Job Destruction in the South African Clothing Industry How an Alliance of Organised Labour, the State and Some Firms is Undermining Labour-Intensive Growth
"Successive government plans emphasise the need for job creation in South Africa, yet industrial and labour market policies are biased against labour-intensive growth. Nowhere is this more evident than in the clothing industry, where employment has collapsed in the face of rising wage costs and intensifying international competition. South Africa’s most labour-intensive firms, which produce basic clothes for the mass market in direct competition with China and other low-wage countries, have survived by relocating to lower-wage regions and/or paying below the legal minimum wage. Some firms have relocated production to Lesotho, where minimum wages are substantially lower. The existence of the rump of labour-intensive manufacturing in South Africa is now threatened by a ‘compliance drive’ launched by the National Bargaining Council for the Clothing Manufacturing Industry (NBC)in 2010. Firms that do not pay the minimum wage are pursued through the courts and eventually forced out of business. We estimate that about 16 700 jobs are directly under threat, with further job losses possible in other firms in the areas concerned. This has serious implications for labour-intensive growth as clothing is South Africa’s most labour-intensive industrial sector, and the lowwage firms targeted by the NBC are its most labour-intensive."
"The paper starts with an overview of South Africa's job crisis. It then moves on to consider whether the country's economic policies are conducive to labour-demanding growth. In so doing, it examines trade policies, labour market policies and macroeconomic strategies, considering their consistency, and whether they are conducive to sustainable job creation. Part 2 shows that increased exposure to international competition is undermining the labour intensive manufacturing sector. Part 3 looks critically at wage-setting institutions. The final section discusses tensions and areas of conflict between the government's macroeconomic strategy and its labour market policies."