A paradigm shift for labour

2008-08-11 00:00

Finance Minister Trevor Manuel’s “economic compass” embraces five vital socio-economic needs he feels strategy should work towards. These are: to dramatically reduce poverty, create more jobs, economic growth of seven percent a year, growth of export trade, and an increase in South Africa’s savings rate.

You will recall I made the point last week that the responsibility for achieving these objectives would seem to be in the hands of Manuel, the governor of the Reserve Bank and captains of industry and commerce.

In other words, all the brightest people would gather together to discuss how these objectives would be achieved and define the strategy to ensure they are. However, you can bet that the importance of labour will not be evaluated, nor will anyone ask, in relation to how labour is currently remunerated: “Is this the most effective way to pay our people?” If they did, the only answer or conclusion would be: “No, it is not!”

Each of the five strategic objectives laid out by Manuel comes back to the role of labour and productivity.

The only conclusion if we are to be successful in respect of these five objectives is that the process must begin by evaluating methods we use to manage and remunerate our workforce.

We need to find ways of paying labour as much as is possible as opposed to the minimum, renegotiated annually.

This objective must not be achieved at the expense of shareholders’ returns nor be inflationary.

What we need to do is to put more money into the pockets of our workers. History reveals the opposite — the rich get richer and the poor get poorer.

There is a strong argument that suggests over 70% of employees in this country earn R1 000 or less a month. How do we expect people to save when they can barely afford to buy bread? If we want our people to save more, then we have to find ways of paying them more.

If we want economic growth, we will have to increase workforce earnings, which will have to be funded from productivity improvements.

Most people in SA want and need things. The problem is that they don’t have money to buy them.

This in itself has many pitfalls to take into account. It is dangerous to stimulate both the wants and needs of people at a time when they have no income available to take part. They will simply turn to credit acquisitions. This is exactly what is happening in the UK. People have spent all their disposable income, but the marketplace is saying, “Don’t worry. You don’t need cash. You can have it today and pay next year!”

Reducing poverty, coupled with our need to create employment, is one of Manuel’s cornerstone economic objectives.

These two points have been uppermost on the government’s agenda for many years, yet there has not been any improvement in either. The best way to create jobs is via growth in the economy, which again brings us back to the importance of worker incomes. Once we are truly successful at making new jobs, the process of eliminating poverty begins.

Equally, all the points I have made regarding the importance of labour in effecting a successful economic strategy come to bear in terms of our need to secure international markets.

This will never be realised unless we find ways of making our labour productivity world class — international customers want the highest quality at the lowest prices. Labour holds the key to our being successful in securing world market share.

Next week, I shall look at ways of paying our workforce, allowing growth for staff and shareholders alike, funded from productivity.

frankgreenfield@iafrica.com

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