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The right to fire

Defend Truth

Opinionista

The right to fire

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets.

The right to strike infringes on the rights of others. To put it simply, it legalises blackmail. It should be reviewed.

The series of actual and threatened strikes, before and during the World Cup, highlighted a fundamental flaw in the Constitutionally-guaranteed right to strike.

The laws and regulations under which strikes may take place are complex. Despite the attempts in the Labour Relations Act to be fair and just to both parties in a labour dispute, there remains a serious imbalance, inasmuch as a worker who strikes in support of a demand for more money or better working conditions cannot be dismissed if the strike action is protected.

In simple terms: A strike protected by law offers unions the ability to blackmail an employer into conceding to their demands. This is evident in the ability of unions to demand wage increases that exceed the rate of consumer price inflation significantly.

This kind of blackmail is all the more effective in cases where strict deadlines are to be met or grave consequences can be expected if a company cannot continue to perform according to its contractual obligations.
Building a stadium for a World Cup, for example, or providing electricity during an event with such high international visibility, gives unions inordinate leverage to make and enforce demands upon employers. Meanwhile, employers do not have the ability to resist their demands, since they are not free to respond to the right to strike by exercising their right to fire workers, nor do they have the time to negotiate a settlement in good faith.

A few myths need to be dealt with in this regard.

There is no doubt that forming unions and engaging in collective bargaining should be legal. Nobody should be forced to join a union if they feel they have a better negotiating position on their own than as part of a collective, but there are no legal or economic grounds for withholding the right to free association and negotiating as a group with coinciding interests.

It is not in employers’ interests to fire employees lightly. Recruiting new employees, inducting them into the company and, where necessary, training them to an adequate standard, are expensive undertakings. If the demands of employees or a workers’ union are fair, employers have every incentive to negotiate in good faith to meet those demands.

Many supporters of protected strikes would argue that the working conditions of employees would erode if they were not so protected. This does not necessarily follow, unless they are already too high. Employers would, instead of citing minimum legal conditions, be forced to compete with each other to attract the best labour, and would do so by offering better pay and better benefits. The more prosperous a society gets, the better these conditions of employment would naturally become under such competition.

Granting employers the right to fire striking workers also does not threaten to increase unemployment. This can only happen in an industry or a company that is already in decline, in which case operational requirements simply become less, and labour becomes more efficiently deployed elsewhere in the economy.

On the contrary, in fact. The opportunities for the unemployed to become employed are hampered by the fact that workers who go on strike are protected by law from being dismissed.

During a recent conversation about Gautrain infrastructure, a labourer made the point that he disapproved of striking workers’ demands for higher pay because he thought they earned plenty already, they had their employer over a barrel involving tight deadlines and he knew many people in his community who were unemployed and would jump at the opportunity to work for the kind of money about which the striking workers were complaining.

He was correct on all points.

It is no accident that essential and important maintenance services are excluded from the right to strike. The government recognises that their cost to consumers would be raised and their delivery jeopardised if workers were given the right to strike without consequence. However, this is just as true for any other productive venture that aims to supply goods and services in response to consumer demand for them.

There’s a basic point of legal philosophy in which the Labour Relations Act errs. It declares that workers who take part in a protected strike do not act in breach of contract. This is a significant departure from the principle that two parties should have the right freely to enter into contracts, and that both parties should have civil recourse for breach of contract on the part of the other. The remedy available to employers should be the freedom to terminate an employment contract in response to its breach. This philosophical principle, based on the individual liberty of citizens, should be sufficient reason to review the way in which strike action is protected in South Africa.

There are other reasons, however, relating to the socio-economic interests of the broader community.

Employers are more likely to absorb unemployed labour if they don’t feel that doing so is an expensive commitment hard or impossible to reverse. Instead of employing at minimum levels, as they do today, more flexible labour law would encourage them to employ labour at optimal (albeit more variable) levels.

With more flexible labour laws, the unemployed would gain more opportunity, because they will be able to compete with other workers who are more demanding.

If workers cannot extort unreasonably high wages out of their employers, but have to negotiate on an equal footing, employers would not be required to pass these expenses on to consumers. The result is that a far greater number of people – customers of the employer – would benefit from lower prices. The general retailer Wal-Mart in the US is often cited as an example here. While it offers relatively low wages by comparison with more unionised companies, it also offers lower prices, which benefit a great many customers, including the employees of the company themselves. In addition to benefiting domestic consumers, more flexible labour also improves the competitiveness of locally-produced goods and services on the international market, which would further improve the prosperity of the nation as a whole.

Inflexible labour cannot put more money in the pockets of workers without taking that money from somewhere else. In general, that somewhere else is the consumer. In essence, wage inflation, which benefits only some, precedes price inflation, which harms all. The protected right to strike, therefore, decreases the efficiency of the domestic economy, increases the cost of living for all citizens and harms foreign trade.

Sure, workers should have the right to strike. But in a just society in which freedom is the cornerstone of constitutional rights, this would be balanced by the complementary right of employers to call their bluff and fire them.

Anything less amounts to legalised blackmail.

Postscript: In my column of 22 June 2010, I undertook to wear a short orange dress and drink Bavaria, should Holland make the World Cup final. They did, and I made good on that promise. I watched the disappointment unfold at my local, provocatively clad in mini and fishnet stockings. As The Daily Maverick refuses to publish the photographs (on the basis that they could scare little children) you’ll have to see the official photographs on my website.

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