‘Not de­cent work’

Finweek English Edition - - COVER STORY -

ONE CON­TRO­VERSY the OECD tack­les is the no­tion that South Africa should cre­ate “de­cent work”. The OECD says de­cent work “is un­ob­jec­tion­able as an as­pi­ra­tion but is less clear as a pol­icy, as the term ‘de­cent work’ can con­ceal dif­fi­cult trade­offs. The goal of de­cent work shouldn’t be al­lowed to per­pet­u­ate or strengthen the cur­rent pat­tern of a core of well-paid labour mar­ket in­sid­ers ex­ist­ing along­side a sim­i­lar num­ber of ex­cluded and im­pov­er­ished out­siders, ei­ther job­less or pushed into the in­for­mal sec­tor.”

The no­tion of a wage sub­sidy – first mooted in Pres­i­dent Ja­cob Zuma’s State of the Nation Ad­dress and then ex­panded on in Fi­nance Min­is­ter Pravin Gord­han’s Bud­get – gets a broadly favourable re­view from the OECD. The or­gan­i­sa­tion says: “A wage sub­sidy may have more po­ten­tial in SA than in many other coun­tries, al­though de­sign is cru­cial. While in­ter­na­tional ex­pe­ri­ence gen­er­ally points to­wards job search as­sis­tance as the most ef­fec­tive form of ac­tive labour mar­ket pol­icy, there’s a ques­tion whether pro­grammes tar­geted at place­ment or re­duc­ing match­ing costs can be of more than mar­ginal im­por­tance where the main prob­lem is a mas­sive mis­match be­tween ag­gre­gate labour sup­ply and de­mand.”

SA’s labour unions are vo­cif­er­ously op­posed to a wage sub­sidy. One of the unions’ prob­lems with the sub­sidy – the ar­gu­ment that a wage sub­sidy will sim­ply mean older work­ers will be re­placed with younger ones – can be tack­led, the OECD says. It says that should be done by ty­ing the wage sub­sidy to train­ing.

The wage sub­sidy is one con­crete pro­posal Gord­han made to tackle SA’s ex­tremely high youth un­em­ploy­ment rate. The OECD says among Africans in SA more than half of the age group 15 to 24 are un­em­ployed – more than three times the rate for whites.

In his Bud­get speech Gord­han said: “Un­der con­sid­er­a­tion is a cash re­im­burse­ment to em­ploy­ers (of young peo­ple) for a two-year pe­riod, op­er­at­ing through the SA Rev­enue Ser­vice pay­roll tax plat­form and sub­ject to min­i­mum labour stan­dards. Our pre­lim­i­nary es­ti­mate is that

about 800 000 peo­ple will qual­ify. The aim is to raise em­ploy­ment of young school­leavers by a fur­ther 500 000 by 2013.”

There was more de­tail in the Bud­get Re­view. It said mea­sures could in­clude regu- la­tory re­form cov­er­ing the pro­ba­tion­ary pe­riod to re­duce the costs as­so­ci­ated with de­ter­min­ing young work­ers’ pro­duc­tive po­ten­tial; as­sess­ing ex­ist­ing mea­sures, such as learn­er­ship al­lowances, so that they pro­vide in­cen­tives to hire younger work­ers; and min­i­mum wage re­form to align pro­duc­tiv­ity and wages for young work­ers. For ex­am­ple, Ar­gentina, Chile, the Czech Re­pub­lic and Turkey all had lower min­i­mum wages for youth.

Cosatu was fu­ri­ous about the sug­ges­tion. Cosatu re­searcher Prakash­nee Goven­der said: “We’re sur­prised the min­is­ter seeks poli­cies to worsen this sit­u­a­tion (low wages for work­ers) by fur­ther sup­press­ing the real wages of youth rel­a­tive to pro­duc­tiv­ity... If young work­ers’ wages are de­pressed be­low pro­duc­tiv­ity, then it’s sim­i­lar to work­ers pay­ing for be­ing em­ployed.”

Goven­der said pro­vid­ing in­cen­tives to com­pa­nies to hire young­sters would shift un­em­ploy­ment with­out re­duc­ing it and con­trib­ute to down­ward pres­sure on work­ers’ wages and em­ploy­ment con­di­tions, ham­per­ing progress to de­cent work.

Zuma has seem­ingly for­got­ten what he said in his State of the Nation ad­dress and is now talk­ing of a need to “de­bate” the is­sue of a wage sub­sidy for young peo­ple. The Demo­cratic Al­liance has ac­cused Eco­nomic Devel­op­ment Min­is­ter Ebrahim Pa­tel of driv­ing op­po­si­tion to­wards the wage sub­sidy in Cabi­net. All such ide­o­log­i­cal wran­gling is hap­pen­ing while SA has an of­fi­cial un­em­ploy­ment rate of 25,3%, an un­of­fi­cial one of around 30% and job losses of more than 800 000 in the year to first quar­ter 2010.

Though there’s much that’s good about SA’s eco­nomic pol­icy, the trou­ble is it’s not good enough to gen­er­ate the eco­nomic growth and jobs this coun­try needs.

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