Free-marketeers and small business proponents are likely to laud the news that five bus groups, including major players Golden Arrow and Putco, have applied to be exempted from recently negotiated collective bargaining agreements.
What makes the bus case interesting is that it is typically small employers and nonmembers of a bargaining council that apply for exemptions, with large employers usually blamed for using the bargaining process to reach agreements that are "unaffordable" for smaller players, thereby keeping competitors at bay.
That the large bus companies also want out on specific aspects of the agreement sends worrying signals about the likelihood of another bus strike and raises a red flag about the extent of the pressure the multi-employer collective bargaining system in SA is under — something likely to be praised by the free-marketeers.
The collective bargaining system allows for multi-employer bargaining with unions in a specific sector, with agreements on wages and working conditions then extendable to all other players in the sector, whether they form part of the bargaining council or not, where the council is seen to be "representative" of the sector. As a rule of thumb, if the council represents at least 50% of employees in the sector, deals can be extended.
The National Employers Association of SA and the Free Market Foundation have been vocal opponents of the system, both heading for court, with varying degrees of success, to test and try to change the legislation.
The main criticism is that bargaining councils’ "one size fits all" approach ignores the specific economic circumstances faced by individual companies.
By making wages "unaffordable" for small firms, the system costs SA much-needed jobs, they argue. Highly publicised cases to this effect include the battle by small clothing manufacturers in Newcastle in 2013, where the council managed to shut down nonmembers that were not complying with agreements on wages and working conditions.
Proponents of bargaining councils believe the system works as it sets a minimum floor for wages and working conditions, thereby offering protection to workers. Employers benefit from a level playing field with their competitors, as unscrupulous players can’t undercut on price by exploiting their workers, a charge the noncompliant Newcastle clothing manufacturers faced. (The critics say that stricter rules lead only to more employers in the informal sector, where workers enjoy no protection at all.)
Organisations like the IMF have also argued that more flexibility in wage setting is one way to help boost job creation in SA, where 27% of the labour force is unemployed. In the latest Global Competitiveness Index, SA ranks 132nd out of 137 countries when it comes to flexibility of wage determination, and stone last on co-operation in labour-employer relations.
Something clearly has to be done. But merely scrapping the nearly century-old system of collective bargaining is unlikely to be the solution for unemployment, as pointed out by University of Cape Town academic Shane Godfrey in a new study for the UN’s International Labour Office.
Providing a comprehensive read on the history and state of collective bargaining in the country, the report, published in June, shows that collective-bargaining agreements cover only 18.6% of all employees in the labour market, based on 2014 data.
There has also been limited research done on the impact the extension of bargaining council agreements, which affects barely 3% of the workforce, have on employment, Godfrey argues.
Here’s the real challenge for union leaders, employer organisations and the free-marketeers, as summarised by Godfrey: SA’s labour market needs new forms of organisation and innovative institutions that go beyond the traditional.
The Putco matter offers a great opportunity for all parties to try to push the envelope — hopefully without another damaging strike.
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