BOTTOM LINE - FROM NICKS WEEKLY REPORT • According to the latest World Economic Forum Competitiveness Report South Africa (SA) has one of the most unionized labour forces in the world. The study scores countries between 1 and 7, where 1 means that wages are determined by centralized bargaining and 7 that wages are determined by individual companies. The US and Singapore lead in labour flexibility with scores of close to 6 and SA languishes with a score of around 2. Only Uruguay has a lower score. • Labour market rigidities are a significant constraint on economic growth. The platinum strike contributed towards an annualised contraction in GDP of -0.6% in the 1st quarter. In addition to work stoppages trade union power tends to cause wages to rise faster than productivity in turn denting company profitability. This in turn reduces companies’ willingness to hire labour. SA’s formal sector unemployment rate of 25% is among the highest of all emerging markets. • While the outlook for SA’s unemployment and economic growth look bleak the government has recently broken with its long-standing traditional support of the unions. Significantly, SA’s Deputy President Cyril Ramaphosa is pushing for a change in union rules which would require union members to vote in a secret ballot prior to a strike. This would reduce the likelihood of strike action. Under the current arrangement trade unions are allowed to organize a strike without consulting members. The Youth Employment Bill is also significant. In spite of union protests that it would jeopardize existing jobs the Bill was introduced earlier this year providing companies with incentives to hire young workers. • The government’s change in attitude towards the unions is encouraging. Further evidence of this trend should be closely watched as a clue to the economy’s growth potential.
Posted on: Mon, 25 Aug 2014 09:34:06 +0000
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