Brought to our knees by an ugly beast

Wednesday, 8 August 2012

Did you ever stop to think about the right to work? Did you ever stop to think about the right to have a job? Did you ever stop to think about the fact that those are two entirely different things? Did you ever stop to think about the fact that you cannot have one without destroying the other?

It's a difficult concept for many people to grasp. For most of us, "work" and "a job" are synonymous. But in practice, they end up being different things.

Let's say you went looking for work but have no formal skills whatsoever. So you have a couple of options – you could become a domestic worker or gardener – which involves a fair amount of physical labour, or you could become a security guard – which generally involves sitting around and raising the alarm if anything untoward happens.

I suspect most of us would prefer the less labour intensive position of security guard. I certainly would. So given that the one position involves less work than the other and both are unskilled, one would expect the security guard to earn less than the domestic worker or gardener.

In practice though, things are quite different. The legal minimum monthly wage for a security officer Grade D is R2 519 per month. The legal minimum monthly wage for domestic worker is R1 152 per month.

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So I can hire a person to scrub my floors and toilets, clean up dog droppings, and do my washing and ironing for R1 152 per month. But if I want that person to sit in a booth outside my front gate and push a buzzer if anyone approaches, I have to pay her more than twice that amount.

Doesn't that sound fundamentally wrong to you? The heart of this problem is this ugly beast called collective bargaining, which has single-handedly brought our economy to its knees.

The principle of collective bargaining is simple. Workers get together and jointly ask employers to agree to specific benefits failing which they will not work. There's nothing wrong with that. Freedom of association is a fundamental human right and workers can express that right in the workplace too.

Similarly, employers too have freedom of association and can agree to jointly negotiate with workers. It all balances out in the end. Or does it?

The problem comes at the point at which there are employees and employers who are willing to come to their own arrangements outside of a collective bargaining agreement.

I for one might well be prepared to hire a person to watch my house for R1 000 per month, and there are many people who would be glad to watch my house for R1 000 a month.

But the law prevents me from hiring that person unless I am prepared to pay that person at least R2 519 per month. It therefore condemns that person to starvation because he has the opportunity to earn R1 000 per month, but the law does not allow him to do so.

Collective bargaining "closed shop" agreements brought the US economy to its knees in the early 20th century until 1947 when lawmakers overturned a presidential veto to put in place what has since become known as right-to-work laws – statutes that govern the extent to which a union can require employees' membership, payment of union dues, or fees as a condition of employment, either before or after hiring. It specifically outlaws closed shop agreements.

Union leaders at the time referred to it as the "slave-labour bill" saying it would drive down wages and lead to exploitation. Nevertheless, 23 US states passed right-to-work laws, mostly in the south and west.

Now what's interesting is that the US allows us to examine first hand the effect of right-to-work laws.

Wages in right-to-work states are lower than wages in the collective bargaining states by almost 10%.

On the other hand, unemployment levels in right-to-work states are significantly lower than collective bargaining states – 6,9% versus 7,5%. The cost of living in right-to-work states is 19,3% lower that collective bargaining states. And workers in right-to-work states do not have to pay union fees.

If we had right-to-work laws here, we would probably have lower wages overall.

But a far larger number of people would be employed, particularly in less developed areas where cost of living is significantly lower. Reduction of labour costs in turn offsets increased freight costs for businesses wanting to relocate to those areas.

The mess in Greece right now is very similar to the problem we have in this country where the state is the biggest employer and every year increases its wage bill at a higher rate than inflation because of collective bargaining.

If we are serious about creating jobs, we must be serious about not protecting jobs.

All of our partners in BRICS are de facto right-to-work states. All of their economies are outpacing the first world. Will we learn? Can we learn?