Government carries jobless albatross into 1999 election
Rigidity in the labour market is the key deterrent to job-creating investors, writes SVEN LUNSCHE
A number of studies over the past few weeks suggests that employment in the formal sector is bound to decrease over the next two years - not to mention the 500 000 schoolleavers who enter the job market each year with scant hope of finding employment.
A quarterly poll by the Central Statistical Service among manufacturers shows that the majority of respondents expects a decline in staffing levels in 1998 (see graph).
The situation is severe in the clothing and textile industry, general manufacturing and the paper and packaging sector.
The only manufacturing sub-sector expecting to employ more people is the hospitality industry, as tourism booms.
A longer-term picture is painted by a recent World Bank report on SA's labour market. The controversial report, which has been criticised by labour and government, suggests that wage increases ahead of inflation often result in job losses.
For example, a 10% rise in real wages for workers leads to a 7.1% loss in jobs, says the World Bank, although this figure varies by sector.
The bank also finds that over half the job losses occur about two-and-a-half years after increases are implemented. This is bad news for the SA economy. Since 1995, real salaries have risen every year, and for the first three quarters of last year, settlements have averaged a real 2%.
This suggests that by 2000, more employed workers could find themselves out in the street unless new investment miraculously pours in.
Unions and the ministry of labour have consistently denied the link between high wages and declining employment, but most economists argue that wage pressures are the key to investment decisions by private companies.
The World Bank study takes only wage levels into account, but other labour-market costs are also having a significant impact on corporate willingness to employ labour.
Not only do businessmen view labour as expensive when coupled with low productivity levels, but they also find workers difficult to lay off in times of economic hardship.
The lack of flexibility in the government's labour-market regime adds considerably to the cost of employment.
Despite the commitment in Gear's strategy to a flexible labour market, the reality is different - government's four labour laws are, in its own words, "labour friendly".
One senior economist notes that of all legislation introduced by the government since its inception in 1994, labour policy is the only area which has gone against free- market principles.
The subject of labour market flexibility is unlikely to be raised in the forthcoming presidential job summit. Discussions in Nedlac to date have not achieved consensus on the agenda for the summit, but sources indicate that labour would boycott it if labour-market flexibility were to be high on the agenda.
At a recent meeting the labour delegation proposed four broad subjects for the summit: measures to prevent job losses; job creation measures; support measures for the unemployed; and assistance to the informal sector. None of this goes to the heart of what most economists insist is the real obstacle to job creation - labour-market rigidity. The unemployment queues are bound to get longer.