While recent news of South Africa receiving positive outlooks from ratings agencies S&P Global and Fitch is quite encouraging, the real test for the GNU will come with whether public policy can aid in tackling our unemployment crisis and therefore multiple corollary crises in food security, stable housing and public services.
As University of Cape Town economists Nicoli Nattrass and Jeremy Seekings note:
“In developing economies, economic growth can generate lots of short-term jobs in sectors such as construction. Sustainable job creation on a large scale generally requires, however, job creation in labour-intensive manufacturing sectors such as clothing manufacturing. To create jobs on a large scale requires taking advantage of global markets by producing labour-intensive products for export.
This was what the East Asian tigers – including China – did. The south-east Asian countries are now doing the same thing: In Vietnam, Cambodia and Thailand, an additional one million jobs in clothing production were created between the mid-1990s and mid-2000s”.
In other words, proponents of free market economics within the GNU, namely the DA, must find ways with which to actively push the GNU towards labour reform and an understanding of our (youth) unemployment crisis that initially prioritises job-intensive growth over mere wage growth. Here a couple of things must be said. Firstly, a low-skill, low-paid job pays better than zero (unemployment). Prioritising basic income grants, even at the upper bound level of R1634 per month in 2024, would give people less than what a job is likely to pay.
The moral panic over initially low wages needs to be balanced against what is essentially an unacknowledged Faustian bargain that proponents of wage growth (labour unions and left wing politicians and academics) make, which is that labour rigidity prioritizes those who already have work, while disenfranchising young workers and shutting them out of the labour market.
As Nattrass and Seekings also note:
“As capitalist economies grow…….they will reach a turning-point at which labour becomes scarce. They will then shift into higher-productivity sectors and wages will rise.
Lewis’s model was reflected in the economic history of East and South-East Asian countries. The economies of Korea, Hong Kong and China developed through job creation in labour-intensive manufacturing sectors before these economies reached the Lewisian turning-point and wages began to rise.”
In other words, South Africa has to make better trade-offs than we are currently making when it comes to industrial and labour policy. Labour market tightening which leads to higher worker bargaining power, and higher wages that don’t shut out young workers can only result from an economy which initially takes into account the low skills base of many of our workers, and which creates an economy in which jobs are also plentiful and workers have options and employers can better match workers and roles: i.e. labour matching. This is how efficiencies are achieved in industry and capital is better deployed. Combined with upskilling and an increasingly better-educated workforce over time (Siviwe Gwarube has her work cut out for her), these are how countries can move from making low-quality goods like Daewoos of old. to having globally competitive and desirable products like the latest gadgets from Samsung and the latest cars from Hyundai and Kia. These things take time, and South Africa’s industrial and labour policy seems to skip the steps necessary to this process, because our policymakers want to have first-world policy and regulations in a developing country.
Another troublesome assumption that underlines our country’s seeming aversion to labour-intensive manufacturing is this idea of “living wages”. This assumes that people in a developing country with a low skills base all live in a developed-country style with nuclear families, where the reality in most of the world is that people live in multi-generational formations. While a family may live in the main RDP house for example, they may extend and have back rooms where a young married uncle lives. People can and will make do, and their lives are made easier when multiple adults in multi-generational formations are gainfully employed instead of relying on grandma’s grant or that measly R350 one. There are also positive psychosocial effects for adults, especially men, in a household being gainfully employed and providing for the family.
We have a billion people north of us who need clothes, combs, pots and pans and other manufactured products. For an African country, South Africa has a fairly robust domestic market which will only be bolstered and create a positive reinforcing cycle if a majority of working-age people are in employment and able to purchase the cheap goods made in the country.
[Image: Oberholster Venita from Pixabay]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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