South Africa’s unemployed walk around in invisible chains.
According to Stats SA’s 2023 Q1 figures, of the 10 million young people aged between 15 and 24 years, 7.7 million (75.1%) were out of the labour force – that is, inactive.
The main reason given for their inactivity was reported as being discouragement i.e., they have lost hope of finding a job that suits their skills or is in the area where they live. The real reason is that they have effectively been nationalised.
Denationalising the unemployed would require the sweeping away of all the artificial hurdles that are currently causing mass unemployment.
From an economic point of view, it is possible to declare that without artificial barriers it would not be possible to have mass unemployment. Denationalising the unemployed is the answer to the existing problem.
Two ways
There are two ways to denationalise the activities of the potential entrants into new employment contracts that could dramatically reduce unemployment in the country.
The one method would be to denationalise businesses and allow them to contract freely with employees on mutually beneficial terms without government intervention.
This method would possibly attract opposition from the labour unions who tend to regard all lower wage jobs as being subject to their control. But perhaps not. Perhaps the unions will realise that they can gain more members if they assist in converting unemployed slaves to free and skilful workers.
An alternative method could be to denationalise the unemployed and allow them to contract freely with any employer of their choice, on simple mutually beneficial terms (without government intervention) and with the employed person being the only determinant of what terms of agreement are beneficial. This second method should not attract opposition from the labour unions, as they surely do not take sadistic pleasure in keeping the unemployed out of the job market. As matters stand, the unemployed are nationalised assets under the control of the legislature. To denationalise the unemployed in this manner would ensure that their access to the labour market least disturbs the job security of people who already have jobs.
The simple conditions of contract could be:
- Grant every person who has been unemployed for 6 months or more a Job Seeker’s Exemption Certificate (JSEC) that is valid for two years, allowing the certificate holder to enter an employment contract with any employer on any terms the job seeker finds acceptable and with no limit on the number of times the job seeker can change employment during the validity period of the certificate.
- Require a contract to be entered into on inception of employment so that the conditions of employment are clear and unambiguous.
- Make a minor change to the labour law creating the Job Seekers Exemption Certificate, stipulating that the holder of the certificate is exempt from the provisions of the labour laws, and that the employer of a holder of a JSEC is similarly exempted in respect only of interactions with holders of JSEC’s and no other employees.
- A six-month waiting period between becoming jobless and receiving a JSEC ensures that employers do not dismiss existing employees and promise to take them back, on reduced terms, if they come back owning a JSEC.
Governments face difficult decisions in formulating economic policies. Not only do they receive conflicting advice from economists and policy analysts putting forward very difficult, even totally opposite solutions to economic problems, they also must contend with sometimes ill-considered or partisan pressure from their political supporters.
Dealing with the essential substance of South Africa’s mass unemployment is assuredly one of the most important and difficult issues facing the country. The signs of steadily growing retrogression were already visible two decades ago. The book, Nationalisation, compiled by Free Market Foundation Director Temba Nolutshungu and published in January 2011, wrote about nationalisation proposals, nationalism, problems with State ownership of enterprises, black advancement, and the rewards of economic freedom. The direction of change in the country has unfortunately not been as urged by the authors and compiler of the book.
‘A price to be paid’
Richard J. Grant wrote: “As state ownership expands, whether horizontally or vertically, throughout the economy, efficiency decreases at an increasing rate. There is always a price to be paid for state involvement in the economy.In small quantities, the burden is commensurately easy to bear. But as state involvement grows, the burden grows at the expense of the capacity to bear it.”
The severe barriers to entry into South Africa’s labour market are enacted to increase the job security of those who are employed. Simultaneously, they prevent employers (including the smallest) from employing people by mutual agreement, thus currently excluding more than seven million people from the labour market.
In 2011, when the book Nationalisation was published, it contained the following statement, “Without the current legislative and regulatory barriers, there could be about five million more people in the workforce today, probably earning a minimum of a conservatively estimated R5 billion and potentially R15 billion per month. This converts to a potential R60 to R180 billion per annum in the hands of the poorest families in the country.”
If the losses of income suffered by unemployed people in the intervening years are assumed to have remained at the same level as they were in 2011, and if the losses have been the same for every year in the intervening years, the losses suffered by unemployed people from 2011 to 2022 (inclusive) at R60 to R180 billion per annum, the potential employment losses suffered by the unemployed would be a total of R720 billion to R2 160 billion.
There can be no valid reason for imposing such a huge cost on SA’s poor.
The poor are paying the price of a government decision to prohibit employers across the entire country from paying their employees less than R25,42 per hour of work. This intervention cannot be justified.
[Image: R. Martinez on Unsplash]
The views of the writer are not necessarily the views of the Daily Friend or the IRR, or of Free Market Foundation
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