The rise and rise of labour broking

The labour broking industry is trumpeting new research that seems to indicate it is a cornerstone of the economy and a poverty alleviator.

University of Cape Town economics professor Haroon Bhorat this week presented new findings on the temporary employment services (TES) sector at an event organised by labour broker lobby group the Confederation of Associations in the Private Employment Sector (Capes).

He estimates there were 970?000 brokered employees in South Africa in the first quarter of this year.

This is up from 810?000 in 2011, his previous finding using similar methods in a similar paper last year for the World Bank’s World Development Report.

In 1995, there were just 199?000 brokered employees, making it one of, if not the fastest-growing “sector” in the democratic era (see box).

According to Bhorat’s method, the broking headcount has grown at 8.7% on average each year since 1995.

Overall employment only grew by 2.5% a year. The result is that about 14% of the 5.6?million additional jobs since 1995 have been brokered jobs.

Capes claims its industry has “created more jobs in South Africa than any other sector since 1995”.

The main argument against labour broking is that it doesn’t create jobs, but only mediates between a worker and a client who would otherwise still need to hire a worker.

“We cannot answer the question of how many jobs there would be without TES,” said Bhorat in response to questions.

But, according to him, even though there would most likely be a loss of employment if labour brokers were done away with, “we must assume there is an incentive to do it [use labour brokers]”.

He added, though, that figuring out how many of the almost 1?million brokered employees would be employed in the absence of labour brokers is impossible.

One of the reasons the absence of labour brokers would reduce the demand for labour is that wages for brokered workers are generally lower.

Bhorat did the economic analysis for the 2010 regulatory impact assessment of a possible ban on labour brokers in an amendment to labour laws that was subsequently scrapped.

This week’s study, as well as a version done last year, was based on that research.

Last year’s version of the paper included a section on how much less brokered workers earn compared with normal workers.

In general, the wage penalty was about 35% in all sectors and 17% in the manufacturing sector.

That’s how much less brokered employees earned.

About 48% of brokered workers had no pension compared with 36% in the formal economy, and about 84% had no health insurance compared with 60% of formal sector workers.

Calls to ban labour broking have continued with the National Union of Metalworkers of SA (Numsa), in particular, trying to eradicate the practice through negotiations instead of new laws.

Since 2011, Numsa has negotiated a ban on labour broking for petrol station attendants in the motor industry.

It has also negotiated for limitations on the use of brokers in the rest of the manufacturing sector.

The ‘unsung virtues’

According to Bhorat’s paper:

»?Considering the average GDP value of a formal sector job, the 970?000 brokered employees are possibly responsible for 8.85% of GDP, which would have been R256?billion last year.

»?Brokered jobs keep 350?000 households above the poverty line, defined as R2?532 in 2000 (about R5?621 now).

As things stand, 35% of households where a brokered worker lives are already living below this poverty line.

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