Table of Contents
1. Introduction
2. South African Labour market reforms in the age of globalization
3. Labour market Regulation and Deregulation by the state of South Africa in response to globalization
4. Failure of the South African BECA legislation to avoid workers exploitation.
5. The Employment Equity Act as legislature that eliminate discrimination in the contemporary workplace
6. Labour market Reforms the cause of socio-economic disparities in South Africa
7. The detrimental effects of labour Market Flexibility
8. Unemployment, inequality and poverty as the common norm of the South African society
9. The government strides in alleviating unemployment in the labour market.
10. Conclusion
11. Data Appendix
12. Bibliography
1. Introduction
Globalization has brought many reforms in the labour market that impact labour, capital and state. With the adoption of liberal market economies many counties have liberalized and deregulated their economies in anticipation of gaining the comparative advantaged posed by trade liberalization. The historical ideological perspective of Adam Smith of the operation of the “invisible hand” were the market forces are determined by the mechanisms of supply and demand have become the sole market regulator with government intervention discarded or kept at minimum. South Africa in the this age of globalization has adopted neo-liberal policies with the anticipation of promoting capital investment, economic growth, gaining comparative advantage in trade and enhance global co-operation of financial markets. Within this era of free market economies tensions have surfaced in the Tripartite Alliance due to differentiation in economic policies to be implemented that are beneficial to labour, capital and state, while the state institution the “government” is accused of being pro-capital than pro- labour. This essay will critically assess how the contemporary labour market reforms impact labour, capital and state and elucidate why many observers see the increasing tension within the Tripartite Congress Alliance as unsettling the regulation of labour markets.
2. South African Labour market reforms in the age of globalization
While the forces of globalization have autonomy effects on government policies the South African government ever since the new democratic dispersion in 1994 South Africa has according to Coetzee faced with the major challenge of forging accelerated growth economic that would raise the country status whilst relieving socio-economic backlogs and imbalances acquired from the apartheid era. According to Steger globalisation is the phenomenon reflected in the liberalization and integration of global markets and the reduction of governmental interference in the economy. The Wealth of Nations, Adam Smith according to Bowles and Edwards proposed the idea that the coordination of all the economic actors within a society, including producers, suppliers, and consumers, could be left to the economic actors themselves. The global environment and the national interests are regarded to be the sole determinants of national policy, the South African government adopted RDP (Reconstruction and Development Program) in 1994 was endorsed by COSATU inline with the Freedom Charter and later adopted by the ANC government. RDP centred on wealth distribution and an increase in state welfare but due to lack of growth, devaluation of the rand and slow inflow of direct investment according to Barker forced the government to consider a relative new policy.
The inception of GEAR in 1996 was the efficacy of neo-liberal policies as the South African government opened its markets to the rest of the world, according to Finnmore Trevor Manuel the Minister of Finance of 1996 tabled a non negotiable frame work GEAR(Growth, Employment and Redistribution Policy) discarding RDP without consultation the government regarded the policy vital to secure economic stability and progress which resulted in more flexible labour market, increase in foreign investment, drop in tariff protection on imports from 10% to 7% to force the domestic industry to become more competitive complied with privatisation of state assets in reduction of state debt. The continuation of the alliance according to Buhlungu enables the ANC to maintain a 'Big Brother' relationship towards COSATU and the SACP and to appropriate the legitimacy associated with the history and political symbolism of the liberation struggle as it displayed that it can implement policies without the acknowledgement of other alliance members.
According to Barker GEAR had several aims and objectives to among them to structure labour market flexibility within the collective bargaining system, enhance human resource development, a social agreement to facilitate wage and price moderation, small and medium-sized enterprise development, restricting of state assets, tax incentives to stimulate new investment ,expansionary infrastructural investment and anti-inflationary monetary policy. GEAR formulation was within the requirements of WTO and Washington consensus of trade liberalization and for the purpose of economic integration of South Africa to the rest of the world. Massive investment resulted the influx of FDIs (Foreign Direct Investment) and through TNCs (Transnational Companies) but with globalization imposing homogeneity or sameness in nation states and workplaces around the world in terms of liberal policies detrimental effects resulted as tension elapsed between the state and labour unions as GEAR was never implemented after consultations, labour still regards GEAR as detrimental to working class.
According Bendix the adoption on the neo-liberal democratic capitalism system has resulted in the treatment of FDI (Foreign Direct Investments) as highly important than the National Investment thereby resulting in the peripheralise and casualize part of the labour force from the formal sector to the unaccountable informal sector hence creating unemployment in the process as most entrepreneurial activities lack funding from the government. Mathekga elucidates that instead of GEAR creating jobs and alleviating poverty, the government policy resulted in retrenchments, downsizing and restructuring
Trade liberalization that is promoted by International organisation such as WTO (World Trade organisation) has been the mostly successful according to Barker in increasing the welfare and economic growth of South Africa which has resulted in the in high labour absorption rate in some of the sectors of the economy such as construction and finance but however South Africa have suffered severely in mining and agriculture as the country is failing to exploit the comparative advantage in agricultural exports . Trade liberalization led to the distribution effect as Haydam propounds because it led to the South African economy to increase the demand for some production factors and reduces of others but this has been the major factor of a jobless economic growth. Whilst globalization is characterised with a route which emphasis skills training, high wages, effective collective bargaining, reward and incentive skills the South African government implemented AsgiSA Accelerated and Shared Growth Initiative for South Africa (AsgiSA) to compliment GEAR. AsgiSA resulted from Government's commitment to halve unemployment and poverty by 2014. Joint Initiative on Priority Skills Acquisition (Jipsa) was established a month later to address the scarce and critical skills needed to meet AsgiSA's objectives. These neo-liberal economic policies were to resolve the rampant effects of globalization on labour, capital and state.
3. Labour market regulation and deregulation by the state of South Africa in response to globalization
Due to the deregulation of the markets atypical unemployment has resulted with capital trying to circumvent the draconian laws such as BECA (Basic Employment Conditions Act) LRA (Labour Relations Act) and EEA (Employment Equity Act) which have been criticised by capital for making the labour market rigid, atypical employment has resulted due the more market flexibility caused by globalization. According to Barker atypical employment reduces labour costs, sidestep burden of labour regulation and avoids the hassle factor associated with the employing workers especially those highly unionised. While one of the most labour market reforms is the high mobility of labour attributed to global reconstruction of the workplace, that has been promoted by high intensification of global economic integration of the South African economy labour has suffered from brain drain and the increase of the unskilled labour whilst capital benefited from highly skilled labour from across the states which results in productivity. While labour broking has boomed the LRA has not protected workers form this exploitative flexibility. Labour brokering is not only a global trend but ineffective labour laws in South Africa also made it easy for the system to emerge quickly. According to Theron the LRA regards labour brokers as the employers of workers, even though labour agencies are not employers, according to the definition of employer.
In order to cut labour costs and reduce the costs of productivity and become globally competitive Webster and Von Holdt emphasised that most companies have decided to retrench and downsize its operations. With the innovation of IT technologies human labour is now being replaced by machines hence casualisation and externalisation of employment has resulted. According to Castells and Ports the casualization and externalisation of the employment relationship is part of the broader process of informalisation of work, a process that has shifted employment way from standard employment generating activities that are unregulated by the institutions of society in a legal and social environment. Due to these massive factors that led to the government to deregulate the market, the government have put in place markets reforms inform of legislation to protect the state from dangers of socio- economic challenges causing social unrest such as strikes, unemployment, high increase in crime and high exploitation of labour by capital.
The introduction of new labour laws according to Clarke ushered in era in industrial relation in South Africa and a stronger regulation to regulation to address the extreme inequality and discrimination that characterised the apartheid work place. The ANC adoption of neo-liberal macro economics and industrial policies impeded the overall transformation of the labour market formal employment has shrunk, informal and subsistence work has become more prevalent and various non standard employment have grown significantly. According Clarke new labour legislation has inadvertently contributed to these employment developments. Weaknesses and loopholes in the laws have led to the growth of distinctive forms of non-standard and precarious employment, such as "independent" contractors. Alongside these changes, "old" forms of casual and contractual employment have continued as holdovers from the apartheid labour market.
The Labour Relation Act as the fundamental legislation in recognition of workers rights
The Labour Relations Act was passed by Parliament on 13 September 1995 according Du Toit et al (1998) it formalised and codified organisational rights, laid a basis for worker participation in the workplace, granted workers a meaningful right to strike (without fear of dismissal), introduced a new dispute resolution system, provided strong support for collective bargaining, and extended coverage o f its provisions to most workers. According to duT oit the key goals of the Act was to shift industrial relations away from its adversarial heritage and create a new system that would be able to meet the challenges posed by globalisation .With Globalization fuelling the conflicts between capital and labour as they have different interests LRA provides the remedies for conflict resolution though a dispute resolution system, the establishment of the Commission for Conciliation, Mediation, and Arbitration (CCMA) through this act was very fundamental by the state to ensure peace between capital and state.
The Labour Relations Act was passed by Parliament on 13 September 1995 according Du Toit et al (1998) it formalised and codified organisational rights, laid a basis for worker participation in the workplace, granted workers a meaningful right to strike (without fear of dismissal), introduced a new dispute resolution system, provided strong support for collective bargaining, and extended coverage o f its provisions to most workers. According to duT oit the key goals of the Act was to shift industrial relations away from its adversarial heritage and create a new system that would be able to meet the challenges posed by globalisation .With Globalization fuelling the conflicts between capital and labour as they have different interests LRA provides the remedies for conflict resolution though a dispute resolution system, the establishment of the Commission for Conciliation, Mediation, and Arbitration (CCMA) through this act was very fundamental by the state to ensure peace between capital and state.
The Labour Relations amendment of 2010 according to Ministry of Labour will regulate contract work the amendment aims to stop the practice of repeated contracting for short-term periods. The onus will be on employers to justify the use of short-term or fixed term contracts, in place of contracting employees on a permanent basis. It will further address the problem of labour broking; the Labour Relations Amendment Bill proposes to repeal section 198 that deals with Temporary Employment Services in the Labour Relations Act (no 66 of 1995). The Department is introducing a new Employment Services Bill which will address both Private and Public Employment Services. The new proposed LRA amendments will result in the decrease of the labour absorption rate in the formal sector as new tenants in the labour market will find it hard to get permanent work as not capital will sacrifice costs associated with labour without assessment of the worker for some period before getting permanence. According to Le Roux the LRA sees the important role for more centralised bargaining in particular at sectoral level, however bargaining council’s agreements might very well result in a high level wages as well as standardisation of work as capital is provided with platforms to determine markets wage rate trends.
In order to avoid exploitation of workers and ensure decent work for all workers as well as to protect the employment relationship, introduce laws to regulate contract work, subcontracting and out- sourcing, address the problem of labour broking and prohibit certain abusive practices. The BECA is important in establishment of the workers conditions of employment according to Clarke aimed to advance equity and workers' rights, while balancing these goals against the need to create more efficient and competitive workplaces. The Act established minimum conditions of employment and extended them to all workers in terms of working time, maternity leave, overtime rates, and annual leave provisions. However the act has been condoned by capital as creating some rigidity in the labour market but the state has defended this allegation elaborating according to Clarke (2004;562) regulated flexibility," was accepted as a way to balance "the protection of minimum standards and the requirements of labour market flexibility”.
5. Failure of the South African BECA legislation to avoid workers exploitation.
The inclusiveness of the legislature in all sectors of the economy has left the informal sector workers to lament under the harshness of labour market flexibility according to Clarke all informal workers are completely excluded from the legislation and many casual workers continue to receive inferior wages and benefits and are entitled to only partial protection with the BECA not taking into consideration workers that work under 24 hours the owners of capital are bound to circumvent from these draconian laws through these loop holes. Clarke further more elaborates that informal work has grown significantly and the poor regulated temporary employment sector is quickly becoming one of the largest in South Africa. With increased legislation by the state, capital investments have reduced as they are high costs in South Africa attributed to labour as high unionism is dominant. Standardization of work has resulted as the enforcement of these legislatures has been weak.
6. The Employment Equity Act as legislature that eliminate discrimination in the contemporary workplace
The Employment Equity Act formulated in 1998 in the bid to create fairness in the workplace that is being dominated by the owners of capital after profit extraction according to Clarke the Act promotes equal opportunity and fair treatment in employment "by eliminating unfair discrimination in any employment policy or practice" (EEA 1998, Section 5), listing nineteen grounds of prohibited discrimination by employers. They are extensive and include: race, gender, sex, pregnancy, marital status, family responsibility, ethnic or social origin, colour, sexual orientation, age, disability, religion, HIV status, conscience, belief, political opinion, culture, language or birth (EEA 1998, Section 6(1)). However the protection of labour in terms of promoting non discriminatory acts on the contemporary workplace has been challenged by high contestation from capital as they have found ways to categorise the current workers according to skills the unskilled face job insecurity while the skilled enjoy more benefits of capital. According to Clarke under apartheid, race determined workers' access to protected employment now, new contractual arrangements play a critical role in determining employment protection for different groups of workers.
In recognition of discriminatory tendencies that are being created by the forces of capital the government introduced the Skills Development Act (SDA) according to Clarke was set out to address labour market segmentation that is linked to gaps and inequalities rooted in skills as well to be a mechanism for promoting investment in training in order to help reverse slow economic growth and the lack of competitiveness in many industries. Globalization has emphasised on efficiency and effectiveness of productivity, as well it has made capital to posses varies profit extraction methods, the need for skilled workforce is important. However the South African government has struggled to offer better educational incentives to majority of the population, Sector Education and Training Authorities (SETAs) qualifications have lacked credibility on the labour market but nevertheless skills have been enhanced.
7. The detrimental effects of labour Market flexibility in South Africa
The South Africa state by adopting neoliberal policies brought about market flexibility, a more flexible market emphasized by GEAR flexibility in working hours, working practices, appropriate wage policies. Horwitz and Eskine labour under globalisation market flexibility has been enhanced work process flexibility, work place process flexibility which has been fuelled by multi-skilling, job rotation and different forms of team work to structure the work place to all the employee participation, work time flexibility has also been alters the patterns of working time through continuous shifts systems hence now the labour markets has been characterised by part time work, temporary work and job sharing. Wage flexibility in this era of free market economies has also been enhanced Horwitz and Eskine elaborates that wages have shifted from uniform pay systems to performance based pay either or an individual team, the most detrimental labour market flexibility that has been the sole result for unemployment and social degradation is numerical flexibility which allows the owners of capital to reduce the size of the labour force to the laws of supply and demand this has resulted in subcontracting of labour, outsourcing, the use of casual or seasonal labour and homework .
Numerical flexibility promotes employers to easily retrench and dismiss the work without any state or union involvement. Mantashe points out those permanent jobs have been replaced by flexible jobs that lack a “standard employment relationship”. Theron argues that “standard employment relationship” implies that workers work full time (this implies that workers have one employer), work in the building of an employer (this indicates that there is a workplace that is controlled by the employer) and that workers are appointed permanently (the assumption here is that there must be a full‐time contract of employment, not a fixed term period or contract).
8. Labour market Reforms the cause of socio-economic disparities in South Africa
The labour reforms have caused detrimental effects to the South African state; the problem of unemployment and other social degradation effects such as poverty, crime, inequality has resulted. The costs of unemployment can be very devastating to South Africa as the economy production lowers which results in inflation and a low GDP. According to Haydam the costs of unemployment is divided into two the economic and non economic costs, the economic cost is the lost of output of workers who are unproductive and the non economic cost results in the high level of crime and labour unrest. In South Africa the economic cost of unemployment can be noticed in the low level of GDP and the increases in transfer payment of the government for example the child grants and the UIF (unemployment insurance funds) this raises government expenditure. With one of the highest crime rate in the world it shows that the people who are involved in the crime activities are unemployed.
One of the factors impacting on the performance of the labour market to eradicate the disparities like the decrease in the labour absorption rate on the market is the increase in the costs of labour; South Africa has a highly unionised labour market. COSATU as the dominate workers union advocate for minimum wage rate for all workers, in relation to the inflationary environment. According to Barker the major factor that impacts employment creation and performance of the labour market is the cost of labour a trade off between employment and relative labour costs is not foreseeable. As cost of labour increase employers become more mechanised or their earnings decrease and they are unable to invest sufficiently for the economy to maintain momentum, lose their market share and shrink. Wage increase impact negatively on employment to the extent that over the long term according to Finnermore and Rensburg the increase in the costs of labour outstrips productivity it will discourage employment.
9. Unemployment, inequality and poverty as the common norm of the South African society
Unemployment results in other social ills such as poverty according Finnermore and Rensburg the costs of unemployment rate in SA is relatively phenomenally high with slow growth the costs of the malfunctioning labour market are borne primarily by poor people between 36% to 53% South African live below the poverty line. The South African population as figure one illustrates growth ranges between 47 million and 49 million the availability of a larger labour force is available but job creation has between sidelined with economic growth in the past government policies. According to Barker higher economic growth does not invariably and automatically translate into increased employment. The unemployment rate according to Stats SA 24, 0% represents 4.5 million people of the 16.8 million total labour force persons in labour market. The unemployment rate according to Altman and Hemson is also serious among the youth about 37% of those aged 15 - 34 are unemployment. From 1995 the high rate of unemployment has increased according to the 2010 Budget Review (2010:36) employment fell by 870 000 during 2009, raising the jobless rate to 24.3% – the highest level in five years. While with the Gini- coefficient of 0.68 inequality is increasing, which is the highest in the world, the government during the 2011 nation state address set aside 9 billion for job creation grant to eradicate the effects of unemployment.
10. The government strides in alleviating unemployment in the labour market.
The government as the last employer through the establishment of the Expanded Public Works Programme (EPWP) was able to address the problem of unemployment in the Labour market the EPWP was launched in 2003 according to Altman and Hemson the EPWP was a short to medium term response to high unemployment and marginalization aimed to provide work opportunities, training and launch pad trainees into labour market. With the South African government the last resort of employment creation, government programmes to halve the rate of unemployment in the labour market is crucial to achieve its macroeconomic goals such as the EPWPs. The EPWPs have created a lot of opportunities in the South African labour Market according to the 2010 Budget review (2010:39) the expanded public works programme created 1.6 million short-term jobs during its first phase from 2004 to 2009, exceeding its target of 1 million, 52 billion in the budget was allocated to the EPWPs and 2.5billion of the total will be allocated for labour intensive this means a lot of employment opportunities will be created this year. The unemployment trends as illustrated figure two have been on the decrease from 2000 from 30% to 24.0% in 2010 all can be attributed to government efforts.
11. Conclusion
Although tensions exist between the Tripartite Congress Alliance because of the non consultation of the GEAR macro economic policy in 1996, globalisation has been the most drive in unsettling the labour market. Globalisation has forced the state to pro-capital than being pro-labour as capital is the major determinant of economic growth and development. Strategic unionism has been fuelled by the ramifications of globalisation rendering union activity weak in the South Africa state as most of the economic decision are in line with the global trade liberalization statutes of WTO. Globalization imposes homogeneity in production, state policies and every aspect of life, labour in South Africa has been severely been affected due to the State economic integration to the rest of the world. Market flexibility has impacted the state and labour creating spheres of social ills, unemployment mainly caused by economic liberalization. The contemporary labour market reforms have had an adverse impact on labour and the State, with capital mainly being protected in by state legislature and the global ideological perspective of neo-liberal economies.
12. Data Appendix
Fig one
% of population growth
Years
Fig two
% of unemployment
Years
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