Just how flexible is SA's labour legislation and is it preventing the country from reducing its high unemployment rates?
The World Bank's Doing Business 2005 report suggests SA's labour laws are among the most inflexible in the world. The report's rigidity of employment regulation index is used to measure how SA's labour laws compare with those in other countries. It measures how difficult it is to hire a new worker or fire a redundant worker, and how rigid working hours are, assigning values between 0 and 100 (see table.)
The report shows SA ranks lower than many other developing countries in Africa and Asia. Also, the cost of firing a worker in SA is high - it takes about 38 weeks to fire an employee, compared with 25 weeks in the UK, 19 in Botswana and four in Singapore.
Though it was not ideal to have insufficient protection for workers, it was important for SA to craft labour market interventions to improve opportunities for workers while fostering incentives for firms to invest, said Ritva Reinikka, the World Bank Southern African Customs Union director, at the 19th Annual Labour Law Conference held in Johannesburg in June.
"It comes down to adapting existing legislation to help workers cope with changes in a more dynamic environment," she said . "Countries need to protect workers, not jobs."
Labour law flexibility regularly comes up for discussion, but the ANC's discussion document for its second national general council at the end of June caused controversy when it suggested a number of ways that SA should consider to make its labour laws more flexible.
"Without wanting to deregulate labour markets or erode the gains of the democratic order, a number of small adjustments to the current regulation of the labour market could produce substantial returns for job creation," the document says.
Adapting the present bargaining arrangements to limit the effect of the agreements on parties outside it, such as small firms, is one possible change. It also suggests that applying a minimum wage in sectors that potentially could employ more people needs to be examined.
However, its most controversial aspect is a model that would introduce a dual labour market - one with a set of rules governing one type of employer and another for those that are crucial in helping to create jobs. For example, allowing small companies, industrial development zones or certain industries such as tourism, textile, agriculture and clothing more flexibility when it comes to complying with labour laws.
But Deneys Reitz director St Elmo Wilken says a dual labour system would only complicate the labour market.
"You would probably find businesses structuring themselves as small businesses simply to get around the laws," says Wilken. "Many businesses blame inflexible labour laws when the real problems relate to management issues and inefficient dispute resolution."
Still, Cliffe Dekker director Randall van Voore says some review of the labour market is necessary.
"What we do know is that labour legislation affects job creation," he says.
Van Voore says that though the broad architecture of the labour laws is working, some streamlining is necessary.
"We should have a maximum of two pieces of labour legislation - one dealing with collective bargaining and one with the basic terms and conditions of employment," he says.
He says the idea of "regulated flexibility" is inherent in the system and that the bargaining councils present an opportunity to introduce more flexibility into the system.
Hofmeyr deputy chairman Faan Coetzee says some laws could be adjusted to introduce flexibility and to relieve smaller businesses of administrative burdens imposed by some of the labour regulations.
But Wits academics Edward Webster and Andries Bezuidenhout say the notion of labour market rigidity in SA is a "red herring". In a paper published by the Centre for Policy Studies, they say the argument that SA's labour market is too rigid assumes that labour markets operate like commodity markets - that as the cost of labour increases, the demand will decrease.
"But demand for labour is also derived from the demand for goods and services," says Webster. "If income levels in an economy decrease, there will be less demand for goods and services."
They say the rise in unemployment is caused by a complex interplay among factors related to labour supply and demand - a growing population, the decline of the gold industry, skills shortages and cheap imports in certain industries such as textiles.
The problem with current labour legislation - from the Labour Relations Act to the Basic Conditions of Employment Act, the Skills Development Act and the Employment Equity Act - is that it is not designed to deal with the changing trends in SA's labour market.
"Labour regulation is generally based on the idea that most employees are engaged in a standard employment relationship," says Webster.
"This refers to a contract of employment that requires workers to work indefinitely, on a full-time basis at the premises of the employer."
But the trend towards casual labour and the increasing use of labour brokers - who act as a third party in the employment relationship - as well as more people working in the informal sector, limit the ability of labour laws to protect workers.
"The labour regime is already being bypassed by business," says Webster. "And this dual labour market has done little to increase employment."
He suggests that even great flexibility of the labour laws, such as waiving the minimum wage, could lead to a further worsening of working and living conditions, with little increase in employment. "There has to be some kind of negotiated pact' between business and labour for any changes to labour regulation," says Webster. "We couldn't get away with the unilateral approach to regulating labour used in Asia, because we face the combined challenge of development and democracy."
There is some realisation by labour that it may have to compromise - high wages and high job security have encouraged some companies to switch to labour-saving technology, subcontract work or employ informal labour.
"This has led to shell agreements where labour wins high standards on paper that apply to fewer and fewer workers in reality," says Webster. But if labour were to compromise on some issues of the labour law, there would have to be a trade-off both from government and from business, he says.
