WSF (1998): “Will low wages create more jobs?”

From Workers Solidarity, magazine of the Workers Solidarity Federation, volume 4, number 2, fourth quarter 1998. Complete PDF is here

The bosses and the government say that low wages will lead to more jobs. This is in GEAR (government) and the SA Foundation (big business) policies. Both government and business made this argument in their submissions to the Presidential Job Summit this year.

What they are saying is that wages in South Africa are very high. Also, workers have many rights, such as paternity and maternity leave. All of these rights make workers very expensive to hire. In fact, they make workers too expensive to hire, and so bosses have decided not to hire more people because this will cost too much. In other words, unemployment is being caused by very expensive labour.

So as a solution to unemployment both the government and the bosses are calling for a so-called “flexible labour market”. What this means is that wages and working conditions must be reduced to the level that is acceptable to employers.

This argument is a lie.

8 REASONS WHY LOW WAGES WILL NOT LEAD TO MORE JOBS

The argument that a “flexible” labour market and low wages will make more jobs is rubbish.

We say this for the following reasons

ONE: Wages in South Africa are already very low. The bosses say that South African workers get paid much more than workers get in other developing countries. This is not true. If you look at the wages of ordinary Black workers, they are lower than the wages of ordinary workers in similar countries such as Mexico, Brazil and South Korea. In fact there are many workers in South Africa who -even under the collective bargaining agreements – still earn only R500 a month. This includes labourers in the metal industry and municipal workers. The situation is even worse for unorganised workers.

TWO: Unemployment is growing in South Africa despite low wages. In the last two years, 1 in every ten jobs in South Africa has been lost. Sectors with particularly big job losses are farming and mining. But in both sectors wages are very very low. For example, many farmworkers earn under R100 a month, yet they are still being fired. So low wages are not a guarantee of a job.

THREE: There are many unemployed people in South Africa who would be glad to work for a low wage. Many people are so desperate that they will take any job. They are not expensive. Some will even work for only food. But they still do not get jobs. How can it be that these workers are unemployed because they are too expensive when in fact they will work for very low wages?

FOUR: If you look at different countries across the world, you will see that low wages do not make more jobs. The countries which have the lowest wages are also the countries with the most unemployment. For example, Zimbabwe and Indonesia. Low wages do not lead to more jobs. In fact unemployment leads to low wages. Let me explain. If there are many unemployed people who will work for any wage, then those workers with jobs are willing to accept low wages because they are afraid if they strike that unemployed people will take their jobs. Low wages always go hand in hand with high unemployment- low wages do not make more jobs.

FIVE: Also, if you look internationally you will see that those countries with the highest wages are also those with the least unemployment. For example Sweden. This is because if there are many jobs, then the boss cannot just hire and fire workers, he has to treat workers better so that they will stay in his firm.

SIX: If wages for existing workers are made lower, then there will be even more unemployment. Let me explain. Workers use their wages to buy goods. The goods are made in factories. If workers can buy many goods, there will be a lot of work in the factories, and more workers will be taken on. If workers wages are cut then workers will have even less money to spend. This will lead to the factories making less goods, which will lead to workers being laid off. So low wages will in fact lead to fewer jobs.

SEVEN: If wages are cut the boss will have more money to hire more workers. This is true. But who says that the boss will put the money into the factory to make more jobs? In South Africa, the bosses have been putting their money into machines which replace workers, or they have been using their money to buy up existing companies-not in expanding their own factories. So they do not make more jobs, they just make more money for themselves.

EIGHT: The labour laws in South Africa already allow flexible labour markets. For example, the Basic Conditions of Employment Act makes many promises to workers including allowances for night shift, paid maternity leave and so on. But the Act also says that these conditions can be flexibly applied to different firms. So the laws already allow flexibility.

OPPOSE FLEXIBILITY! MORE WAGES! MORE JOBS!