The Economic Crisis and Its Implication for Workers

Wednesday, 5 May, 2010 - 09:44

The global financial downturn contributed to the increasing unemployment in South Africa. Despite signs of economic recovery and growth, hundreds of thousands of workers have fallen victim to retrenchments. Government’s Extended Public Works Programme is unable to create permanent jobs for the unemployed. Retrenchments led to the loss of membership for many trader unions. Retrenched workers live in poverty and are unable to maintain their regular union membership subscriptions. They rely on unemployment insurance benefits to support their families or on social grants for survival

In his State of the Nation address in February this year, President Jacob Zuma stated, somewhat confidently, that in the six months period ending December 2009, the government’s Expanded Public Works Programme (EPWP) “Had created more than 480 000 public works job opportunities, which is 97 percent of the target we had set”. These jobs, Zuma went on to highlight, were in areas such as “Construction, home and community based care and environmental projects.”

Of course in an economic recession where a massive number of jobs have been lost through retrenchments and company closures, any job, no matter its quality, is still a job. However, a closer look at the jobs which the President says the economy created in the unbelievably short period of six months shows that he was perhaps a bit optimistic.

It is now well known that jobs created through the EPWP are temporary and of a rather poor quality. This being the case, it is doubtful whether the EPWP has had any significant long term impact on the country’s unemployment crisis.

South Africa’s already grave unemployment situation has been made worse by the recent economic recession. While our economy is slowly rising to its feet, we are far from the worst effects of the global crisis. The latest unemployment figures released by Statistics South Africa  show that between December 2008 and 2009 alone, the economy lost a staggering 870 000 jobs which raised the country’s official rate of unemployment to 24.3 percent.

In concrete terms, South Africa now officially stands with around 4.2 million unemployed workers but this does not include about 1.7 million others who are simply too discouraged to look for work because there are no jobs available in their area, or they have completely lost hope of finding any work. Not surprisingly, many workers have become disillusioned.

When the number of discouraged work seekers is taken into account, we have, unofficially, 5.9 million unemployed workers in the country which translates into an unemployment rate of 31.1 percent. In comparable terms, South Africa remains one of the very few middle income countries where more than a quarter of the labour active population is out of work. In contrast, many Asian countries including India, South Korea and Malaysia have an unemployment rate of below five percent.

As the economy slowly begins to recover from its worst battering in 15 years, what has been the implication of the unemployment crisis on workers? The first major implication is that unions have been forced to shed a significant number of members due to retrenchments. Many retrenched workers find it difficult to maintain regular union membership subscriptions and eventually, they stop making payment altogether. The result is that their membership lapses or is discontinued. Membership is the life-blood of every union and if a union loses the core essence of its structure, then it can no longer continue to function as a strong and militant structure that represents workers’ interests.

Secondly as subscriptions have fallen, so have union finances. Reduced finances mean that unions are unlikely to carry on many of their functions particularly those relating to the organising, recruiting and servicing of workers. Activities such as collective bargaining require unions to consult widely with their members both within, and also outside of their organisational structures. Without an adequate budget to cover these activities, the degree of such consultation among members is likely to be inadequate which may in turn impact on the nature, coherence and strength of the demands made.

Thirdly, for the foreseeable future at least, workers will remain under severe pressure to compromise and accept lower wage increases and benefits from employers. In 2009, workers were time and again urged to be ‘realistic’, to take the harsh economic climate into account, and to work jointly with employers to arrive at reasonable settlements. Not that there is anything wrong with such calls, but then, how does one account for the fact that company chief executive officers earned on average R5 million. Their counterparts in government departments took at least a million rand home.

In the recent past, workers have had to fight pitched battles in order to get meaningful concessions from employers. Hard bargaining is still the order of the day as illustrated by the recent strike by municipal workers. Furthermore, dispute resolution bodies like the Commission for Conciliation, Mediation and Arbitration which played a decisive role in settling some of the major strikes in 2009 have remained under severe pressure.

Fourthly, the country’s social safety net has experienced tremendous pressure as workers who have lost jobs have been forced to rely on their unemployment insurance benefits, or on those family members who receive a state social grant. Currently over 13 million people receive one or the other grant on a monthly basis but it is widely known that the grant supports not just the individual recipient, but often the whole family too. An unemployed able-bodied person between the age of 17 and 60 years gets no income support whatsoever from the state. Their only option is to rely on relatives, family members and friends for survival.

The global economic crisis may be over but for workers, their struggle is still unfolding. Unfortunately, workers have few choices given the pressure from below. On a daily basis, those with jobs are reminded that there are millions of other unemployed workers who would accept the same job at any cost.

- Kimani Ndungu is senior researcher at the National Labour and Development Institute.

Related organisation(s): 
National Labour and Development Institute

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