Wage Regulation in Industry

 

One of the consistent demands by workers is for wages that are ‘decent’, ‘living’ or similar terms.  Employers are consistently criticised for paying wages that are too low.  The use of Labour Brokers is viewed as evil and anti-democratic, primarily because a part of the cost to the ultimate employer accrues to the broker, rather than to the worker, as it would in a direct employment relationship.

One of the very important factors that appears to be forgotten in this discussion is that workers have a right and an ability to select their employer, and one might reasonably believe that those workers do so rationally.  An employee has the right to terminate the employment relationship in a way that is not open to the employer.  The employee can decide to move to another employer without giving any reason, and with a short notice period.  The employee is not obliged to pay compensation to the employer for such termination, even though the employer might have invested a considerable sum in the training and development of the employee.  It is not unusual for an employer to carry the cost of the employee for some time, ranging from a couple of months to a couple of years, before the employee reaches a level of capability to actually earn the wage he or she is paid.  The employer, on the other hand, cannot simply terminate the employment relationship without cause.  It is usually obliged to pay some compensation to the employee for the termination, usually based on the length of the employment.

The corollary of the freedom of movement of the employee is that he or she has the ability to leave an employer to seek employment with another employer for any reason, including the level of wages paid, the benefits, the working conditions or any other imaginable cause.  In these conditions, the probability exists that the wage paid will amount to what the workers’ contributions are really worth.  Stability, in an economic sense, will be achieved.  Employment will, once again, represent a situation in which Party A trades what he or she is able to offer to Party B.

Of course, the ideal market will quickly show up the advantages or disadvantages of each participant.  Labour will flow to the employer able to extract the greatest utility from it.  Workers with greater capabilities will be paid more than those with lesser capabilities.  The market will force each participant to maximise its’ or his or her, benefits to the other.  Higher qualifications, including education, training, skill, willingness to put in an honest day’s work, will be rewarded, and lack of those qualifications will be punished by lower rewards.  That is how the world works, on a scale of countries, and on a scale of person to person, even at the housewife-maid level.  Any action taken in an attempt to enforce different rules will ultimately result in a flow of economic activity away from that market inefficiency to a more economically beneficial place.  The introduction of a minimum wage for household workers resulted in a massive loss of jobs in that sector.  The imposition of high wages for miners has resulted in the number of mining jobs halving within a decade.  The dominance of Union-inspired wage and working conditions has resulted in South Africa becoming one of the slowest-growing economies on the continent.

The origins of the Trade Unions lie in the old conditions, in which the employee was comparatively immobile and the employer was, in all likelihood, one of a very few employment possibilities in the area.  The employee was, in all probability, bound to a particular employer.  It was necessary to regulate the conduct of the employer, to ensure that the employees had a reasonable deal. 

Those conditions no longer apply.  Employees have a wide variety of employment possibilities and opportunities.  If there are not enough such opportunities in the area in which the employee lives, he or she is free to move to another area, as is frequently done.  There has been a massive migration between employment areas.  Half the population of the Northern Cape has migrated away from that Province in search of employment.  A large proportion of the Eastern Cape has moved to Gauteng or the Western Cape in search of employment.  The problems at Marikana and numerous other mines have illustrated how many workers come from other areas, even other countries, to obtain employment at those mines.  This is not the fault of the mining companies.  They fulfil their economic function in making employment possibilities available.  If a worker migrates from another area to take up those opportunities, it is at the choice of the worker.  It is a clear indication that the worker is not able to find a comparable employment opportunity in his or her own area.  The mine owner cannot be blamed for that condition.

The emergence of Trades Unions was justified in the circumstances of the time and place.  Over time, they became a business, generating a good income for the management of the Unions, and they evolved ever more clearly to becoming organisations for the protection of the members, not for the advancement of society.  By virtue of their size, they became a more dominant force that the businesses that gave their foundation cause – there are dozens more employees of businesses than there are business owners – and they have used that dominance to exert influence on Governments and on society.  In a way, the myths that they perpetuate have become something of a religion.  Very few people ever question them or their real purposes, and it is easy to justify their existence to the members – they are preaching to the converted.

However, in this day of rampant DEMOCRACY, it might be wise to question some of the fundamentals of the current order. 

Unions do not create jobs.  In many ways, they destroy them, and by so doing, they act against the fundamental interests of society.  Businesses create jobs. 

The unions have achieved a situation of crass inequality vis a vis the employers.  When did you last hear of business owners marching to demand lower wages and better work contributions by employees?  When do businesses simply walk out on their employees, except in conditions in which the businesses are no longer viable (often because the cost of labour and their associated expenses have become prohibitively high)?  When a business fails, who enjoys preference in payment from the assets?  The business owners are the last to stand in the queue for distribution of assets, while the employees enjoy preference second only to the South Africa Revenue Services, a parasite that made no contribution to the existence of the business in return for the blood it sucked out of that business.  And then, to cap it all, Patrick Craven, the spokesman for Cosatu, claims that the employees carry a much greater risk than the business owners!  If he was saying what he and his organisation believe, it is a frightening thought that the organisation that claims to provide a reasonable interface between employers and employees can have so little understanding of the reality of the economic situation. 

It is worth stating the facts again.  Businesses create jobs.  Employees do not.  Without businesses, there would be no employees, no tax, no Trades Unions.

Is it not time to reconsider the balance of the relationships between labour and employers?  Is it not essential to give businesses an equal say, and equal force, in the relations between them and employees?  If the mutual conditions were to become more fair, there is a good possibility that the potential for conflict between the two groups will be reduced, and that will be good for all, except, possibly, the Trades Unions, which would find that their role will be reduced to what they claim it to be – reducing the imbalance between employers and employees.  It would also act to ensure that businesses remain in South Africa, or come here, to create the jobs that are needed, rather than seeking an environment abroad, where they will be rewarded for the risk, the capital investment and the contributions of skills, innovation and effort that they make.

It is essential for the South African economy to become more free, more fair, and more democratic if the South African citizens are to enjoy the sort of growth that is an absolute essential.