SECTORAL COLLECTIVE BARGAINING, PRODUCTIVITY AND COMPETITIVENESS: SOUTH AFRICA S CLOTHING INDUSTRY BETWEEN A ROCK AND A HARD PLACE

Transcription

1 SECTORAL COLLECTIVE BARGAINING, PRODUCTIVITY AND COMPETITIVENESS: SOUTH AFRICA S CLOTHING INDUSTRY BETWEEN A ROCK AND A HARD PLACE Shane Godfrey University of Cape Town with Trenton Elsey and Michelle Taal Labour Research Service

2 Wage setting: Continuity 1924 and 1925 statutes established voluntary sectoral bargaining framework (industrial councils) and administrative wage setting for sectors where bargaining not taking place African workers excluded from sectoral collective bargaining but covered by agreements and administrative wage determinations In the exclusion of African workers is dropped and by mid- 1980s trade unions representing African workers move onto industrial councils Major impact on system: aggressive bargaining and focus on pushing up wages for low skilled workers Post-1994 political transition, new statutes but significant continuity in system of voluntary sectoral bargaining and administrative wage setting for sectors

3 Trade and industrial policy: Change Import substituting industrialisation promoted from the 1920s From 1970 slow shift to greater export orientation but not a lot of progress Uruguay GATT round in 1994/5 sees outgoing government and incoming ANC government agree to significant tariff reductions Supply side assistance to clothing and textile sectors is not forthcoming Little or no benefit from AGOA for clothing manufacturers and other bilateral trade agreements have either not benefitted or disadvantaged SA industry (ie SACU and SADC Free Trade Protocol) Support programmes for clothing firms come on-stream only in about 2010 only accessible by firms compliant with labour laws.

4 Clothing employment: Between a rock and a hard place Industrial council wages rise through more aggressive bargaining from 1990 Market share of domestic manufacturers declines from late 1990s as cheap imported clothing enters SA, particularly from China Formal employment declines from 1996 and then steeply downwards from 2004 Loss of employment not absolute process of informalisation sees shift from formal to informal employment Informal employment rises slowly from about 1986, then more sharply from 1992 to 2002, before declining slightly through to 2010 In 2000s there is also a huge increase in non-compliance by formal firms

5 Productivity: What does it measure? 200 Labour productivity, actual earnings and unit labour costs: (2005 = 100) Labour productivity Actual earnings Unit labour costs

6 Problems with productivity as a measure Managers an ex ante goal for improving competitiveness; but productivity is only one of a range of measures related to competitiveness Productivity has limited role in improving position in a domestic value chain dominated by retailer Retail mark-up on clothing about 100% but excluded from clothing sector unit labour cost calculation Trade liberalisation sets up competition based on low wages higher productivity might off-set some difference but unlikely to maintain competitiveness

7 Linking productivity and wages: Sector level initiatives Memo of Understanding on absenteeism Provision for a twilight shift Establishment of skills and productivity institute for sector still not done? 2008 framework for workplace productivity agreements 0.5% of weekly wage; only a couple of firms and eventually stopped 2011/12 scheme - new employees paid 70% (Metro) or 80% (non- Metro), contingent on 15% employment increase caused resentment and stopped In about 2013 scheme for new employees to be paid 80% plus more pay up to 100% if achieve targets contingent on national framework agreement being reached this did not happen

8 Linking productivity and wages at the workplace level: Three case studies of compliant Cape Town firms All 3 firms retained or created jobs while improving performance (incl. productivity) although gains not big All 3 firms are full package manufactures that work closely with a major retailer All 3 firms competing on range of factors as well as price The BC schemes had no relevance first scheme played marginal role at one firm but all three largely management initiatives Successful incentive schemes require management capacity and capability All 3 firms participate in Cape Town Clothing Cluster

9 Linking productivity and wages at the workplace level: Two case studies of non-compliant Newcastle firms Most firms in Newcastle are CMTs Most firms appear to be non-compliant or exploiting confusion around phased-in wage compliance Work for major retailers but deal with intermediaries (design houses or suppliers ) Competition based almost entirely on price Workers viewed as a cost rather than a resource Very limited management capacity, hence piecework seen as the panacea to low efficiency (and influenced by own experience in China)

10 A new approach for collective bargaining? Workplace and sectoral bargaining seeks to balance collective power of workers with employer for share of value added But in a buyer-driven value chain the power resides with the retailer or brand merchandiser and value accrues disproportionately to retailer SA retail sector highly concentrated with range of global, regional and local sourcing options, whereas few clothing manufacturers have penetrated export markets Major clothing retailers average profit is 28% whereas clothing manufacture at about 3% Retailers must be brought to the clothing sector bargaining table in one way or another