Brian Kantor suggests our economy needs to resolve the ‘trade-offs between better jobs for some workers and the very poor alternatives open to those who are unable to get “decent jobs”’. One has to agree with him that the ‘formal labour market has not been allowed to match the supply of, and demand for, labour at anything like market-clearing employment benefits’. This results in insiders and outsiders. Employment should be encouraged and it would be very helpful if formal employees were willing to share in the risks of production. This is what informal miners do: they ‘accept less by way of guaranteed pay and more by way of rewards linked to performance and profits’.
Brian Kantor, chief economist and strategist at Investec Wealth & Investment, wrote Illegal mine workers reveal flaw in the labour model, which was first published in Business Day on 17 September 2014.
Extracts
A RECENT Wall Street Journal carried a front-page story about SA leading the world — in illegal gold digging. To quote the report, “Dangerous Economy Thrives in SA’s Abandoned Gold Mines“, by Devon Maylie:
“After years of watching its dominance over the gold industry shrink dramatically, SA has emerged as the world capital of illegal gold digging. In staggering numbers … desperate former miners and gang members have created a subterranean subculture of abandoned mine-shaft wanderers. Armed with a few crude tools, they dig into blasted or cement-sealed mines, comb through tunnels, and spend days chiseling away at bedrock.
“Once the world’s biggest gold producer, SA accounted for 80% of the global supplies as recently as 1970. Today, that figure is less than 1%, in large part because China and other countries have sharply picked up their own production, forcing mine closures here that created an opening for freelancers. Today, some 4,400 abandoned mines dot the countryside, almost four times the number in operation, according to SA’s Council for Geoscience. And while there are still about 150,000 formally employed gold miners in SA, ‘we’re very close to the point where there will be more illegal miners than legal miners’, says Anthony Turton, a South African mining consultant.”
The Journal continued:
“Taken together, the output of these swelling ranks is having a noticeable affect on the bottom line of the country’s sagging mining industry and tax revenues. SA’s Chamber of Mines … estimates that the country loses about 5% of its potential annual mineral output to illegal mining activities, equivalent to around $2bn. In 2010, the most recent year available, the government estimated losing $500m in tax and export revenue from gold illegally mined and sold in the black market, compared with about $2bn it raises annually in corporate taxes from all mining companies.”
. . . .
These improved remuneration and employment trends are unlikely to be independent. The fewer workers have become more productive, helped no doubt by more and better equipment, judged by the volume of ore extracted rather than the gold produced. The industry would not have survived other than by providing fewer jobs in exchange for what have become better paid and more productive workers. Operating margins for the chamber member mines have improved rather than deteriorated over the years, despite lower grades of ore.
. . . .
The challenge to SA’s economy is to resolve the inevitable trade-offs between better jobs for some workers and the very poor alternatives open to those who are unable to get “decent jobs”. The formal labour market has not been allowed to match the supply of, and demand for, labour at anything like market-clearing employment benefits. And so we have the insiders, those with formal employment and willing to strike to further improve their conditions of employment, and the outsiders, who find it so difficult to gain entry to formal employment, of whom the illegal miners are a numerically important group.
. . . .
To encourage employment in the gold mining industry and everywhere else, it would be very helpful if workers employed formally were willing to share in the risks of production, as the illegal miners appear willing to do: that is to accept less by way of guaranteed pay and more by way of rewards linked to performance and profits.
In other words, for workers to become, to a greater degree, owners of the enterprises they engage with. If pay went up and down with the gold price, the gold mining industry would surely be willing to bear the risks of hiring more workers.