Business

Youth wage subsidy: a response to comments

By Paul Berkowitz 1 September 2011

The debate over labour legislation and unemployment is frequently racialised in South Africa. PAUL BERKOWITZ makes another attempt at arguing for labour market deregulation.

In a recent article, I made the argument for greater labour market deregulation, particularly for young, first-time job seekers. Response to the article was mixed: most of the respondents supported my argument, with a few notable dissenters, namely Nhlanhla Nxumalo and Bonginkosi Mthembu. I dedicate this article to them, because the points they raise deserve a full hearing.  

These include the following: job creation and retention is a function of good management, not good labour laws; the process of dismissal is not onerous; the racial composition of the South African economy is an important factor in who is hired and fired; and there are other factors, such as centralised bargaining, which are as limiting to job creation, if not more so. 

I’ll attempt to tackle each of their points, with a mix of theory and personal experience. I’m aware that “the plural of anecdote is not data” and I apologise in advance to those who were expecting a rigorous theoretical defence of labour market economics. I’ll also try to do more than pay lip service to the human beings behind the units of labour, while also not shying away from the realities of markets. 

On the subject of management, in an ideal world every manager would be supportive, visionary, and empowering. The transfer of skills would flow smoothly and worker productivity would be maximised. In my life I have had good managers and bad managers. In my first job as a waiter I was frequently insulted and once physically assaulted by the boss. Skills were often transferred through a raised voice. When I eventually left that job, however, it was with more skills than when I entered. Some of those skills were learned from my colleagues, not from my boss, but there is no doubt in my mind that I benefited from having that job. 

Bad management can destroy morale and lower productivity, without a doubt. But, as other comments pointed out, bad management can also be shielded by the law, not just bad subordinates. 

Is dismissing a non-performing employee difficult? I offer anecdotal evidence from different perspectives. A relative of mine used to manage a large restaurant. He told me that, in a bad month, he could spend up to 25% of his time locked in labour disputes with employees fighting dismissal or disciplinary action. In many of these cases, in his opinion, the employee was in the wrong and could eventually be dismissed – but only at a cost greater than retention of the employee. The employee and his legal representative knew this, and knew that my relative knew this. The practical upshot of this was that employees were kept on the books who were frequently late for work (and in some cases didn’t bother to show up for their shifts) because it was cheaper than firing them. 

I also have my own story, told from the other side of the equation. In 2007 I began work at a large, JSE-listed company. It quickly became clear to both me and my boss that I was unsuited for the job. I was not a corporate animal and I was miserable in that environment. I was called in by the boss’s boss and asked to start applying for jobs elsewhere. I did find another job, but it took a few months. In that time I am certain that I was a liability to my employers and that remains the biggest blot on my employment copybook.

In that particular case the labour laws and internal procedures worked in my favour. I was told that it would be costly to procede with a disciplinary hearing. I therefore did not have unemployment thrust upon me, but my employers bore the cost of keeping me on the books for those extra months. 

This brings me to the issue of race and racial politicking in the economy. I cannot hope to cover this sufficiently here but there are a few important points to be made. Firstly, unproductive employees are certainly not stratified by race (I offer myself as an example). Secondly, management is increasingly black in South Africa, and the black managers I have spoken to have just as many horror stories about staff from hell as their white counterparts. People are people, as the great philosophers Dave Gahan and Martin Gore once said, and their behaviour and work ethic can be predicted by their circumstance and the incentives available to them, not by their skin colour. 

Fortunately or unfortunately, people also predictably hire people that they can most relate to, and often they feel that they can relate to people who look like them. Race is the big elephant in the room, no doubt about it. I don’t have an easy answer to this because there isn’t one. However, we should not conflate our structural problems of race relations, which will take time to dismantle, with the structural problems we have created in respect of job creation. We can do more about the latter, much more quickly, than we can about the former. Making it easier to find work is also not synonymous with denying workers their rights, and many comments acknowledged the need to find a happy medium. 

I acknowledge the historical backdrop to labour-management tensions in South Africa and I can attest to the fact that black graduates still find it harder to find jobs than their white counterparts.  Official unemployment figures for white South Africans have been below 7% for over a decade, and below 5% for most of this time. The answer to the problem doesn’t lie in making it harder to fire existing workers but in making it easier to hire new workers.

This brings me to the final and most important point raised: that of the other problems faced by potential employers. Here I am completely in agreement with Mr Mthembu. Collective bargaining, and all the challenges that small businesses face in general, probably do more damage to job creation than labour market legislation. Let me just clarify, for now, that criticism of one area of policy shouldn’t be interpreted as ignoring the other areas. I thank Mr Mthembu for raising the topic and I ask for his patience in allowing me to respond adequately in a future article.

In conclusion, there is our idealised imagined view of the labour market and there is the reality. The reality is that it’s a messy world. People enter jobs for the wrong reason. Some people find their work environments disempowering and a hardship. Jobs are sometimes destroyed through bad management or through external forces that nobody can foresee or control. When jobs are lost workers are dismissed – there are human casualties.

It is a hard truth that nobody is guaranteed a job. What we should be doing is maximising the opportunity of every citizen to compete for a job, to give them every chance of finding gainful employment or of creating their own business. An entry-level job is sometimes unpleasant and mostly low-paying, but very seldom is it a life sentence. The alternative is unemployment, with all of its devastating psychological and social harms. There’s also enough evidence to suggest that unemployment can lead to a permanent state of discouragement and disengagement from the labour market. What will we bequeath our young people? iM



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