trade unions remain a force to be reckoned with in South Africa; and that they deliver benefits to their members, particularly those who work in the public sector.
THE PROS AND CONS
Some consider the effect of unions on the broader economy to be negative. In 2014, 670 working days per 1,000 employees were lost to strikes, placing pressure on affected firms’ outputs. And the Global Competitiveness Report continues to rank the relationships between employers and employees in South Africa as the worst in the world.
Business perceptions suggest that employers may be more constrained in their ability to pay wages in line with labour productivity than in most other countries. Post-apartheid labour laws – such as the Basic Conditions of Employment Act of 1997, the Labour Relations Act of 1995 and the Employment Equity Act of 1998 – have been designed to protect workers from historical discrimination. They also empower unions in defence of their members. But some researchers assert that rigidity resulting from this legislation provides a central reason for South Africa’s high and growing unemployment rate in the democratic era.
Economist Haroon Bhorat and his colleagues place the existing evidence in context. Statistics for union membership, strike prevalence and lost productivity resulting from industrial action are shown to be internationally comparable. Unions may not necessarily be “too powerful”, as the Global Competitiveness Report may have us believe.
My own research shows that, while unions do contribute to wage inflexibility in the short run, agreements tend to be more flexible in the long run.
South Africa may, therefore, not be very different from the rest of the world when it comes to labour-market rigidity. It therefore seems unlikely that this feature is the only or dominant reason for high unemployment.
PUBLIC VS PRIVATE-SECTOR UNIONS
A more central question is to understand whether unions have used the labour-friendly legislative framework to the advantage of workers’ well-being. The obvious answer appears to be yes: average wage settlements of 7.8% in 2014 improved the household welfare of unionised workers.
Strike activity (measured by lost working time) tripled between 1994 and 2014, showing that unions have increased their influence in the workplace. Membership statistics also indicate that unions are still considered relevant. As shown in the graph below, the share of public and mining-sector workers who are union members has grown over time. In contrast, manufacturing and other private-sector workers have become less likely to join unions.
Why have these trends diverged?
It is plausible that the benefits of union membership differ by sector. The alliance between the governingAfrican National Congress and the Congress of South African Trade Unions suggests that the public sector and unions share a common interest in enabling and implementing democratic-era policies. This includes enforcing labour laws and fairness towards workers.
A number of indicators can be used to assess whether the public sector has fared better than the private sector in defending workers’ rights.
A first clue may lie in the different wage increments across sectors. Union members are paid about 7% more than similar non-union members in all sectors. This figure has remained remarkably stable over time: wage increases or decreases resulting from workers’ transitions in and out of union membership amount to roughly 9% in both the 2001-2004 Labour Force Survey and the 2008-2010 National Income Dynamics Study panel datasets.
Over and above this premium, many union members are also covered by industrial bargaining council agreements. The Labour Relations Act stipulates that a collection of firms and unions may jointly negotiate industry-specific terms of engagement on a more macro level. In this scenario bargaining power increases, as many stakeholders engage in these meetings.
Should such agreements cover a substantial number of workers, the minister of labour enjoys the prerogative to extend the stipulations to an entire industry or region, regardless of whether firms or workers’ representatives participated in the negotiations.
As the table shows, public-sector employees enjoy greater benefits from this bargaining mechanism: about 35% of public-sector union workers report that they additionally benefit from bargaining council negotiations, compared with only 8.2% of private-sector union members.
Not only is coverage greater in the public sector, but so are the wage benefits: public-sector union members who are also covered by bargaining councils enjoy a 22% wage premium compared with only 16% in the private sector.
The benefits of unionisation and collective bargaining are therefore far more pronounced in the public sector. This underlines the government’s commitment to implementing its policies among its own employees.
Unionised public-sector workers are also far more likely to have secure working conditions than private-sector and non-unionised workers. As shown in the table, all union members in the public sector have a written employment contract, while figures are slightly lower in the private sector.
Despite improvements in contract coverage for non-unionised workers over time, members still have greater job security (as seen in the figure below). The table also shows that more than 90% of unionised workers (in both sectors) report that they receive paid leave benefits and that the nature of their contracts is permanent, rather than insecure and temporary. Unions are therefore highly effective at translating the prescriptions of the law into real benefits for their members.
Non-unionised workers do not enjoy these benefits to the same extent. But in the public sector the disadvantage of not being a union member is greater. So the incentive to participate is clear. Recentanalysis goes as far as to suggest that unionised public-sector employees now constitute a new “labour elite”.
Amendments to the Labour Relations Act in 2015 stipulate that low-paid temporary workers become permanently employed after three months of work. This provision has been put in place to avoid firms bypassing labour laws through high staff turnover. While the effects are yet to be seen in official statistics, this has broad implications for labour brokers and outsourced workers. If enforcement is poorer in some sectors than others, this legislation may not have the full intended effects without additional monitoring and union involvement. But, if current trends continue to support higher levels of written (and particularly permanent) contracts, the legislation could enhance job security.
Union federations are also leaders in the campaign for a national minimum wage. Currently, the selective sectoral minimum wages do not generally put pressure on unemployment. Increases in wages of better-paid workers – typically covered by collective bargaining agreements – do, however, tend to place a burdenon job creation. The balance between unions’ objective to maintain living wages and fairness for workers and job loss remains critical for future debate.
Overall, unions in cooperation with government alliances – and also in collective negotiation with business – have played an important role in improving both pay levels and job security. While negative macroeconomic effects remain debated, unions have gone beyond their political mandate to improve conditions of the working poor in South Africa.
Dieter von Fintel is a senior lecturer in Economics, at Stellenbosch University.