Our politically correct price-fixing cartels – Politicsweb, 9 May 2016

By John Kane-Berman 

The struggle against bargaining councils will continue

Even though the Free Market Foundation (FMF) has lost its case against the compulsory extension of bargaining council agreements to "non-parties", this is unlikely to be the end of the matter.

As Judge John Murphy said in the Gauteng Division of the High Court in Pretoria last week, the "persistently high level of unemployment and its attendant negative social consequences" are the "most intractable social and economic problem" facing South Africa.

While dismissing as "wholly wrong" the FMF's arguments that the absence of adequate state or judicial control rendered the "legislative scheme" for extending agreements unconstitutional, he pointed out that there might be even better remedies under the Promotion of Administrative Justice Act. The extraordinary powers that bargaining councils enjoy are also being challenged by the National Employers Association of South Africa in the metal and engineering sector.

With two other judges concurring, Judge Murphy made no order of costs against the FMF, which must have come as a great relief to that organisation as it faced 52 respondents represented by half a dozen senior counsel, along with eight juniors, plus firms of attorneys  representing the minister of labour, bargaining councils, and trade unions. "There should be no quibble with [the FMF's] activism on behalf of small business and the unemployed," he said. "Many will argue that as a society we need to think outside the box and cannot simply continue with business as usual."

Here goes. Although the FMF narrowed its case to questioning the manner in which bargaining council agreements were extended by the minister to "non-parties", the power to extend them should actually be removed altogether. Agreements, in other words, should bind only those who sign them.

Even though the court decided that the extension procedure was constitutional, this does not alter the fact that it is coercive and undemocratic. And even though the court found that the procedures for seeking exemption from agreements were satisfactory, this does not alter the argument that nobody should have to seek exemption from an agreement to which they are not party in the first place.

Employers and unions - or even non-unionised workers - in all sectors should be free to conclude whatever wage and other agreements they like without the interference of third parties, whether in the form of other unions and employers, bargaining councils, or the minister. The Constitution should indeed be amended to cater for this by including two additional rights.

The first would protect the right to seek and obtain lawful employment by private voluntary contract without the interference of these third parties. The second would protect the right to earn a living. These two amendments would bring about a better balance of rights in the Constitution.

At present it tilts too far in favour of the collective rights of unions, employer organisations, and bargaining councils, while failing to protect the rights of individuals to operate outside the framework of these structures. In line with this, the Labour Relations Act, which establishes the bargaining council system, promotes the interests of the organised majority against minorities and indeed against individuals.

It is of course argued, as the court pointed out, that the extension system benefits workers who do not have collective bargaining strength and who therefore cannot negotiate wages and terms of employment. But this overlooks the fact that it confers most benefits on those who already possess bargaining strength and who then use it to protect themselves against those without it.

They do this by imposing minimum wages at higher levels than small business in particular can afford. In practice bargaining councils function as price-fixing cartels, the price being that of labour. Like all cartels, they seek to eliminate competition. This is illegal in many other fields. So too should it be in industrial relations.     

* John Kane-Berman is a policy fellow at the South African Institute of Race Relations, a think-tank promoting political and economic freedom.

Read the column on Politicsweb here.