There are three reports in the Business Day today which are of vital concern to the future of job-creation in South Africa.   The Minister of Labour and a major bargaining council are under attack for allowing an ‘alliance’ of organised labour, some clothing manufacturers and the state to fix and impose wages.   The future of some 450 clothing companies and nearly 17,000 employees is at stake.  According to one report the ‘case also goes to the heart of the type of employment and industry that South Africa wants to foster:  is there still a place for low-wage, labour-intensive industry, or is South Africa set on its path of “decent work” and higher capital intensity, along with which comes lower employment but higher wages?’

Business Day links

Court case to decide future of 17,000 clothing workers

More than just small clothing companies at stake in wage case

Clothing companies challenge minimum wage move

Recent posts

Collective bargaining without bargaining councils ?

It can be argued that the concept of a bargaining councils (formerly known as industrial councils) was introduced by General Jan Smuts in 1924 as a political ploy.   Smuts wanted to win back the support of Afrikaners, mainly those who worked on the gold mines, after the disastrous 1922 Rand Revolt where many white strikers were killed or injured.   Now there is speculation about the effectiveness of bargaining councils.

Unintended consequences of minimum wage laws

If we are ever to make a serious dent in South Africa’s cataclysmic unemployment levels, a critical review of labour policies is required.   No aspect of labour market policies should be regarded as sacrosanct.   All rational comments and proposals grounded in empirical evidence warrant consideration.   In this context, I believe it is appropriate to question the motivation for the introduction and maintenance of minimum wage laws in South Africa’.

Minimum wages are not meant to be living wages

Factors determining business sustainability are not the same when determining the living requirements of employees.   It is wrong to confuse the sustainability of jobs and businesses with maintaining or improving the living standards of employees.

Making a living wage the focus of workplace pay negotiations indicates the failures of government at all levels to provide a better life for all, and create an economic environment to support the survival, profitability and growth of businesses of all sizes.

Extracts from reports

Court case to decide future of 17,000 clothing workers

THE Centre for Development and Enterprise (CDE) says a court case challenging an “alliance” of organised labour, the state and some clothing manufacturers over minimum wages will decide the future of 450 clothing companies and nearly 17,000 workers.

The case, which began in the Pietermaritzburg High Court on Tuesday, is an attempt to allow employers to create jobs in a labour-intensive industry.

The case was brought against Labour Minister Mildred Oliphant and the National Bargaining Council for the Clothing Manufacturing Industry by five small Chinese-owned clothing firms in Newcastle, in KwaZulu-Natal.   The CDE says it highlights how the government’s high-technology, high-wage economic strategy marginalises and impoverishes millions of low-skilled work seekers.

“We need to stop destroying jobs though policy choices.   We need to stop closing factories,” CDE executive director Ann Bernstein said on Tuesday.   She said that rather than being “exploitation”, the jobs in Newcastle’s clothing factories — where workers were paid less than the bargaining council’s minimum wages — were the “best opportunity” for workers who could not participate in a high-skill, high-wage economy.   The jobs enabled them to gain skills, start businesses and feed their families.

“These are the best jobs available — and often the best jobs going for people with limited skills,” Ms Bernstein said.   The CDE said state policy on minimum wages would benefit clothing factories in China only, not those in South Africa.

It said if lower-wage, labour-intensive production in the clothing sector was a “race to the bottom”, as the government said, then all clothing manufacturers would be situated in non-metro areas such as Newcastle, and not mostly in Cape Town.

The co-author of the CDE report, University of Cape Town economics professor Nicoli Nattrass, said raising minimum wages in labour-intensive industries that vied with low-wage factories in countries such as China and Lesotho “affected profit margins that are already tight”.

The CDE report said the bargaining council consisted mainly of about 100 high-end clothing manufacturers — many based in the Western Cape — who had benefited from R1bn in support from the Department of Trade and Industry.

“Recipients of these subsidies must comply with the terms of National Bargaining Council agreements, disqualifying Newcastle’s Chinese manufacturers who do not pay the minimum wage, although often pay more through productivity bonuses” the report read.

It said wages in the industry were therefore set by large, capital-intensive companies producing clothing mainly for high-income consumers.

“To do this, we need to make some of the ‘tough choices’ the National Development Plan talks about,” Ms Bernstein said.   “We urgently need to create the regulatory framework, employment relationships and wage regime that can compete for the investors and associated jobs moving out of China.   Until we have a situation where workers are competing for jobs, it is an employers’ market.”

More than just small clothing companies at stake in wage case

THE case of five small Chinese-owned clothing firms in the KwaZulu-Natal town of Newcastle, which on Tuesday launched court action against the wage-setting practices of the National Bargaining Council for the Clothing Industry, has implications beyond the future of the enterprises involved.

The outcome of the case, which considers under what circumstances the council and the minister of labour are legally able to extend agreements reached in the council to non-parties, will decide the future of a further 450 firms employing 16,700 workers.   All of them face closure for failing to comply with the minimum wages set by the council.

It also puts the focus on the bargaining council system, over which there has been continuing debate, and contradictory research findings about whether the system dampens employment, job creation and whether it takes adequate account of the needs of small businesses.

The Newcastle clothing producers’ struggle to remain in business, they say, is “symptomatic of the difficulties involved in promoting labour-intensive growth in South Africa”.

The argument of their paper is that the firms involved are the “last remaining labour-intensive (example) of the manufacturing sector in South Africa”.

The bid to close them down by both government and trade unions, with the explicit support of big employers, is driving “a process of structural adjustment that undermines labour-intensive employment and exports South African jobs to lower-wage countries such as Lesotho or China”.

Agreements reached in bargaining councils, which are typically dominated by large employers and large unions, can be extended to other parties only if the parties on the council are sufficiently representative or if the majority of employees and employees to whom the agreement is extended, are members of the organisations that are represented on the council.

Since the coverage of bargaining councils has been in decline, it makes it an interesting case to watch.   The CDE paper shows how, since the introduction of a clothing bargaining council in 2002, wages in rural, economically marginally locations, such as Newcastle, have been driven steadily upwards, threatening the small Chinese-owned firms.   These were originally attracted to the area through apartheid era rural industrial incentives, which subsidised wages.

Harsh political realities have propelled the development of policy in this direction.   But the deep concern is, as professors Nattrass and Seekings conclude, that the “hoped for high road of job creation through skill-and capital-intensive growth has yet to materialise”.

In the interim, the costs have been born by workers in this labour-intensive industry.

Clothing companies challenge minimum wage move

LABOUR Minister Mildred Oliphant’s decision to extend a collective bargaining agreement for clothing manufacturers to non-parties was “irrational” and failed to take account of potential job losses and factory closures, advocate Les Rose-Innes SC said in the Pietermaritzburg High Court on Tuesday.

The United Clothing and Textile Association and clothing companies Valuline, Africa HK Manufacturers, Satcotrade, JCR Clothing and Gold Sau-Lin Clothing, which are not party to the bargaining council, have challenged Ms Oliphant’s decision in 2010 to extend the collective bargaining agreement to non-parties of the bargaining council.

Congress of South African Trade Unions KwaZulu-Natal provincial secretary Zet Luzipho said on Tuesday, however, that an “unpatriotic business sector” was at the centre of threats by employers to cut clothing sector jobs in the province.   Up to 14,000 jobs may be lost in KwaZulu-Natal if the agreement is enforced.

However, Mr Rose-Innes, who represented the clothing companies, said Ms Oliphant could not have taken the required majority of clothing employees into account when she made her decision, as the number of employees listed by the bargaining council was less than 50% of the sector.

“The bargaining council does not explain, on its own figures, how the relevant majority could have been achieved.   The silence is telling,” Mr Rose-Innes said in the court.