Bargaining councils violate both democracy and basic rights - Business Day, 14 October 2013

Oct 21, 2013
John Kane-Berman explains why bargaining councils are bad for South Africa.

The governor of the South African Reserve Bank, Gill Marcus, the International Monetary Fund (IMF), Woolworths chairman Simon Susman, and Bank of America-Merrill Lynch have all recently joined the chorus questioning South Africa's collective bargaining system.

Their criticism follows several challenges to the system in the courts, some still in progress.

All of this is good news because our centralised collective bargaining system, set out in the Labour Relations Act of 1995, is one of the causes of our very high unemployment. Not that long ago critics of that system could be counted on one hand. There are still too few, but their views now have added ballast thanks to the breakdown of centralised bargaining in several industries.

The declining influence of the Congress of South African Trade Unions, one of the main beneficiaries of centralised bargaining, further helps to undermine its support base.  

Though re-enacted by the 1995 statute, our centralised bargaining system dates back to the 1930s. It was designed to protect so-called "civilised" (that is, white) labour from black competition.

It had two key effects. One was to give white trade unions the power to exclude blacks from jobs. Another was to empower larger firms to reduce competition by compelling smaller ones to pay wages that only the bigger firms could afford.

The legal mechanism for doing this was to issue decrees extending agreements reached in bargaining councils by employer organisations and trade unions to firms and workers that were not members of the councils or parties to the agreements and had no wish to be.  

The system underwent reform in 1979, following the report of the Wiehahn Commission .

The colour bar was removed. But the new black union movement proved as adept as its white predecessor in limiting competition by pricing unskilled people out of the labour market.

Also, as Ms Marcus noted in July, collective bargaining favours big firms at the expense of smaller ones. A reserve bank paper published at the same time recommended that small firms should be given blanket exemption from the legal extension of bargaining council agreements.

"Where large firms and unions agree to high standards, legal extension reduces competition and inhibits creation of new firms and their survival," the paper said. Citing findings that bargaining council agreements were associated with 8%-13% lower employment in a particular industry, the paper said that limiting extensions would shift the distribution of employment from commodities and towards labour-intensive manufacturing. 

Now the IMF says, "It is important to stop extending negotiated wages to other firms that were not part of the bargaining process." 

This is music to the ears of all those who have long criticised the undemocratic nature of our bargaining system, sacred cow though it has become. It is also a cruel system in that it lifts the bottom rung of the wage ladder too high for unskilled people to be able to step on to it.   

Any measures that thus price people out of labour markets should also be seen for what they are: a violation of a fundamental right. The point was well put back in 1776 in one of Adam Smith's lesser known arguments in The Wealth of Nations: "The property which every man has is his own labour, as it is the original foundation of all other property, so it is the most sacred and inviolable. 

"The patrimony of a poor man lies in the strengths and dexterity of his hands; and to hinder him from employing this strength and dexterity in what manner he thinks proper without injury to his neighbour, is a plain violation of this most sacred property. It is a manifest encroachment upon the just liberty both of the workman, and of those who might be disposed to employ him."

Without money or education, the poor have no asset or property to exploit other than their own willingness to work. It is time our labour law got out of their way.


A version of this article was published in Business Day on 14th October 2013.





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