Written by: Ron Weissenberg
South African unemployment statistics illustrate a nation in potential decline. Various solutions ranging from upgrading skills to creating a balanced employment climate by coercing a “tripartite alliance” between employers, labour and government, have been mooted. Sadly, however, natural solutions such as free-market principles and supply/demand laws have been ignored in favour of populist rhetoric, idealism and discrimination against employers in the quest for creating jobs.
The zero unemployment scenario
One of the greatest cause of statistics – is unemloyment. The health of an economy is gauged largely by employment figures. Employment is seen to symbolise security, consistency and the will of a people to achieve. Latest South African estimates quote the unemployed at nearly 5 million or 32 percent of the economically active population. Twenty five years ago, some 70 percent of new entrants to the job market obtained employment in the formal sectors. Today, the figure is estimated at 8 percent. Population growth outstrips economic growth by a wide margin. Job creation just doesn’t keep up with requirements and the gap is widening. Even if one wishes to question the accuracy of statistics, the trends are tragically clear, and the facts speak for themselves.
Let us now focus on another set of hidden facts: the unwillingness of entrepreneurs and industrialists create employment. Two decades ago employers were unanimous in stating that the worst part of their jobs was to dismiss and retrench people. Today, scratch a little below the surface and they will indirectly admit the worst to be the need to hire people. An employer will talk of rationalisation of the workforce, capital-intensive projects, productivity-enhancing mechanisms and automation… in short, how do they reduce people on their payroll, or if they do invest, how this may be accomplished with the minimum manpower requirement. In the context of South Africa today, this attitude evolvement is as tragic as it is completely understandable.
The victimisation of the employer
Entrepreneurs are governed primarily by the simple pursuit of profit. Their actions are a natural result of the commercial environment in which they endeavour to achieve. If the environment is conducive to employment, they will employ. Sadly, however, the South African employment environment lacks natural incentives to hire people. In fact, through labour legislation, employment regulation and statutes and the perceived negative influence of organised labour, and investor would be advised to leave South Africa well alone.One hesitates to admit, but most investors do just that.
Employers today tread a weary path of primary and secondary victimisation. An employer is perceived as a singular entity, whereas an employee is now accepted as part of a collective. As the distinction between the singular employer and the collective employee has become more established, so have employers shied away from employing. In the case of dispute, the employer generally stands alone against the collective employee caucus. Consider the following primary victimisation example:
Employer hires employee under the terms of performing work for an agreed salary or benefit. Should the employer in any way detract from this agreement (by, say, refusing to pay, withholding a benefit) they are guilty of a criminal offence. Should the employee detract from the agreement (by demanding more benefits or decreasing his work rate) he is guilty of nothing.
Employers succeed in restitution through cumbersome, costly and time consuming internal and external procedures. These procedures continually conflict between common law and labour law. Most importantly, they detract from the employer’s primary motive.
The solution must lie in criminalising all forms of coercive labour practice — whether instituted by employer, or employee. Sadly, although our common law may provide for this, it is in all practicality interpreted and administered by conflicting labour legislation, resulting in bias against the employer.
Secondary victimisation against employers relates to absolving the employee from their own personal responsibilities in the workplace. Other than the Unemployment Insurance Act (which should be privatised and contributed to voluntarily), the Occupational Health and Safety Act is a prime example. Here the CEO of a company is ultimately responsible for the safety of his employees in their workplace. Whereas no employer would advocate purposefully or knowingly exposing employees to undue risk or danger, there is no clear distinction of what an employer is deemed to be aware.
By interpretation, employers may be charged with negligence if it is determined that they have not taken reasonable steps to ensure worker safety. This places an extreme burden on an employer by presupposing and double-guessing specific knowledge, or the natural behaviour of people. Definitions of “reasonableness” are open to interpretation by authorities who may in themselves lack specific knowledge or expertise in understanding an individual’s behavioral patterns. An employer, on the other hand, is absolutely responsible for his own actions. There is no fund or handout available for his own incompetence or irresponsibility. Surely, the best way of empowering people is to give them responsibility for their own actions. Remove the need to be responsible, and we create a society of collective dependents — not independent individuals.
The role of government and the law of consumption
It is generally accepted that government can only directly address unemployment by generating employment within its own salaried structures. The problem is that any employment generated by government is generated by expense to the employer and the employed, through direct and indirect taxes and levies.
The law of consumption (as applied to commerce and markets) implies that one cannot consume more wealth than one produces, and conversely one cannot produce more than one consumes, without a resultant effect.
It is accepted that government consumes far more than it produces. The resultant effect is taxation excessively applied to the producers. Someone has to balance the equation — and they do. Business on the other hand, is devoid of the luxury of consuming more wealth than it can produce — the free-market law sees to that. If a business consumes more than it produces, it is bankrupt and ceases to exist. However, any excess production of wealth in a business, is wealth creation. And the result of this natural absolute equation? Permanent wealth creation.
What is now only beginning to gain acceptance, is the immense power government can unleash by not governing things which have had no need to be governed in the first place. The lack of job creation is proportional to the lack of free-market freedoms and principles relating to the employment of people.
Government’s indirect (and cost-free) role in addressing unemployment is twofold. It must abolish (and resist all attempts to institute) all regulatory and statutory legislation relating to the employment of people, whilst at the same time stringently upholding individual rights by the application of common law. One is not advocating anarchy — quite the opposite. One is promoting total freedom of the employment market to evolve and find its own balance and natural mechanisms in a climate of respect and acknowledgement of human rights.
The empowering free market
In a free market, a scarcity of skills translates in an employer paying more for those skills. Have you ever heard of employers striking because they have to pay more for a skilled worker in short supply? Conversely, when supply exceeds demand, the free market must determine what should be paid. Markets are the most natural, balancing mechanisms in commercial society. Leave them alone to find their own level. People are complex and beautiful in their individuality, but their skills and physical effort are commodities like any other. Free the employer to hire under market supply terms and conditions, and they will comply — either by paying less as the current supply permits, or paying a premium when demand exceeds supply.
Imagine replacing, inter alia, the Basic Conditions of Employment Act, the Labour Relations Act, the Wage Act, the Occupational Health and Safety Act, and the Unemployment Insurance Act with strong common law application and free-market principles. This also means that trade unions would have to evolve away from the collective, and toward another path. Within a very short space of time, entrepreneurs will evolve their own privatised assistance funds and set of individualist principles of operation.
This will initially result in a large pool of very attractively priced job opportunities, and attract investors who are now given a free market to trade their money for skills. Markets must, however, balance, and as the available manpower pool decreases, so the money offered for this resource increases proportionately. The result is full employment at the right price. This is not a simplified version of an employer’s paradise — it is the result of the most complex and powerful natural market forces working without hindrance.
Before crying “Utopia” and “face local realities”, bear in mind that the wealthiest country in the world evolved from the principle of the least possible government, responsible for individual freedoms and rights in the pursuit of happiness and profit individually. Unfortunately, this was destined for failure when in the early part of this century, the US government imposed federal taxes on their residents.
From focusing on the challenges from an employer’s perspective, here is a summary of solutions:
Government’s function is to uphold human rights stringently and administer the common law effectively. At the same time, to indirectly address unemployment by abolishing all labour legislation and any statute or practice which detracts from free market principles and supply/demand laws. Thirdly, actively criminalise any coercive labour practice.
Labour can only achieve its true value in a commercial free and lawful environment. Leave employers alone to evolve, train and appoint people as they deem fit. If it makes commercial sense, they will be the greatest providers of opportunity and advancemet for their employees.
Give people responsibility for their own lives and aspirations in an environment conducive to individualism and achievement. Evolve a society of independents.
A free-market society. An employable society of responsible and self-empowered individuals. A zero unemployment scenario.
Author (1995): Ron Weissenberg is a director of companies engaged in the field of medium-scale mining, mineral beneficiation and engineering services. He is also the Chairman of the Association of Industrial Minerals, Metals and Mining (AIM3).
Disclaimer: This article originally appeared in The Individualist of May 1995 (Vol. 19 No. 1). The Individualist was last published by the Libertarian Society of South Africa.