There is a way to prevent legislation from strangling jobs

SA’s persistently high unemployment rate is shocking. On an upward trajectory for decades, it seems overwhelmingly unsolvable. Eustace Davie, a director at the Free Market Foundation, has been haunted by this tragedy for a long time. Despite pleas and proposals from Davie and others, there has been no traction or progress made so far. In fact, Davie believes government legislation is creating and exacerbating — rather than reducing — such mass unemployment.

We have a shocking 9.4-million people unemployed, 37% of the potential workforce. The granularity of this humongous statistic, being heavily weighted towards the young and those who are discouraged, is even more alarming.

With Cosatu being silent on this national disaster and the South African educational system in a dire state, Davie sees no effort to solve the problem. Our Bill of Rights is failing the unemployed and government mumblings on the issue do not even scratch the surface, he says.

The problem continues to grow as the black-owned entrepreneurial businesses that previously operated in the townships and employed the lowskilled have moved on and no one has taken over from them.

The causes of mass unemployment are clear to Davie.

They are labour legislation — such as onerous termination procedures — which gives high job security to those who are employed; sectoral and impending national minimum wage laws; and company compliance requirements, such as insisting on references.

Canvassing employers for estimates, Davie says the cost of labour law compliance is at least R2,000 a month per employee. Then add to that the R3,500 suggested monthly national minimum wage.

The imminent national minimum wage is a fiery topic for many stakeholders, with much debate as to whether an initial or increased minimum wage leads to huge job losses. Davie points to Puerto Rico where such a move triggered massive declines in employment levels and GDP. The general expectation is that job shedding is minimal when a national minimum wage is introduced or increased — but reality on implementation can be harshly different.

Davie points to the Commission for Conciliation, Mediation and Arbitration requiring additional funding to deal with the effects of the national minimum wage, based on the expectation that employers will reduce their workforce when it is implemented. He is also disappointed that the minimum wage will be national, with no distinction between urban and rural workers. This makes it easier for the government to police and ignores the negative effect it will have on rural employment.

In what he calls his “simple solution” to mass unemployment, Davie says the government will never be able to remove the numerous protections that employed people enjoy. So, instead, he would like to see the creation of a special worker classification that exempts the work-seeking unemployed from labour legislation burdens and employer impositions including the national minimum wage.

The exemption would apply for, say, the first two years in employment. When that person becomes firmly ensconced in the labour force, the exemptions would fall away and normal labour legislation would apply.

Exemption status would be reinstated if that person becomes unemployed in the future after a specified period of job seeking.

Davie says this type of solution must be acknowledged by Cyril Ramaphosa, a key proponent behind the impending national minimum wage. The mass unemployed do not understand what is behind their unemployment. But they certainly will when they learn they cannot get a job specifically because of the national minimum wage initiative.

Davie implores the government to take real action or it will be in serious trouble as unemployment continues to rise.