This resource is hosted by the Nelson Mandela Foundation, but was compiled and authored by Padraig O’Malley. It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.
8 Employment, Wages And Training
8.1 Present trends in the labour market
South Africa's labour market is extremely fragmented. Employment growth in the formal sector of the economy has stagnated over the past decade and private sector employment has fallen. It is apparent that unregulated low wage employment has increased significantly since the 1970s, now accounting for an estimated one-third of all job opportunities. In addition, a large pool of unemployed men and women, who earn no income or derive sporadic earnings from informal self-employment, make up about a third of the potential labour force.
Irregular, sub-contracted, out-sourced or part-time employment on semi-formal contractual terms is becoming the preferred source of labour for many employers. This is resulting in a growing gap between the wages and benefits in the regulated and unregulated parts of the labour market. Where regulations raise the costs of job creation, employers turn to unregulated forms of employment.
The major development in the primary segment of the labour market over the past two years has been the new Labour Relations Act. This has four key features. It establishes a single industrial relations system for all employees, promotes collective bargaining by providing certain organisational rights for trade unions, establishes new procedures and institutions for resolution of disputes and provides for workplace forums to facilitate a shift from conflictual employer-employee relations towards joint problem-solving with employee participation. The reduced incidence of industrial unrest in recent years attests to the considerable progress made in this regard.
Present trends in the economy lead to employment growth of 100 000 to 130 000 per year, with unemployment rising to 37 percent by the year 2000 and an increased casualisation of the labour force. On this trajectory, poorly rewarded employment in survival activities grows nearly twice as fast as formal sector job opportunities. Weakening employment opportunities for the poor imply that income distribution is likely to worsen, impacting particularly severely on the rural poor, young work-seekers and those without education or skills.
8.2 Labour market reform challenges
The fragmented character of the South African labour market, conflictual labour relations and poor productivity have tended to undermine competitiveness and hence investment. Appropriate balances have to be struck in the labour market in respect of job creation, between regions and sectors and between maintaining existing jobs, protecting those in employment, and creating opportunities for new entrants. In a context of approximately 33 percent unemployment, the challenges are immense.
Government has a responsibility for ensuring that labour market rules are fair and that there are appropriate mechanisms for dispute resolution. Government is also an important employer and the main investor in human resource development in the economy. It influences, through its industrial and other policies, the sectoral growth trend of the economy. Accelerated job creation and improved productivity are direct or indirect goals of a wide range of government policies and programmes, some of which are noted elsewhere in this document.
In this integrated macroeconomic strategy, employment growth accelerates, reaching 409 000 jobs annually in the year 2000 and reversing the upward tendency in the unemployment rate. Over the next five years some 833 000 more jobs are created in the higher growth strategy than would otherwise be possible.
In this strategy there are two broad thrusts relating to labour market policy. The first is the pursuit of regulated flexibility aimed in part at extending the protection and stability afforded by this regulatory framework to an increased numbers of workers. The second is the promotion of continued productivity improvements aimed at bolstering the development of skills across the full spectrum of the workforce in both the formal and non-formal sectors. These points of departure are the basis of Government's labour market policies and will be further elaborated in response to the report of the Comprehensive Labour Market Commission.
The Government will pursue a policy of regulated flexibility in managing the labour market. This entails the regulation of the labour market in a manner that allows for flexible collective bargaining structures, variable application of employment standards and voice regulation.
The appropriate determination of wages is a critical component of the medium term macroeconomic strategy. It is a precondition for sustaining the competitive advantage of the currency depreciation, and it is the key to ensuring the maintenance of industrial competitiveness in the longer term. A sudden upsurge in nominal wage demands would either unleash a wage-price spiral that would soon erode any semblance of a real depreciation or force a severe tightening of monetary policy leading to higher interest rates and economic contraction. It is therefore important that wage and salary increases do not exceed average productivity growth.
Analysis of employment prospects indicates that accelerated job creation can be achieved in broadly three ways. Growth itself could account for about one-third of the increased job creation envisaged under an integrated strategy, some of which would be in informal or other unregulated activities. Government programmes can add a further quarter of the new jobs, mainly through accelerated labour-based infrastructural development and maintenance of public works in urban and rural areas. Some 30 percent of the increased employment, however, and more than half of the new formal private sector opportunities, will have to arise from institutional reforms in the labour market, employment enhancing policy shifts and private sector wage moderation. Stronger growth of more labour-intensive components of industry, facilitated by shifts in industrial policy, is vital. It is these reforms that are needed to bring about the increased responsiveness of labour demand to output growth, and are the essential ingredients of a sustainable, labour-absorbing growth path.
Furthermore, the general direction of economic policy is towards greater openness and competitiveness. The economy will thus become increasingly subject to global forces. The challenge then facing labour market policy is to promote dynamic efficiency, skill enhancement and the expansion of reasonably remunerated employment - while at the same time supporting a labour-intensive growth path which generates jobs for the unemployed, many of whom are unskilled and have never had previous employment. The Government intends to promote collective bargaining while simultaneously pursuing an appropriate balance between productivity enhancement and employment creation.
8.3 A more flexible labour market
Government recognises that industrial agreements which reach across diverse firms, sectors or regions should be sufficiently flexible to avoid job losses and should be extended to non-parties only when this can reasonably be assured. The Minister of Labour's discretion to extend or not to extend agreements should be broadened to permit the Minister to bring labour market considerations into play. Wage agreements must be sensitive to regional labour market conditions, the diversity of skills levels in firms of varying size, location or capital intensity and the need to foster training opportunities for new entrants to the labour market.
Other labour market policies should be negotiated by labour, business and government constituencies at appropriate levels in terms of a national framework. Reforms consistent with accelerated access of new entrants to employment and training opportunities might include a less onerous wage schedule for young trainees, increased incentives for more shifts, job-sharing and other measures to support greater employment flexibility. Variations on norms set through collective bargaining must be an integral aspect of a system of regulated flexibility building on the safeguarding of employment standards and worker's rights implicit in existing policies.
The determination of minimum wages remains, in certain sectors of the economy, to protect the vulnerable and the weak. The approach will not be to set one minimum wage across the whole economy but to determine appropriate standards by sector and area. The determination of these minimum wages must follow proper hearings, investigations and consideration of relevant economic conditions, the potential for employment creation and the alleviation of poverty.
The Department of Labour will encourage, through the mechanisms provided in the Labour Relations, Act, the rationalisation of collective bargaining arrangements to meet the challenges of the new economic environment while recognising the diversity of the domestic labour market.
8.4 Enhancing productivity
Government also recognises that job creation and improved living standards require a substantially increased commitment by the business sector to industrial investment and productivity-enhancing training. Accelerated investment is a principal thrust of this strategy, and must be promoted across a broad sectoral front, including export-oriented manufacturing and agro-industrial projects, tourism-related industries and improved transport and communication services, and with a particular focus on smaller firms. In many sectors, there is scope for both increased employment and training of the unskilled and improved productivity at higher skill levels.
International indicators show that South African investment in human resource development is inadequate. An enhancement of the level and effectiveness of training across all employment sectors is central to this growth strategy. Training underpins productivity improvement by enhancing human capability - across all labour market segments and product lines - to exploit technological flexibility and add value on competitive terms. Regulated flexibility of the labour market, discussed above, must permit employees to increase their productivity over time. Improved management training, modernisation of work practices, appropriate job grading and better utilisation of working time are also key aspects of enhanced efficiency.
A refocusing of curricula and the organisation of formal learning is currently in progress under the auspices of the education authorities. Coordination of standards and quality assurance will be the responsibility of the newly established South African Qualifications Authority.
The Department of Labour has embarked on the development of a new human resource development strategy, in partnership with all major stakeholders, which is planned to culminate in new legislation in 1997. Central to this strategy is a new financing mechanism and governance framework which aims to increase the aggregate level of effective investment in training. Towards this end the government is investigating the feasibility of introducing a mandatory levy on payroll. The matter is currently under negotiation with the social partners represented in NEDLAC. The strategy includes the following:
In addition, there will be deliberate campaigns to enrich human resource development programmes within government departments and agencies, aimed at effective service delivery. Management training initiatives are already underway in several key departments.
Government recognises that it has an important role to play in financing education and training activities aimed at the unemployed and the small business sector and in enhancing the quality of technical and vocational education and training. Sustained improvements in the quality of general schooling are also largely the responsibility of the fiscus. Industrial training must remain mainly the responsibility of employers. Government seeks to facilitate the development of financing mechanisms that will enjoy broad support from both the business sector and organised labour.