WAGE POLICY
CLAIRE BISSEKER: Youth jobs a litmus test for Ramaphosa
The success of the youth wage subsidy shows that companies respond to lower entry-level wages by hiring more young people
One of the government’s enduring misconceptions about economic policy is that it can significantly reduce unemployment in the absence of labour market reform. If there is one change President Cyril Ramaphosa should be contemplating, having made youth unemployment his priority, it is to curtail the automatic extension of collective bargaining agreements to small and medium-sized enterprises. Where bargaining is truly collective, the system works, but often large, dominant firms negotiate wages with dominant trade unions. The terms that are agreed to are then invariably extended by the government to the whole sector. The granting of above-inflation wage increases year after year eventually forces smaller and less profitable companies to close unless they become more capital-intensive. The upshot has been lower levels of employment at higher wages and a concentration of fewer, more profitable companies across the economy. Studies suggest that central bargaining in SA reduces employment...
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