Transcript Document

Labour Market Policy and the Emasculation
of the Right to Work:
Lessons from the Clothing Industry
Jeremy Seekings
(University of Cape Town)
Freedom Charter:
There Shall be Work and Security!
… The state shall recognise the right and duty
of all to work. …
The NDP:
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estimates that 11m new jobs will be needed by 2030;
whilst eschewing the language of rights, it implicitly proposes a right to
work through (if necessary) a massively expanded Expanded Public
Works Programme, i.e. the EPWP serves as a partial employment
guarantee scheme (prospectively costing >5% of GDP).
hopes for a massive expansion of employment for less skilled workers in
small and medium-sized businesses in labour-intensive sectors, i.e.
precisely the occupations/businesses/sectors that have failed to grow –
or have shrunk – in the past.
How does the NDP imagine that these jobs will be
created?
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‘active labour market policies and incentives to grow employment,
particularly for young people and in sectors employing relatively lowskilled people’
at first, emphasis on ‘mass access to jobs’, with flexibility on wages (as
long as existing, experienced workers are not displaced) and wage
moderation: ‘In the earlier years, as the country expands access to
employment on a mass scale, a large proportion of working people will
receive low pay.’
subsequent emphasis on wage growth
Job creation vs “decent work”?
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Decent work is an unassailable objective
But how should any possible tradeoff – in the present – between decent
work and other objectives be managed? Might there be a tradeoff, in the
short-term, between decent work and job creation?
The ILO emphasised both job creation and “decent work”, and “decent
work” was not primarily about wages
In South Africa: the “decent work agenda” is often delinked from
meaningful job creation, and focused more sharply on wages
The NDP reflects the original ILO position (= echoed by Mantashe,
Gordhan, Manuel etc) more than COSATU’s
The NDP: long on vision, short on detail
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Rhetoric about tough choices …
But little to say about what the state will do differently to steer the
economy down a growth path that is more labour-absorbing growth than
hitherto.
The only major reform mentioned = a youth wage subsidy.
No discussion of how labour market institutions shape the cost structure
of labour-intensive sectors, leading to job destruction, especially in
tradable sectors; this is the dark side of South African labour market
policies.
A first step: End state-sanctioned job destruction!
The first step: Stop state-sanctioned job destruction.
•The Minister of Labour uses the extension mechanism in the LRA
– To impose increases in the minimum wage in some sectors, to levels that
some employers cannot afford, without any requirement even to consult with
the affected employers or workers, or to take into account employment effects;
– To criminalise non-compliant employers; and hence
– To destroy jobs, both directly and indirectly
•Insofar as this happens:
– South African workers do not have a right to continue to work in jobs that may
be compliant with all other labour legislation and pay wages that were higher
than the pre-existing minima
– Wage-setting institutions conflict with the NDP vision of ↑ employment in
labour-intensive sectors.
– This is tragically ironic, in that criminal, non-compliant firms may pay wages <
legal minima but > the payments made to EPWP participants.
Job destruction in South Africa:
Since 1994: wholesale destruction of less skilled formal employment in
labour-intensive, tradable sectors.
Clothing industry:
• last remaining low-wage, labour-intensive manufacturing sector (perhaps
even the last such tradable sector)
• squeezed between cheap imports and upward pressure on local costs
(primarily wages)
• therefore = a focus of debate (or battleground) over “decent work”
Employment in the Clothing Sector
160000
140000
120000
100000
80000
60000
40000
20000
0
Clothing
Employment in the Clothing Sector
160000
140000
120000
100000
80000
60000
40000
20000
0
Clothing
Job
destruction in
the clothing
sector:
abandoned
factories in
very poor,
rural areas
How are jobs destroyed?
(1) The process for setting minimum wages
1.
SACTWU and the various
regional employers’
associations negotiate in the
National Bargaining Council
(NBC)
2.
If SACTWU and at least one of the employers’
associations agree, then their Collective
Agreement is binding on all members of the
employers’ associations that are party to the
agreement
4.
Court sheriffs (acting for the
NBC) attach the assets / close
the factories of employers who
do not comply; jobs are
destroyed directly and
indirectly
3.
The Minister of Labour extends the Collective
Agreement to all employers, i.e. employers who
were not party to the agreement in the NBC,
across the whole country
How are jobs destroyed?
(2) Raising minimum wages
Minimum wage for trainee machinist (in
2003 prices)
Rand per week (2003 prices)
450
400
350
300
250
Cape Town
200
Durban
150
Newcastle
100
50
0
1995 1997 1999 2001 2003 2005 2007 2009
How are jobs destroyed?
(2) Raising minimum wages
Minimum wage for trainee machinist (in
2003 prices)
450
Rand per week (2003 prices)
Wages set by
regional
bargaining
councils
400
350
300
250
Cape Town
200
Durban
150
Newcastle
100
50
NBC established
2002
0
1995 1997 1999 2001 2003 2005 2007 2009
Wage Board / Employment Conditions Commission:
• modest increases in 1997 (WD471 extended) and
• a more marked increase in 2000 (SD4) - but cushioned by
depreciating Rand.
How are jobs destroyed?
(2) Raising minimum wages
Minimum wage for trainee machinist (in
2003 prices)
Rand per week (2003 prices)
450
400
350
300
250
Cape Town
200
Durban
150
Newcastle
100
50
0
1995 1997 1999 2001 2003 2005 2007 2009
Wage Board / Employment Conditions Commission:
• modest increase in 1997 (WD471 extended), and
• a more marked increase in 2000 (SD4) - but cushioned by
depreciating Rand.
NBC (established 2002): sustained increases
in minima through extension of collective
agreements in face of strong Rand and
strong opposition
Arguments made in defence of job destruction
in the clothing industry
(and our counter-arguments)
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2.
‘Sweatshops’ (with illegal working conditions) should be shut
down
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Yes, but wage setting is the wrong instrument to regulate
working conditions
Labour costs do not matter to employers: firms can pay higher
wages (perhaps through higher productivity); or, the problem is
not labour costs, but trade liberalisation
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?! Then why are firms shutting down? There is considerable
evidence that this is a low-profit as well as low-wage sector.
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Yes, product prices matter, but the appreciation of the Rand
was more decisive in the 2000s than tariff reduction in the late
1990s; but they are only one side of the ‘squeeze’ on firms.
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Why did the union itself agree to moderate wages after 2010?
Employment in the Clothing Sector
160000
140000
Clothing
120000
100000
80000
60000
40000
20000
0
Tariff reduction on
imported clothing
1994
100%
1997
78%
2000
60%
2003
40%*
* Later raised to 45%
Arguments made in defence of job destruction
in the clothing industry
(and our counter-arguments)
1.
2.
‘Sweatshops’ should be shut down
Labour costs don’t matter to employers: firms can pay higher wages,
primarily through increased productivity
3.
Labour costs do matter to employers: if low wages are tolerated,
then there will be a “race-to-the-bottom”; compliant firms will
close down, and higher wage-workers will lost their jobs
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Why are there any firms left in high-wage areas? There is
technological and market differentiation in the sector.
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Why would firms go to (eg) Newcastle rather than (eg)
Lesotho?
4.
Low wage jobs are simply unacceptable
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Unacceptable to whom? Who makes this decision?
We are not arguing that:
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There should be deregulation of the labour market
There should be no minimum wage-setting
Minimum wages should be lowered in all sectors
Minimum wages in the clothing sector should be abolished
Unemployment in SA is primarily or even largely the consequence of labour market
regulation
We are arguing that:
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The level at which minimum wages are set has large effects on employment in
specific circumstances, notably in labour-intensive, tradable sectors
Minimum wages should not be increased through the LRA extension mechanism
without taking into account possible employment effects
If or when there are employment effects, then minimum wage-setting should take
into account the preferences of the workers most affected
The NDP vision of substantial employment growth in low-skilled occupations
cannot be realised in tradable sectors without selective flexibility on minimum
wages
Working papers by Nicoli Nattrass & Jeremy Seekings:
• ‘Differentiation within the South African clothing industry: Implications for wagesetting and employment’, CSSR Working Paper no.307 (Centre for Social Science
Research, University of Cape Town).
• ‘Institutions, wage differentiation and the structure of employment in South
Africa’, CSSR Working Paper no.309 (Centre for Social Science Research,
University of Cape Town).
• ‘Job destruction in the South African clothing industry: How an unholy alliance of
organized labour, the state and some firms is undermining labour-intensive
growth’, CSSR Working Paper no.323 (Centre for Social Science Research,
University of Cape Town) and CDE Focus (Centre for Development and Enterprise,
Johannesburg), January 2013.
Criticisms of our third Working Paper by SACTWU (in the press, to UCT, etc), and our
replies to each and every criticism.
All available on: www.cssr.uct.ac.za.
Is there a “race to the bottom”?
technology, production and markets
Labour-intensive, lower-wage
(non-compliant) factory
More capital- and skillintensive, higher-wage (and
compliant) factory
Our labour-market and
industrial policies favour
this end of the industry…
Labour
productivity
(output
per
worker)
Lower wage, lower
labour productivity
firms: producing for
mass markets,
competing with
imports; mostly nonmetro
Higher wage, higher
labour productivity
firms: producing for
niche markets;
subsidised by DTI;
mostly metro
wages
Labour
productivity
(output per
worker)
Increased labour
productivity
through capital
subsidies
Raised minimum wage
Labour
productivity
(output per
worker)
Increased labour
productivity
through capital
subsidies
Raised minimum wage
Firms move
into more
capital- and
skill-intensive
production
Labour
productivity
(output per
worker)
‘Non-compliant’
firms shut down;
jobs are destroyed;
consumers buy
imported clothing
Is there differentiation
in the sector?
Do all employers use
the same machinery,
differing only in make
and age?
This is like saying that
all cars on the road are
the same and that the
differ only in make
and age…..
If technology makes no difference, why:
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Did SACTWU general-secretary Ebrahim Patel spend ten
years pushing the government to adopt an industrial
policy for the clothing industry that focused on
pulling/pushing firms into more capital-intensive, highwage production?
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Did the DTI spend R500m in 2010-12 on capital subsidies
for the larger, compliant firms? (Including about R100m
to union-owned Seardel!)
Yes, some firms in Cape Town are
vulnerable
• CMT (cut-make-and-trim)
• Primarily for a niche market: K-Way
• The employer is strongly opposed to Newcastle firms
having a competitive advantage due to lower wages
• But where is their main competitor? Lesotho!