Pay rises, policy alternatives & regime change

Posted on July 4, 2013


Trade unions are irresponsible and greedy, demanding double digit pay rises and so driving up inflation and threatening the stability of the currency and the economy. And while they criticise government policies, protest about the system or refuse immediately to accept government brokered deals, they provide no adequate explanations or alternatives.

Such accusations, with variations depending on specific circumstances, are levelled annually as the wage bargaining season gets underway. This year is no different, although there appears to be a more concerted effort to portray some trade unions and the labour movement as a whole, as blinkered dinosaurs, trampling on everything in their path in a manic rush after money and power.

All of this is understandable when it is realised that the accusations serve certain political and economic agendas, whether they are made by employers, government ministers or union leaders. They also come more to the fore when the economy appears headed into a particularly turbulent period and when an election is looming. But, as in the past, the accusations, based largely on simplistic analysis and often carrying more than a hint of bigotry, do not stand up to close scrutiny.

So a reminder about the basic role of trade unions may be timely: they exist to at least maintain, and hopefully to improve, the living standards of members. In a world where sufficient resources exist to adequately feed, clothe, house and educate everyone — and where the distribution of such resources is grossly skewed, this role is wholly legitimate. In South Africa, where those in work provide an effective safety net for many of the unemployed, this is even more obvious.

Unions, because of the power they potentially wield in both the economic and social spheres, also often fall prey to manipulation from within and without. But for all the often messy meddling, contradictions and power plays they remain, for the most part, the most democratic institutions in the country.

As this column has mentioned before, the demand for double digit pay increases has arisen because, without these, the average employee in South Africa will almost certainly be worse off, six or 12 months from now. This is the stark reality that faces trade union negotiators in the current bargaining sessions.

Employers, wedded to the existing economic system, also face rising costs — before even considering increases to the payroll. Everybody, employers, employed and the unemployed, is going to be paying much more for everything from food and clothing to transport and electricity. The fuel price rise this week, as it filters through the economy, is alone going to mean much tightening of belts and squeezes on bottom lines.

With the volatility in the currency markets likely to continue, there is also every indication that the increase in fuel prices this week may not be the last. This in a country with no navigable rivers or canals and a poor rail network. As a result, we in South Africa rely on road transport and spend, on average, more of our disposable income— 5 per cent — on petrol and diesel than perhaps any other community anywhere.

The average income in this country — courtesy of the minority who are very highly paid — is R10 140 a month. According to the latest available survey, the approximately 10 million vehicles on the roads — 9 million of them privately owned — each consume an average of 140 litres of diesel or petrol a month. The latest price rises mean that the average additional cost per motorist will be more than R125 a month.

When this background is taken into account, it seems obvious that union pay demands are not motivated by greed, but by the need to try to maintain an established standard that, in many cases, amounts to mere survival. The unions, on a domestic and international level, also put forward alternative policies that, at the very least, should be the basis for serious discussion.

One long standing proposal is for the introduction of a progressive tax regime going as high perhaps, as 75 or 80 per cent for those individuals paid more than R10 million a year. But this would only apply if the existing and extraordinary wage and welfare gap persists.

A union-backed proposal in Switzerland has raised the prospect of closing this gap. Because much government policy in Switzerland is decided by referendum, the latest move is to have top executive remuneration pegged to a maximum of 12 times more than the wage of the lowest paid in any company. This proposal follows a referendum in March where 68 per cent of Swiss voters elected to have tougher rules brought in to restrict “rip-offs” in the form of managerial bonuses and “golden parachutes”.

“We think these are very interesting developments,” says Cosatu spokesperson, Patrick Craven. Cosatu and the other federations have also taken on board the “Tobin tax” promoted by the International Trade Union Confederation. Named after economist James Tobin, this is a proposal that all financial transactions be taxed at a minimal rate.

With the advanced and integrated information systems now in place, all financial transactions can be recorded, from the smallest purchase to the mega billions that banks move daily in the financial sphere. One argument is that a tax of as little as 0.05 per cent on every transaction, flowing automatically into state coffers, would bring in revenue at a level that would allow for the abolition of most income tax and of VAT, a tax the unions oppose on principle.

At a more parochial level, such as e-tolling, the unions also do not merely oppose, but have, along with other groups, put forward a range of alternative means of raising revenue.

“But for us to close the wage gap and stop corruption will require regime change,” says National Council of Trade Unions president, Joseph Maqhekeni. However, he hastens to add that regime change does not mean simply replacing one political party in government with another. “It means changing direction, changing policies and becoming more democratic.”