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Laws need to limber up - TES creates 20% of all jobs in SA

01 December 2011   (0 Comments)
Posted by: Natalie Singer
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Labour broking - Job creation

Laws need to limber up

Claire Bisseker

Thursday, 1 Dec 2011

A substantial portion (20%) of all the jobs created in SA since 1994 have been for temporary employees and were generated by labour brokers.

A substantial portion (20%) of all the jobs created in SA since 1994 have been for temporary employees and were generated by labour brokers.

In all, labour brokers have generated about 600000-700000 jobs over the past 17 years. This is about the same number of jobs that have been created by SA's construction sector (608000) but more than double the number generated by manufacturing, which created 271000 jobs over the same period.

Prof Haroon Bhorat, director of the Development Policy Research Unit at the University of Cape Town, presented these findings at the annual Bureau for Economic Research (BER) conference last week.

His conclusion — that labour brokers are responsible for about a fifth of all job creation in SA — is of concern since the National Economic Development & Labour Council is debating proposed amendments to labour regulation that are widely expected to curb labour broking activity.

" Any change in regulation that reduced labour broking activity would be bad for job creation,” says Bhorat. He fears a "double whammy” on SA employment, should the world enter a double- dip recession simultaneously.

Stats SA's Labour Force Survey considers a temporary job generated by a labour broker to be equivalent to a permanent job, provided the person was actively working in the week prior to the survey.

According to Adcorp, the biggest supplier of temporary workers in SA, the average duration of its temporary placements is 1½ years. However, it says the average job tenure of workers placed in these posts is only 8,4 months as many leave before their time is up to proceed to new, better jobs.

BER director Prof Ben Smit shares Bhorat's concerns: " Labour broking has played a very important role in employment creation over the past decade and it would be detrimental if [it ] were to be further curtailed by the unions.”

Bhorat says that 66% of all SA's job creation since 1994 has occurred in just two categories: the financial & business services sector and the wholesale & retail trade sector. But these categorisations are misleading.

By digging down into the first category he found that nearly all the jobs created in this sector, 900000 jobs since 1994, were not jobs in finance but classified broadly as "other”. This category represents mainly the activities of labour recruitment and employment agencies, including labour brokers, as well as investigation and security activities.

Bhorat says there is insufficient evidence to suggest that employers are using labour brokers in order to pay workers lower wages. Rather, he says employers appear to be paying the same cash wage but saving on nonwage costs such as those of running a human resources department.

If cost is not the reason that employers are hiring temporary workers, this invites the interpretation that there is a problem with the rigidity of SA's labour laws.

Bhorat shows that SA sits in the middle of global rankings on employment rigidity when compared to other middle-income countries. "We are not overly regulated by global standards,” he says. However, he says that "since employers have voted with their feet [by shifting to temporary workers], where we sit in these global rankings is almost irrelevant”.

Bhorat's labour market analysis informs the thinking of the National Development Plan (NDP) unveiled by minister Trevor Manuel in November.

Like Bhorat, the NDP does not advocate wholesale changes to SA's labour laws. It proposes four specific changes: taking out people earning more than R300000/year from the Commission for Conciliation, Mediation & Arbitration process; making it easier for firms to fire people who are on probation; making it less technically complex to dismiss people for misconduct; and simplifying hiring and firing laws for small businesses.


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