Economics & Labour

Job Outlook Bleak

Recent figures issued by government show 179,000 jobs lost in the first quarter of 2009.  The largest losses have been recorded in Retail (66,000) Financial Services (43,000), with Manufacturing holding up relatively better at 29,000.

These figures reflect the huge downturn in the growth rate over the same quarter, and suggest strongly that job losses overall will be at higher levels than we anticipated for 2009.  It is not clear if this data includes employees supplied by labour brokers, who would be the first to bear the brunt of the reduction.  We believe that it does include such labour, which does infer that there is some resistance to losing permanent full time core employees.  Much evidence suggests that employers use brokered labour as a means of creating labour flexibility, to respond to quick changes in the level of demand in their product market.

If  this is so, then it is possible that these jobs have not been lost permanently, but would resurface, albeit more slowly, as the economy turns.

Employers at present may effect such changes with brokered labour without resorting to the retrenchment provisions of S189 in the LRA.

This supports the view that these losses will reflect a large component of brokered labour, since retrenchment is a longer and a more difficult process.  It also has implications for wage settlements, which we discuss in our Wage Settlement Survey.

UPDATE: Labour Brokers - The Battle Hots Up

The volume of the anti-labour broker cry has been increasing exponentially, and it is something to which all should pay heed.

In the latest move, organisational activity and dispute declaration is increasing rapidly amongst labour brokers themselves, and it seems as if COSATU unions are following a strategy.  Organise and dispute - after all, brokered employees are 'employees' as far is the act is concerned, and this means that unions can demand organisational rights, or submit disputes on behalf of their members.  We are seeing a rapid increase in this, and it creates an important question for the labour broker itself, and an uncomfortable situation for the firm who has brokered labour on the premises.

It seems a certainty that the heat will increase significantly in the balance of this year on this controversial topic

UPDATE (by Daniel Levy): Newly appointed Labour Minister Membathisi Mdladlana has told the Motor Transport Workers' Union (MTWU) that there will soon be 'fireworks' over the prickly matter of the legality of using brokered labour. Referring to instances where UIF, pension and tax deductions were not implemented by the brokers themselves,  Mdladlana said that this exploitation amounted to criminal activity on their part.

Certainly this is not the last we will hear about this issue, and keep watching this space, as we will continue to monitor  and report back on the situation.

Source: Business Report. Click here for the full story.

Brain drain or drain gain?

Those who left SA to work abroad, and are caught up in the current financial maelstrom overseas find themselves in a double bind. Using LIFO, they will be vulnerable to retrenchment, and their work permit may be dependent on a job with that particular employer.  Jobless South Africans may find themselves at the end of the recruitment list with little hope of finding employment in the short to medium term.

Anecdotal evidence is that many South Africans are considering returning home where currently the prospects are more inviting.   Whilst South Africa is not immune to the economic devastation that is taking place overseas, it is in a better position to withstand these ravages than many other countries. This is because the regulation of our banking sector as well as the national Credit Act does not allow for the sorts of loans which triggered the current financial collapse.

However this is not a guarantee of a job for a returnee who may have to look for alternative ways of earning a living. And this may mean acquiring news skills or setting up in business on their own.

It stands to reason that with the economic turmoil elsewhere that South Africans in employment who may have been contemplating emigration, mainly because of the political situation and the Eskom fiasco of last year, will now think twice about uprooting to another country when there are no guarantees.

This will be to South Africa’s advantage. We are currently experiencing a massive skills shortage and although we have also had an injection of foreign skills, there are still gaps. The more skilled labour we can attract and retain, the more we can harness this into an engine for growth and opportunity. 

Strike Action On The Increase

As we predicted in our year end Wage Settlement Survey, strike action is significantly up for year to date 2009.

Currently, our statistics show nearly double the number of strikes over the full total for last year, and there are still significant negotiations in the pieline.  Whilst wage settlements are contiuing to increase (see our note in this regard), there is a definate hardening of employer attitudes insofar as settlement levels are concerned.  COSATU still has double digit settlements in mind, but employers' feeling the weight of the struggling economy seem unable and unwilling to meet these demands,  A volatile mix.

Keep an eye on Transnet negotiations, as well as the Chamber of Mines.  The Johannesburg bus drivers also bear watching, as their industrial action continues.

Massive retrenchments in the pipeline?

This is the view expressed in a study published by Solidarity, and entitled ‘Towards a Labour Recession’.
Solidarity predicts massive job losses, with unemployment rising from 23.1% to possibly as high as 25% in 2009. it also claims that in small firms, employers try to circumvent the proper procedures, as well as using the downturn as a means of dealing with poor performance.  It claims that ‘non-unionized workers experience a negation of their rights during a labour recession’, and suggests that the only real chance of security lies in joining a union.

We would disagree in the main with this very gloomy prediction.  Certainly South Africa cannot expect to dodge the bullet, and it terms of our own figures there has been, and continues in this quarter to be an increase in the incidence of retrenchments, but we are of the view that there is already a degree of flexibility in the labour market to cushion the immediate retrenchment option, provided by outsourced labour.

This, however, is a double edged sword, and there is increasing pressure from unions upon government to end labour broking.

We cannot see this happening, but it no doubt presages some form of increased regulation of the outsourcing business, - which in itself is not a bad thing.

Employers with unions can expect pressure at this years wage negotiations for both a moratorium on retrenchments, as well as a halt to the use of brokered labour.