‘Not decent work’
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.