The Implications Of Labour Unions On Employment Economics Essay

Trade brotherhoods protect members from development ; nevertheless, they are associated with high unemployment degrees and decelerate economic growing. There is comparatively dead employment growing in the South African labor market. This paper reviews whether trade brotherhoods play a important function in the slow degrees of employment in the state. Congress of South African Trade Unions ( COSATU ) was formed with the purpose of turn toing the deformed labor market because of the apartheid system by stand foring the unemployed and by bettering working conditions of workers. We find that the brotherhood and affiliates have been effectual in negociating for better working environment conditions however the labor market has been distorted further through high pay demands as these increase the cost of engaging comparative to other states, worsening unemployment. The system of bargaining councils and the Tripartite Alliance have contributed extremely to brotherhoods ‘ deductions on employment in the state.


South Africa has a relentless high unemployment rate and increasing brotherhood densenesss. Slow economic growing relative to growing of labour force participants is the chief ground for high unemployment in the state. In 2011, a 2.8 % of economic growing was reported compared to a 0.7 % diminution in employment. Absorption rate declined from 44.8 % in 2008 to 40.9 % in 2011 ( South African Reserve Bank -SARB, 2011: 4-21 ) . Deficit of needed accomplishments as the consequence of the economic system switching from primary to third sectors has besides contributed extremely to unemployment rate ( Lestrade-Jefferis 2002: 55 ) . William claude dukenfields ( 2000: 05 ) recommends bettering the accomplishments of the unemployed and less-skilled or giving prominence to instruction of the future coevals of workers.

Harmonizing to Go et al. ( 2009: 02 ) , high cost of labor input and labour market inflexiblenesss and other structural jobs in the labor market which are impacted on by brotherhoods have besides exacerbated unemployment rate in the state. The Congress of South African Trade Unions ( COSATU ) and affiliates have on norm managed to dicker for a two-digit nominal pay increase for their members in 2010 but labour productiveness merely increased by 3.7 % ( SARB, 2011: 4-23 ) , increasing the cost of labor. Workers join brotherhoods to emancipate themselves from poorness and societal exclusion. They intend to show their demands for flexible working hours, high rewards and benefits, and improved on the job conditions through corporate voice – the brotherhood, ( International Labour Organization -ILO, 2005 ) . COSATU is besides concentrating on take downing the high degrees of unemployment through its close relationship with the governing party. The brotherhood has tabled a policy which puts more accent on youth employment creative activity through the Extended Public Works Programme ( SARB, 2011: 22 ) . The confederation with the governing party is thought to be the best manner of safeguarding or stand foring workers ‘ involvements in parliament ( Buhlungu, Brookes and Wood, 2008: 454 ) .

The aim of this survey is to analyze the deductions of labour brotherhoods ; chiefly COSATU as the taking brotherhood organisation and affiliates such as National Union of Mineworkers ( NUM ) ; on employment in South Africa from a theory position to see if they are in line with theoretical anticipations. Section 2 gives a reappraisal of the literature refering how trade brotherhoods affect employment and what the planetary empirical findings are. We so concentrate on the instance of South Africa but this assessment requires a brief historical background of labour brotherhoods in the state, and the economic and political environments under which they function and see if they are lending to the brotherhoods ‘ deductions on employment ; subdivision 3. In subdivision 4 we look at employment tendencies in South Africa and causes of high unemployment in the state and so analyze brotherhood rank tendencies and what the impact is on employment in subdivision 5. Section 6 discusses the causes of brotherhoods ‘ ruin in developed states and effects in the labor market, and debates whether South African brotherhoods ‘ power can prevail for long given international experience. Finally pull a decision from what the literature says and state whether labour brotherhoods should be abolished in the state in subdivision 7.


With employers more interested in productiveness and profitableness, labour brotherhoods play an of import function of smoothing communicating between employees and direction by guaranting that differences of sentiment do non turn into major struggle. However, brotherhoods have a important negative deduction on employment through pay effects and hinder economic growing through industrial differences. A simple theoretical account of how monopolistic brotherhoods affect labour market efficiency in a two-sector economic system through rewards can be demonstrated as follows:






Shanghai dialect





Formal Sector


Ef ‘



Informal Sector


Ei ‘



Beginning: Borjas 2005: 414

Where W0 is the competitory pay in the absence of brotherhoods, Wu is the brotherhood pay rate and Wn is the nonunion pay. Df and Di are the labour demand curves for formal ( brotherhood ) and informal ( nonunion ) sectors severally. The theoretical account assumes an inelastic labor supply curve such that a sum of I workers are employed in both sectors. When brotherhoods set rewards above competitory degree at Wu, employment degree in the formal sector reduces from Ef to Ef ‘ piece in the informal sector employment additions from Ei to Ei ‘ and rewards cut down to Wn ( spillover effects ) . The figure of workers employed in the economic system under competitory rewards is higher than that under brotherhood rewards therefore unionism consequences in allocative inefficiency in the economic system, doing a dead weight loss equal to the country of the trigon ABC. This loss is given by:

Increasing rewards above competitory degree is an indirect manner in which brotherhoods lower ( enhance ) employment ( unemployment ) growing. Wittenberg ( 2006: 02 ) provinces that brotherhoods can straight raise rewards by increasing rewards in a nonionized house or by widening a centrally negotiated pay deal to other houses, and they can indirectly raise rewards in non-unionised firms- menace effects. Firms that are non nonionized may pay higher rewards as a scheme to forestall unionization. Unions can besides cut down employment straight by implementing a restraint on the figure of workers that enter a house ( Douglas, 2001 ; as cited by Pantuosco, Parker & A ; Stone 2001: 197 ) . Lindbeck and Snower ( 1988 ) position brotherhood workers as insiders and they explain how insider power can hold negative impact on the chances of foreigners, lead to the impairment of the accomplishments of the foreigners, and cause additions in unemployment rates. The precedence of any concern, nevertheless, is to maximize net incomes and minimise costs. When any factor monetary value additions ; in this instance labor, a cost minimizing house will choose for capital strength, and by so making the figure of employed workers will drop instead than increase in the long-run.

Dittrich and Schirwitz ( 2010: 39 ) have shown that the deformations in the labor market due to brotherhoods depend on the snap of labour demand and brotherhood ‘s clip penchant rate i.e. how much the brotherhood values future losingss in rank. When the brotherhood extremely values future losingss in rank ( low clip penchant ) it is more willing to forestall these losingss by prosecuting higher employment for case by defying technological alteration as it increases the chances of replacing labor for capital. At the same clip the brotherhood may welcome technological progress as it may increase productiveness later growing and higher rewards ( Borjas, 2005: 131 ) . If brotherhood clip penchant is high, rank losingss take topographic point. For a house with a absolutely or extremely inelastic demand for labour, there will non be much alteration in the figure of workers in response to a rise in pay rate. This will be in a instance of a house that can non replace labor for capital. Union power is more successful if the demand for labor is inelastic as employment is comparatively stable even if there is a immense pay addition.

Harmonizing to Tzannatos and Aidt ( 2006: 258 ) the effects of trade brotherhoods differ state by state over clip and the behavior of trade brotherhoods depends really much on the economic, institutional and political conditions under which they operate. For case for a competitory economic system, if the brotherhoods ‘ productiveness matches the increased rewards, employment is less likely to be negatively affected. But, if the opposite holds, houses will be less profitable because of increased cost of labor and this may take to employment losingss ( Leonard, 1992: 84 ) . For an economic system unfastened to merchandise, brotherhoods limit handiness of goods that compete with the end product of nonionized industries. This can be accomplished by naming for quotas and import ordinances ( Herman, 2011: 120 ) . The action has both negative and positive deductions on the degrees of employment in domestic industries. If the cost of importing is comparatively higher than the cost of purchasing from the domestic state, employment will non be affected as consumers will be buying from the domestic market and hiking the economic system, and exporting will be less expensive relation to other states. On the other manus import ordinances may take to impairment of employment. In a instance where brotherhoods demand pay addition, domestic houses will hold to increase monetary values of domestic trade goods or cut down labors in response to increased labor costs. On the other manus, Borjas ( 2005:400 ) argues that the impact of labour brotherhoods on the labor market depend on factors that motivate brotherhoods to prosecute certain schemes such as doing pay demands that may take to work stoppages while disregarding others and non merely the political and institutional environment that regulates the employer-union relationship.

Lucifora ( 1998: 360 ) provinces that brotherhoods might seek to protect occupation security by presenting limitations and rigidnesss with regard to the enlisting policy of the house given workers can exert the right to form. For case brotherhoods may put a high saloon for firing members such that the effects are dearly-won to the house.

Empirical findings

Harmonizing to Linneman and Wachter ( 1986, as cited by Hirsh, 1991 ) , from 1973-1984 in 1-digit industries in the United States, diminutions in employment were restricted about wholly to brotherhood workers while, in contrast, non-union employment grew in about all sectors. To turn out this, they calculated brotherhood premiums in each industry, comparative to an “ chance cost ” pay in turning sectors of the economic system. Union premiums were found to hold increased over that period and Linneman and Wachter concluded that much of the diminution in the brotherhood employment was in response to higher brotherhood pay premiums.

Vedder and Gallaway ( 2002: 106 ) discovered that occupation chances in nonionized sectors in the U.S. lessening as brotherhoods addition pay rates through the usage of their monopoly power. By raising the income of members, brotherhoods may increase pay gap inequality between brotherhood and non-union workers. These deformations in the pay construction by brotherhoods may coerce non-union members out of the labour force. The writers concluded that people move off from extremely nonionized sectors to comparatively less nonionized sectors because there is an addition in the figure of occupations available in the latter as pay rates are comparatively low- measure of labor demanded lessenings with increasing rewards. Lucifora ( 1998: 366 ) when analyzing the impact of brotherhoods on labour turnover in Italy in the metal-mechanical technology industry found that brotherhoods have a statistically important negative consequence on turnover. He found this correlativity to be explained by monopoly-wage and, or non-wage schemes, such as the ‘one voice ‘ mechanism.

In India, the consequences of the National Sample Survey conducted in 1999-2000, reported thatA a big part of the work force was found employed in the non-unionised sector. In 1999-2000, it was estimated that out of 397 million workers, 369 million workers ( about 93 % ) were employed in the unorganized section of the economic system whereas merely 28 million workers ( 7 % ) were engaged in the nonionized sector.A It can, hence, be concluded that the non-unionised sector plays an of import function in footings of supplying employment chances to a big section of the work force in the state ( Industrial Relations Naukrihub, 2007 ) 1.

The literature shows that employment has declined in extremely nonionized sectors of the economic system, whereas occupation growing has occurred in the mostly unorganized sectors. In contrast, Lu, Tao and Wang ( 2010: 209 ) when utilizing dataset conducted in 2006 from the private endeavor study in China, showed that nonionized endeavors have a larger entire employment than their non-unionised opposite numbers in China. They explained what might hold caused this positive correlativity to be the brotherhoods ‘ compulsory function which was harmonising employment dealingss between workers and employers, or brotherhoods contributed towards productiveness, and they did non straight contribute to positive pay additions.

The extent at which brotherhoods affect employment is problematic. Some surveies have shown a negative relationship between brotherhood rank and employment growing while others have shown a positive consequence. For case, the issue of pay additions, one may reason that increasing rewards of members by brotherhoods may hold a positive consequence on employment since members are perceived to set in more attempt as high pay rates are considered to hike workers morale. These might in bend lead to economic growing as labour productiveness would be increasing, as a lagging factor ; employment will besides increase.


Historical overview of South African brotherhoods

Trade unionism in South Africa was regulated by the Industrial Conciliation Act of 1924, under the authorities of Jan Smuts. During that clip, merely non-Black workers were allowed to hold their brotherhoods officially registered and to prosecute in corporate bargaining. Black ( Africans, Indians and Coloureds ) brotherhoods were non illegal but were denied province acknowledgment and corporate bargaining powers which meant Black workers were barred from direct engagement in dialogues that determined the conditions of their working lives ( Lichtenstein 2005: 298 ) . Blacks were deprived labour jurisprudence protection and were discriminated from formal occupations. The apartheid system was designed such that instruction system for Blacks merely trained them for low-skilled occupations ( Barnard, 2009 ) . Individual Black workers could fall in White brotherhoods if those brotherhoods chose to acknowledge them as members, but the Numberss that did so were negligible ( Alexander 2000, as cited by Major, 2005: 478 ) . At the South African Trades and Labour Council ( SATLC ) conference in 1944, a gesture to revise the 1924 Act so as to acknowledge Black brotherhoods was carried by a vote-of-hand and was merely narrowly defeated on the card ballot that followed. The SATLC dissolved itself in 1947 to go the South African Trade Union Council ( SATUC ) , on the footing of excepting Blacks from rank. Along with the rightist South African Federation of Trade Unions ( SAFTU ) , it so entered the new national coordinating organic structure, which quickly died out in its early phases. The Black brotherhoods dropped by SATUC so formed their ain South African Congress of Trade Unions ( SACTU ) , and allied themselves to the African National Congress ( ANC ) ; a political party. However, the brotherhood was driven underground as Black political parties were banned during the apartheid epoch ( Major, 2005: 482 ) .

Recognition of African trade brotherhoods was merely established in the 1970s and 1980s. In 1979 the Federation of South African Trade Unions ( FOSATU ) was formed. However, unlike SACTU, FOSATU did non aline themselves with any political parties as it was merely concerned with workers issues. This arms-length relationship to political relations was questioned by other brotherhood motions. In 1982 the National Union of Mineworkers ( NUM ) was formed and was portion of the release motion led by ANC. Its formation was informed by mine and energy workers solidarity and action. NUM embraced four pillars of the battle ; the armed battle, mass mobilisation ( un-governability ) , international solidarity / isolation of apartheid South Africa and the belowground operation2. Some brotherhood motions were in dissension with these rules. This brought about immense differences between the assorted viing blocks in the brotherhood motion over issues, such as whether brotherhoods should be general brotherhood or more focussed industrial brotherhoods ; whether they should register, whether they should include white workers ; whether they should prosecute in community political relations ; and whether they should hold direct links to the release organisations3.

COSATU was formed in December 1985 after four old ages of integrity negotiations between brotherhoods opposed to apartheid and committed to a non-racial, non-sexist and democratic South Africa ; and to better the effectivity of brotherhoods. FOSATU merged into it but SACTU dissolved in 1990 and advised its members to fall in COSATU. At its launch COSATU represented organized workers from 33 brotherhoods and as a new combined organic structure resolved to be politically active and to organize confederations with political administrations, yet keep its independency. COSATU met with the ANC and the South African Communist Party ( SACP ) to organize the Tripartite Alliance in 1990 when political administrations were unbanned. COSATU so continued to seek to convey all organized workers in each industry into a individual brotherhood, and affiliates that had members in assorted sectors were expected to hold to the procedure of streamlining the federation ‘s rank. COSATU presently has more than two million members and 20 affiliates4.

Unions and the South African Political environment

The brotherhood played a important function in political mobilisation that led to an terminal of the apartheid administration. ANC has been taking the authorities since 1994 when the state became a democracy with the support of the Alliance members. COSATU has a strong relationship with the authorities through assorted establishments – Parliament, the National Economic Development and Labour Council ( Nedlac ) and authorities sections ( Cherry, 2006: 143 ) . Nedlac is a forum where organized concern, organised labor and organised community grouping come together to discourse and seek to make an understanding on issues of societal and economic policy. The council considers all proposed labors statute law associating to labor market policy before it is introduced in parliament. This gives the brotherhood a strong voice as representatives in the council should pass on with workers about policies discussed and determinations made5. Having some brotherhood members as parliament members is besides good to the brotherhood as workers ‘ involvements are represented in parliament and should the authorities fail to present, the brotherhood will be influential through the parliamentary office ( Cherry, 2006: 145 ) .

Cherry ( 2006: 155 ) provinces that support for the confederation has declined from 82 % to 66 % between 1994 and 2004 owing to tensenesss around policy arguments such as denationalization of public services and amendment of labor Torahs through GEAR ( Growth, Employment and Redistribution ) policy which the authorities saw as economic rescue for the state but other members of the confederation, particularly COSATU strongly opposed. In 2007, the brotherhood and its protagonists played a important function in subverting former president Mbeki and naming Zuma as his replacement in the 2008. This shows that non merely does the brotherhood represent its members in the labour market but, it is besides influential in political issues ( Taylor, 2009: 219 ) . Taking everything into history, the political environment is contributing for the brotherhood to be effectual in South Africa and the confederation has given COSATU some power in the labor market.

Unions and Economic Growth

When looking at South African economic growing for the past three decennaries ; figure 1, gross domestic merchandise ( GDP ) growing was much volatile in the 1980s because of the political instability and worsening return of gilded monetary value ( Fedderke and Simkins, 2009: 27 ) . The economic system was in contraction in the early 1990s, but accomplished to prolong growing for the following 16 old ages ; from 1993 to 2008. Harmonizing to Fedderke and Simkins ( 2009: 28 ) , growing was led more by engineering than capital input and labor input was lending negatively to growing in the 1990s whereas antecedently capital and labor inputs contributed more to growing than augmented engineering. In 2009 there was a contraction of 1.5 % following planetary economic crisis, but the state ‘s economic system managed to retrieve in 2010 due to the hosting of the FIFA World Cup tourney ( SARB, 2011: 06 ) . The lowest degree of growing the state experienced was 0.5 % in 1998. There was a 7 % diminution in the goods-producing industries as there was a displacement from goods-producing to service-providing industries. Non-gold excavation industry was besides affected by a diminution in international demand, managing costs of exportation form the state increased ( SARB, 1998: 10-12 ) .

Industrial actions have besides contributed negatively to economic growing since productiveness slows down and these actions frequently go together with hooliganism of belongingss. To last drawn-out industrial actions, employers resort to replacement “ scab ” labor ( Mafela, 2010: 33 ) . About 41 % employers reported to hold used scab labor in 2010 compared to 27 % in 2009. This therefore explains how the economic system has sustained growing during continued brotherhood work stoppages. The highest figure of working yearss lost due to industrial actions between 1999 and 2011 was in 2010. There were 74 work arrests affecting about 1.2 million workers, of which 90 % were public retainers. Around 90 % of work arrests were about rewards and other compensation. Constitutions with more than 300 workers were affected more compared to 2009. More than three quarters of work arrests lasted within 15 yearss ( Mafela, 2010: 33 ) .

The authorities has introduced assorted development policies such as Reconstruction and Development Programme ( RDP ) , GEAR and Black Economic Empowerment ( BEE ) to better socio-economic criterions of South Africans. BEE was implemented in 2003 and the intent of the act is to economically authorise Black people. However the policy has been greatly questioned as it does non profit bulk of the Blacks, but merely a few elite and discriminates against Whites ( Van Klaveren et al. 2009: 10 ) . The authorities besides introduced land reform policies to right the county ‘s socio-economic instability such as unequal distribution of income that are bequests of apartheid. Despite all this enterprises, economic growing in the state has been low and has non been sustained plenty for significant employment creative activity. The brotherhoods are runing in a sulky economic system ; which is non a good economic status for labour brotherhoods to be effectual.

Figure 1: Changes in GDP

Beginning: South African Reserve Bank-1980 – 2011


From Figure 2, there is a gradual lessening in employment from late 1980s to 2001. The consequences of the October Household study conducted between 1994 and 1997, recorded that from about eight million people that were absorbed in the labor market in 1994, about half a million ( 6.25 % ) were out by 1997. This led to a 2.9 % addition in unemployment rate ( official unemployment rate in line with ILO definition ) , Stats SA ( 1998: 15 ) . Hodge ( 2009: 502 ) grounds that one of the factors that led to this diminution was the sloughing of occupations in the excavation industry, particularly gilded mines. The costs of pull outing gold were increasing comparative to the monetary value of the end product in the market. About 676, 380 people were employed in the excavation industry in 1990, this figure reduced to 535, 644 and so 415, 000 in 1993 and 2004 severally, therefore 38.6 % occupation losingss occurred in the industry between 1990 and 2004. Hodge ( 2009: 502 ) farther adds that there were besides high layoffs in the fabrication industry, perchance as a consequence of the effects of trade liberalization steps between 1988 and 1994.

Employment accelerated between 2002 and 2007 and so reached a extremum in 2008. Harmonizing to the SARB ( 2011: 6 ) , 383 000 employment chances were lost between the 3rd one-fourth of 2008 and the first one-fourth of 2010. From so until the first one-fourth of 2011 employment creative activity became seeable in the trade, energy, providing and adjustment services ; and the finance and insurance sectors. The hosting of 2010 FIFA World Cup tourney was one of the factors that led to employment addition in those sectors. This growing was later dwarfed by lessenings in employment in building, gold-mining, fabrication, conveyance and communicating sectors.

Figure 2: Entire employment in the non-agricultural sector

Beginning: South African Reserve Bank – 1985 – 2011

Index: 2000=100

Unemployment in South Africa has been turning quickly due to loss of occupations in the formal sector and because of labour force turning faster than employment growing rate and non needfully by a diminution in employment growing ( Hodge, 2009: 490 ) . This indicates that the economic system is confronting a challenge in footings of occupation creative activity. Formal sector employment grew by 32 % between 1995 and 2007 but unluckily this growing was stunted by a 48 % addition in the labour force. Branson ( 2006 ) when transporting out a cohort analysis found that increasing degrees of unemployment were due to a diminution in the age Africans theodolite from school into economic activity, and non from a diminution in the handiness of occupations. There is besides grounds that there is deficit of accomplishments where these are required as a consequence of the displacement in the economic system from primary to third sectors, 54 % of the unemployed people reported deficiency of accomplishments to be the chief ground for being unemployed in 1999 ( Lestrade-Jefferis, 2002: 55 ) . There is a divergency between the demanded and the supplied types of labor. Skilled and high skilled labor is extremely in demand whereas semi and unskilled labor is in extra supply ; taking to high degrees of unemployment, DPRU ( 2008: 10 ) . It is because of this mismatch between the demand and the supply side in the South African labor market that there is high unemployment rate, and non to the diminution in economic activity. This means unemployment job in the state is more structural than natural. Travel et Al. ( 2009: 02 ) explain high degrees of unemployment in the state to be besides caused by high cost of labor input and labour market inflexiblenesss and other structural jobs in the labor market which are impacted on by brotherhoods. A elaborate treatment of these causes will be dealt with in the subsequent subdivisions. Unions have a direct impact on the cost of labor through the minimal pay demand or living pay run discussed below.

Populating pay run

South African labor market is besides characterized by high income inequality and COSATU purposes at contracting the spread through “ Living Wage ” run. The Union is cognizant of the deductions of increasing “ life ( minimal ) pay ” on employment ; nevertheless it argues that the negative effects merely hold in the short-run, in the long-term minimal pay may take to additions in employment. It grounds that higher lower limit rewards could lend to faster economic growing as there is grounds that states with sensible income distribution grow faster and make employment. It supports legalising minimal rewards on two bases: foremost, when rewards are low, productiveness remains low as workers are demotivated ( higher rewards lead to greater attempt from workers ) . Low productiveness implies low net incomes and this limits overall employment creative activity. In this instance, the province may promote employers to increase their investing in human capital, taking to higher productiveness and finally growing in employment, or cut downing income inequality and unemployment. However surveies have shown increasing brotherhood rewards that are slackly tied to productiveness additions. For case, in the instance of South Africa, when looking at the graph in the appendix, there is an increasing upward tendency in wage per worker but non much can be said about labour productiveness.

Second, higher wage leads to an increased demand for basic goods due to an improved buying power. As these goods are more likely to be produced in South Africa, that in bend would excite local economic growing, to run into the increased demand, houses will use more workers ( Naledi, 2011: 11 ) . However, GDP and employment growing rates have been traveling in contrasting waies in the 1990s and early 2000s ( see Fig.1 and Fig.2 ) . On the other manus when looking at the conventionalized concern rhythm facts, there is a strong correlativity between GDP and employment and a really weak correlativity between existent rewards and GDP ; addition in rewards does non vouch economic growing. Furthermore, additions in pay rates may take to a lessening in aggregative supply doing cost-push rising prices. As production costs ( labor ) travel up, houses are forced to control the costs by cutting down on the measure of labour employed and or by cut downing production. Harmonizing to Fields ( 200: 04 ) , the grounds for back uping minimal pay are based on macroeconomic intuitions ( multiplier effects ) ; there is no grounds that supports these statements. The demand for labor is at big determined by the cost of labor.

In South Africa surveies have derived estimations of -0.5 to -0.7 of wage-employment snap. This means that 10 % pay increases lead to more than 5 % decrease in employment ( Kingdon and Knight, 2007: 823 ) . The extent to which minimal rewards affect employment depends on the pay snap of the industry and the proportion of workers that are gaining below the proposed lower limit pay ( DPRU, 2008: 25 ) . For case, in an industry where less than 10 % of workers are sub-minimum pay earners, an addition in minimal pay is less likely to impact employment degrees than an industry in which more than 50 % of workers are sub-minimum earners. Minimum rewards have a significantly negative consequence on employment, but to forestall development and better criterions of life of the employed, minimal pay may be a utile policy. Sing how high minimal rewards may impact employment, we now turn to other union-driven factors that affect employment in the state.


Figure 3 shows COSATU rank growing tendency from 1991 to April 2010. The brotherhood is more effectual in the excavation, fabrication and public services sectors ( Buhlungu, Brookes and Wood, 2008: 442 ) . Between 1994 and 1997 there was a crisp addition of approximately 43 % in the figure of members but this dropped by around 5 % between 2000 and 2003 following high portions of industrial actions by the fabrication, community services, conveyance, storage and communicating, and excavation and quarrying industries. Harmonizing to Mafela ( 2003: 9 ) , an norm of 1.1 million workers were involved in industrial actions in 2000, the figure rose by 106 % from 1999 and declined drastically by 92 % in 2001, nevertheless, the figure of work arrests were approximately 43 % and 4 % higher than in 2000 in 1999 and 2001 severally. It is believed that in 2001 workers were loath to be involved in industrial actions following loss of wage and occupations. Mafela ( 2003: 14 ) found the chief cause of industrial actions in 2000 to be retrenchments/ redundancy as they contributed 61.3 % ; followed by differences over rewards, fillip and other compensation which contributed 25 % towards industrial differences. From 2001 to 2003 rewards were the chief cause of industrial actions ; disputes over rewards contributed 51 % in 2003. South African Transport and Allied Workers Union ( SATAWU ) and NUM were most apt to industrial action engagement in 2003. SATAWU took portion in 25 % of all industrial actions while NUM was involved in 20 % of all industrial actions in 2003, ( Mafela, 2004: 17 ) .

It is non surprising that figure of employees in organized industries went down during industrial actions as series of surveies have shown that there is a tradeoff between minimal rewards and employment. Unions make hiring and fire of employers expensive. Klein ( 2012: 20 ) when analyzing South African employment tendencies between 2008 and 2010 found existent pay growing to be one of the factors that contributed to high occupation losingss observed in 2009. Schultz and Mwabu ( 1998:701 ) when measuring brotherhood pay derived function in South Africa observed that a 0.5 % decrease in brotherhood relation pay consequence could increase African employment by 2 % as pay payment would be redistributed from the upper middle-class African brotherhood workers to lower-wage nonunion workers ; the likely 2 % . They found 70 % of the African pay earners non in brotherhood to be at a hazard of losing comparatively due to brotherhood comparative pay consequence.

As one of the schemes to make occupations among SA ‘s young person, curate of finance proposed relaxation of labour Torahs and lowering of rewards so that employers can afford to enroll more workers. Labour brotherhoods strongly opposed the thought and they said under no fortunes will they let any labour Torahs to be relaxed or agree to workers being paid lupus erythematosus ( Nevin, 2011: 94 ) . They argue that cheaper labor will non take to economic growing as there would be less revenue enhancement remunerators and less demand for trade goods. This is a clear indicant that COSATU extremely values its rank, and it will move in favor of its members so that it does non free trust from its members. Some surveies show that a Chinese mill worker earns approximately six times less than his South African opposite number and produces more.

Harmonizing to Taylor ( 2009: 216 ) , brotherhoods may besides cut down employment by demanding flexible or fewer working hours. Decrease in working hours leads to higher hourly cost of labor for houses that do non pay per hr but on hebdomadal or monthly bases. This implies higher production costs and employment will worsen as a consequence. Compensation of hours worked overtime, household duty leave, one-year leave, long-paid sick leaves consequence in loss of work hours, increasing the cost of labor ( Taylor, 2009: 216 ) . For case, when comparing hourly cost of labor in South Africa and China in footings of leave entitlements, a South African employee in the formal sector harmonizing to the Basic Conditions of Employment Act of 1997 – revised in 2002 – is entitled to 21 yearss paid one-year leave, 30 yearss paid ill leave in three old ages, three yearss paid household duty leave and adult females are entitled to four back-to-back months of paid pregnancy leave ; which the brotherhood wants to be increased to six months ( Van Klaveren et al. 2009: 22 ) . Whereas in China an employee with less than 10 old ages in the house is entitled to 5 yearss one-year leave, 90 yearss pregnancy leave and ill leave depends on hours of work and salary piece on leave depends on length of the on the job clip ( Liu, Zhang and Li, 2009: 55-57 ) . Maximal on the job hours in a hebdomad are 45 hours in five yearss or more in South Africa, compared to minimum on the job hours of 40 hours in China ( Van Klaveren et al. 2009: 22 ) . These labour Torahs increase the cost of labor in the state relative to other states. Harmonizing to Lewis ( 2001: 340 ) , 40 % of houses reported that they had either fired fewer workers, substituted labor for capital or hired more impermanent employees in response to labor ordinances. However, 60 per centum of the houses reported that all labour statute law combined had no influence on their employment determinations. Chadra et Al. ( 2001 ) as cited by Go et al. ( 2009: 3 ) reported that fabrication houses prefer using impermanent workers to lasting workers, and depend extremely on sub-contracting services in response to labor market statute laws.

In 2004 in the South African fabric industry, China was accused of dumping, doing unemployment and the closing of mills. About 30 % occupations were lost between 2003 and 2006 as fabric imports from China represented about 60 % . Firms viing with imports from China were concerned about lifting unemployment and protecting the fabric industries from prostration. They strived for authorities intercession with the aid of COSATU ( Herman, 2011: 128 ) . In this instance brotherhoods contributed towards occupation creative activity. A study by the University of East Anglia in Britain stated that between 2001 and 2010, 77000 mill occupations were lost in South Africa because of an influx of low priced Chinese imports ( Barron, 2012 ) . Regulative mechanisms to protect domestic makers are deficient and China is capitalising on that. Harmonizing to Gleason ( 2012 ) , an understanding between employers and the fabric workers brotherhood was reached in 2011 October with the purpose of salvaging the industry from fall ining. The trade was that emerging houses should get down on rewards 30 % lower than the antecedently agreed and 5 000 more people were to be employed over three old ages. The brotherhood is now demanding a 13 % pay increase ( Gleason, 2012 ) . This fails to do sense as the ground for lower rewards was to salvage occupations. Higher rewards will decidedly take to occupation cuts as the domestic states can non vie with inexpensive imports in the market.

Figure 3: Entire Affiliate rank ; 1991-2010

Beginning: Naledi research Paper on life pay ( 2011 )

By and large, brotherhoods in the state have been effectual in dickering for high rewards, fillips and other compensation, doing cost of labor input to increase. From the appendix, wage per worker has been increasing aggressively while employment has been fluctuating. In 2007 wage growing outstripped employment growing and of all time since there has been a dead growing in employment.


Union rank has been falling in most states but in South Africa the opposite holds. In this subdivision we look at grounds for drastic bead in brotherhood rank in the US and Great Britain ( GB ) and see what the consequence of their ruin has been on employment growing in several states. We besides discuss the hereafter of South African brotherhoods given international experience and grounds behind success of the brotherhoods in the state. Unlike brotherhoods in GB, brotherhoods have non been attached to any political party in the US. In GB, Labour Party was the political arm of brotherhood motion ( Borjas, 2005: 402 ) . In the US, brotherhood rank has declined because of structural alterations in the economic system ; employment in the fabrication industry declined because the industry is more prone to unionisation than other industries. Besides more occupations were located in provinces that have less favorable environments for brotherhood organizing. The labour Torahs were in favor of concern proprietors and non workers. This gave concern proprietors more say and control over disposal and rewards. Labour force engagement by adult females besides increased and this dampened brotherhood rank as adult females are less likely to fall in brotherhoods ( Borjas, 2005: 409 ) . In 2003, 12.3 % of work forces were brotherhood members compared to 10.5 % of adult females. Unions have besides declined because they no longer function the demands of their members and there is low demand for unskilled or low-skilled labors due to skill-biased technological alteration and because. A big figure of brotherhood members are low-skilled and technological progresss being introduced in work topographic points compliment the skilled labor and replace the unskilled labor. Forming skilled labor is non every bit easy as forming unskilled labor because the latter is homogeneous, by definition ( Dinlersoz and Greenwood, 2012: 1 ) . The weakening of brotherhood densenesss was found to hold contributed significantly to economic growing and increasing proportion of the on the job age population that really works ( Vedder and Gallaway ; 2002: 128 ) .

Union denseness in GB fell during Margaret Thatcher ‘s reign as Prime curate in the early 1980s. She accused brotherhoods of oppressing instead than protecting workers ( labour force participants ) as they were killing employment through high pay demands ; doing workers worse off. Between 1980 and 1990, brotherhood denseness fell by about 30 % because of altering composing of employment through amendment of labour statute law, and because of macroeconomic conditions ; such as rising prices, unemployment and economic growing ( Disney, 1990: 166 ) . Like the U.S, employment shifted to countries that do non favor unionism. Full-time employment contracts shifted to parttime, more adult females were being hired than work forces, employment shifted from manual to non-manual, from fabricating to services ( Disney, Gosling and Machin, 1995: 406 ) . Anti-union statute laws were passed that lowered brotherhood acknowledgment. New constitutions were non obliged to be unionized ; it was up to the concern proprietors to make up one’s mind if they want nonionized or union-free concerns. Employment Act of 1980 placed farther limitations on protesting, made brotherhoods apt to be sued for amendss, broadened the evidences on which to claim unjust dismissal for refusal to fall in a closed store, and repealed the statutory acknowledgment process ( Machin, 1997: 649 ) . The relaxed ordinance of hiring and fire increased both income inequality spread and employment in the state. Majority of brotherhood members are those that are at the bottom terminal of the pay distribution and less skilled. When brotherhoods are abolished, low-skilled earners are left unprotected ; their income becomes dead as income of high-skilled earners additions, widening the spread between high and low income earners ( Machin, 1997: 651 ) .

South African union-government relationship is more like that of Britain before 1980. Not merely is the brotherhood ‘s monopolistic power strengthened by the confederation but besides the system of bargaining councils. The system allows corporate bargaining understandings to distribute out across the remainder of the sector regardless of house size ( Barnard, 2009: 27 ) placing pay burdens on little and new concerns that are non nonionized ( Bhorat, 2011: 5 ) . This applies every bit long as the bargaining council has the support of a trade brotherhood stand foring the bulk of employees in a sector and when big houses dominate the employer party bargaining during dialogues ( Burger and Woolard, 2005: 454 ) . Minister of Labour gives a concluding consent it these minimal rewards should be extended to employers in the industry and country, who were non parties to the dialogues. Large houses may hold to put high labor criterions with the connotations of decreasing competition from little houses. The agreed “ high ” pay rate may be lower than what big houses might hold had to pay under a decentralised system. In response to a bargaining council understanding, big nonionized houses will increase employment to run into the increased demand while large-non-unionised and little houses will pare down employment due to high labor costs. Magruder ( 2010: 32 ) found dickering councils to be associated with 7-16 % less employment in little houses and 8-13 % less employment in a given industry in South Africa.

Unlike brotherhoods in the US and BG where brotherhood rank rates were higher among blue-collar workers, COSATU has a strong adult females support and its rank reflects a displacement towards higher-skilled workers. Paton and Naidoo – 2009 – found a one-fourth of the brotherhood ‘s members to hold third makings and, a 3rd to be employed in the populace sector ( Van Klaveren et al. 2009: 23 ) . This may be an indicant that the brotherhood can still travel strong unless the authorities decides to strip it of acknowledgment through anti-union statute laws like in GB.


The grade of the deductions of labour motions on employment is theoretically inconclusive. COSATU has been more effectual in pay dialogues and bettering working conditions of workers, but did non vouch occupation safety as awaited. The brotherhood has distorted the labor market through comparative pay consequence doing unemployment to intensify nevertheless income inequality has reduced as rewards of the lower income earners have increased. To turn employment creative activity, rewards should be at a competitory degree, set by employers with authorities intercession to protect workers from being exploited. William claude dukenfields ( 2000: 04 ) suggests making employment chances while keeping existent rewards fixed because rewards are gluey downwards. The authorities can besides acquire involved by subsidising employers by supplying revenue enhancement interruption ( Lewis, 2001: 346 ) . The labour market in the state is inflexible ; current labor Torahs in the state favour workers and non concern proprietors, doing the cost of labor to be really high and investors do non happen it profitable to put. Costss related to engaging and firing workers make the concern clime unattractive, peculiarly to new possible investors, who merely take to take their capital elsewhere ( Taylor, 2009: 216 ) . The authorities needs to revise labour policies to pull investors and make concern friendly environment. Merely when the involvement of brotherhoods and employers converge will brotherhoods non interrupt the market. Unions need non to be abolished as they can still stand for workers in other work related issues other than increasing rewards. It should besides be noted that there is a tradeoff between employment and income equality in the absence of brotherhoods since bulk of brotherhood members are at the bottom terminal of the pay distribution.


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