are unable to find it, at almost 70%, with unemployment among the youth being extremely high.

It is now trite that unless we are able to address issues of unemployment, it is unlikely that we will be able to tackle poverty, hunger or the growing sense of hopelessness that so (un)easily turns violent in our country.

For many years economists and other commentators, both here and abroad, have speculated that protective labour laws create barriers to employment. In relation to South Africa, and other countries alike, it is suggested that neither the process of employing nor terminating an employment relationship should be costly. The costs here are measured by taking into account the time, effort and expenses associated with both initiating and terminating employment relationships — which often include the need to employ labour law specialists to guide employers through the legally compliant procurement or termination of employment process(es). 

Given the significant costs associated with initiating and terminating employment, the risks associated with taking on a relatively young, fresh out of school and/or otherwise inexperienced employee — with the hope of training that person and providing them with a vocation, remuneration, opportunities for further skills development, promotion and positive future prospects — is extremely high. 

This is especially so when considered against the potential costs associated with terminating the employment of a non-performing employee or employee guilty of misconduct — who even after the fair termination of their employment may cause more wastage of their erstwhile employer’s resources by challenging the termination and requiring the employer to defend the termination or risk an adverse, and even more costly, arbitration or other award against it.

The argument then is this: by allowing for employment and its termination to be more frictionless, greater employment at all levels of the workforce would be encouraged. Employers would employ more staff, more frequently — even if sometimes only to fulfil short-term or part-time needs; and, in so doing, would create greater opportunities for all unemployed persons and new labour market entrants in particular.

In turn, this would afford not only employment experience but also income to many persons (and, vitally importantly, their households) who otherwise would not necessarily have been employed.

The argument for easing restrictive labour laws is particularly poignant in considering the critical role generally understood as being played by small- and medium-sized enterprises (SMEs) in job creation and unemployment reduction. A less restrictive labour market would encourage the growth of the SME sector, the proliferation of new business enterprises and, with this, employment opportunities. It would further assist, as well as encourage, SMEs already in existence to devote additional resources to expansion, and, with that, further employment prospects.       

It is important to note that nothing written here should be read as suggesting an approach that says “to hell with protective labour laws in their entirety”. Protective labour laws and laws relating to the transformation of all levels of South African workplaces remain necessary. I say this given our country’s very particular history, our hard-won and constitutionally enshrined labour rights; and the high levels of exploitation and other unfair labour practices witnessed daily in CCMA offices and bargaining councils across the country.  

Yet, South Africa needs to do something to tackle the unemployment crisis and the only way to do that is if more businesses, especially SMEs, are created, expanded and encouraged to invest in human capital.

So, perhaps the answer lies somewhere in the middle. Instead of tending to the far economic right or left of the debate, more would be gained in the lived reality of job seekers’ lives were we to focus the conversation on devising a workable middle ground. One where certain restrictions are eased and other employee protections are retained.

The first step may be as simple as making our country’s labour law requirements easier for employers to navigate.

The second may be a comprehensive review of the Labour Relations Act to quell the tension that exists between unions and employees already in jobs and protected by the Labour Relations Act on the one hand; and the unemployed and the struggling economy on the other.

A third and more controversial step may be for the targets contained in Employment Equity Plans required of companies not to frustrate appointments of persons whose specific (often still disadvantaged) race-gender designation is considered over-represented in a particular workplace or at a particular skill level (think coloured or Indian women/men in the Western Cape). This is a restriction that often results in positions remaining vacant, denying all job applicants with appropriate skills (including those from disadvantaged groups other than that of the preferred candidate for the position) from benefiting from the potential employment on offer. It is an example of where legitimate workplace transformation goals arguably fail legitimate economic needs.

Source: Daily Maverick at https://www.dailymaverick.co.za/opinionista/2021-08-19-unemployment-crisis-south-africa-must-ease-restrictive-labour-laws-and-focus-on-job-creation/