Chapter 1

A Framework for Labour Market Policy

Objectives and Scope of this Report

1. The Commission's terms of reference, reproduced above, are extremely wide-ranging, covering such diverse and difficult questions as how best to increase both employment and productivity, how to redress discrimination in the labour market, whether and how to implement a national incomes accord, how to address the impact of regional and sectoral decline, and how to regulate the flow of labour from neighbouring countries. Accordingly, our first challenge was to settle on an operational interpretation of our brief that could enable us to do justice to the important questions posed, within the limits of the available time and resources.
2. We understand our task to be the development of a series of policy frameworks ­ first an overarching framework for approaching problems in the functioning of the labour market, and then a series of more focused proposals for dealing with the specific questions posed. Accordingly, we do not claim that all of our proposals are sufficiently detailed to be ready for immediate implementation and action. Rather, our goal was to identify the broad parameters within which the various branches of government ­ and, to a significant extent, of civil society ­ should approach the task of developing detailed programmes for implementation.
3. The terms of reference also instruct the Commission to structure its work in relation to the core objectives of the government, as expressed in its Reconstruction and Development Programme. In summary form these objectives are:
• The eradication of poverty, both through job-creation and through improved remuneration for the working poor, i.e. through more and better jobs;
• The elimination of race and gender-based inequality and discrimination, with the problem of the unequal access to employment being of paramount importance in relation to this Commission.
4. These objectives are fully endorsed by the Commission, which notes that rapid growth in GNP per capita is a crucial condition for their successful attainment. Accordingly the policy proposals developed in this report are directed at supporting economic growth that creates secure, reasonably remunerated employment, the basic conditions of which are subject to statutory protection, including protection against unfair discrimination. Our approach to the labour market is best summed up as one that attempts to extend the coverage of labour market institutions -- particularly institutions of collective bargaining and participatory policy formation -- while simultaneously ensuring their ability to adapt to current global and domestic realities. The attainment of this balance will be reflected in the simultaneous creation of sustainable employment opportunities and the maintenance of acceptable working standards and rates of remuneration.
5. South Africans are not alone in grappling with high levels of unemployment. Few societies have escaped this scourge in recent years, and many of those that have succeeded in maintaining employment levels have done so at the cost of increasing poverty at the lower echelons of the labour force. From its review of the international evidence the Commission has learnt that there are no one-off solutions to our, or any other country's, labour market problems. Furthermore, although there is considerable value in understanding the approaches adopted elsewhere, it is extraordinarily difficult and often inappropriate to simply replicate approaches from other countries. We have rather concluded that solutions to mass unemployment need to be highly time and place specific. Measures that proved successful in the past are not appropriate in the global circumstances that dominate the current period. Furthermore, solutions that may be countenanced by a repressive, hierarchical social order are simply non-starters in a democratic society.
6. South Africa is a society strongly committed to democracy, including industrial democracy, with an economy increasingly exposed to the disciplining effects of international product, capital and, indeed, labour markets. While the increasingly globalised economy demands high levels of adaptability or flexibility on the part of the labour market and its participants, South Africa's commitment to democracy requires that this must be compatible with labour market security, a point stressed in the opening chapter of the ILO Review. This entails protection from arbitrary loss of employment, protection against arbitrary reductions in income, protection against dangerous and unhealthy work practices, and protection against discrimination. This key relationship between labour market security and labour market flexibility is discussed in greater detail below. The ILO also points out that flexibility in the labour market is a multi-dimensional concept, and is not synonymous with deregulation. Thus, to pose the policy options as a choice between two grand alternatives (regulation versus deregulation, or minimum standards versus flexibility) is to greatly oversimplify the matter. Such oversimplifications rarely offer workable solutions.
7. It is the need to balance flexibility with security that justifies the Commission's emphasis on voice regulation of the labour market, namely, the constructive role that bargaining between workers (and their unions) and employers (and their associations) can play in the productivity-enhancing redesign of the work process, in training and skills development, in employment equity planning and in many other aspects of the employment relationship. The ILO argues, and the Commission agrees, that excessively bureaucratic regulation is inimical to flexibility, while an over-reliance on market forces is incompatible with labour market security and may result in increased inequality. Voice regulation provides the best means of charting a course that avoids both of these undesirable outcomes.
8. The focus of the recommendations that follow is on policy instruments that fall directly within the sphere of the labour market. In Chapter 4 we examine the institutional aspects of wage determination and make recommendations on, inter alia, minimum wages and the future roles of the Wage Board and of the bargaining councils. In Chapter 5 we focus on productivity enhancement, which we argue is absolutely central to the objective of raising the standard of living of the majority. Chapters 6 and 7 examine measures to assist the unemployed: Chapter 6 confronts the problem of employment losses due to economic restructuring and recommends that government supports Social Plan initiatives around retrenchments and regional development. Chapter 7 makes recommendations around reforms to the Unemployment Insurance Fund (UIF), and around the management of the Community Based Public Works Programme (CBPWP) and the National Public Works Programme (NPWP). Chapter 8 tackles the question of employment equity, in particular the case for affirmative action as one means by which progress towards an equitable labour market may be encouraged. Chapter 9 presents a framework for regulating cross-border labour mobility, cognisant of the fact that labour markets ­ like capital and product markets ­ cannot be confined within national boundaries.
9. We have not, however, limited ourselves to the realm of labour market policy. Chapters 2 and 3 consider the relationship between macroeconomic and industrial policies on the one hand, and labour market policies and outcomes on the other. These are not strictly speaking within our terms of reference and, accordingly, are not dealt with in the same depth as are labour market policies. However, the interplay between macroeconomic, industrial and labour market policies and outcomes is so crucial that we judged it necessary to enter, albeit briefly, this complex terrain. South Africa is clearly at a decisive economic cross-roads, and a comprehensive analysis of the role of the labour market, one that takes full account of its relation to other areas of economic policy, is needed; this we have tried to provide. The Commission's recommendations in this regard culminate, in Chapter 10, in our advocating for a nationally negotiated Accord for Employment and Growth. Such an Accord represents voice regulation writ large: it is a negotiated means by which the dual requirements of flexibility and security can be accommodated at the macroeconomic level.
10. This daunting list of issues notwithstanding, the Commission is acutely aware of several vital omissions from this Report. For example, we have barely mentioned the AIDS epidemic despite its potentially powerful impact on the labour market. Furthermore, despite its inclusion in our terms of reference, we have not been able to do justice to the complex issue of public sector employment. Nor does our discussion cover the full range of important exogenous influences on the labour market such as housing, transport, urban planning, rural development and land reform.
11. The balance of this introductory chapter is devoted to a more detailed presentation of the economic problems with which the Commission has grappled, and of the interrelation between the various areas of labour market, macroeconomic, and industrial policy that we have addressed.

The Economic Context: Extreme Inequality and High Unemployment

12. South Africa is not a particularly poor country. Its GNP per capita (in 1995) of US$3150 places it squarely in the ranks of the upper-middle-income developing countries. However this aggregate measure disguises an extremely skewed distribution of income. South Africa is, indeed, infamous for having the most unequal distribution of income in the world. The Gini coefficient is a widely accepted measure of inequality, which takes values between 0 and 1, with 0 representing absolute equality in income shares and 1 representing absolute inequality (that is, all income accruing to a single household). South Africa's Gini coefficient of 0.65 compares with a coefficient of 0.61 for Brazil, 0.50 for Mexico and 0.48 for Malaysia (among other middle-income countries) and coefficients of 0.41 or less for the advanced industrialised countries. Our skewed income distribution is also reflected in the fact that the bottom 20% of income earners capture a mere 1.5% of national income, while the wealthiest 10% of households receive fully 50% of national income.
13. South Africa's extremely unequal income distribution accounts for the extremely high incidence of poverty for a country at its level of development: depending on the measure used, between 36 and 53% of South Africans are estimated to live below the poverty line. This explains why, despite South Africa's upper-middle income ranking in terms of per capita GNP, against other key measures of economic and social progress, such as infant mortality, life expectancy and literacy, it is placed in the ranks of low- and lower-middle-income developing countries. South Africa's infant mortality rate, for example, is 52 per 1000 births, which is considerably higher than that of Malaysia and Mexico where rates are 13 and 35.
14. Poverty is overwhelmingly concentrated in the African and coloured population: 95% of the poor are African, and 65% of Africans are poor. Roughly 33% of the coloured population live in poverty, compared to 2.5% for Asians and 0.7% for whites. The racial form that characterises poverty and inequality in South Africa is the product of past discrimination in employment, in related fields like education and training, and indeed in nearly every aspect of social, economic and political life which were all systematically distorted, first by colonialism and then by apartheid. The racial structure of poverty persists both because of current discriminatory practices and because steps taken to redress the legacy of apartheid have thus far been inadequate, but also because of poor economic performance, the negative outcomes of which bear most heavily on the black majority.
15. Mass unemployment is one of the major causes of poverty. Using the official (expanded) definition of unemployment (that is, including those who would accept employment if it were available, but have given up looking for it), a 1993 survey by the South African Labour and Development Research Unit (SALDRU) reported unemployment at 30.1%. The 1994 survey undertaken by Central Statistical Services (CSS), and using a similar measure, reported the total number of unemployed at 4.7 million, yielding an unemployment rate of 32.6%. The absence ­ relative to other developing countries ­ of opportunities for earnings and subsistence from the land, and hence of a rural safety net, underlines the seriousness of mass unemployment. Total African unemployment is approximately 4 million constituting an unemployment rate among Africans of 41%, as compared to 23% for coloureds, 17% for Asians, and 6.4% for whites. Female unemployment is higher than male unemployment for all racial groups. Youth unemployment is particularly high: 64% of the African economically active population between the ages of 16 and 24 (about one million youth) are jobless. This high rate of youth unemployment contributes to a sense of despair amongst the nation's young people and may well encourage some to become involved in criminal and gang activities. African unemployment is also higher in rural areas than in urban areas. Thus an African women aged between 16 and 24 living in a rural area has the highest probability of being unemployed.
16. The ILO Review argues that official statistics, including those statistics quoted above, may significantly overestimate the unemployment rate. The Commission accepts that the official unemployment data may indeed be an overestimate but is unable to reach a definitive view regarding the extent of this overestimation. The ILO Review also argues, with substantial cause, that the official statistics underestimate the extent of employment growth associated with the recent economic upturn. There are indications of net job growth, although often of lower-quality, less permanent or less formalised employment. The implications of these findings must be clearly appreciated. First, they do not mean that unemployment is no longer a serious problem. Even on the most optimistic estimations the Commission believes that reducing unemployment must remain a central objective of socio-economic policy. And no-one disputes that the weight of unemployment falls heavily and disproportionately on black people, women, and the young or that it has a regional dimension. Second, they suggest not only that observers should be less hasty in concluding that we are experiencing "jobless growth", but also that more attention should be paid to examining the quality of jobs created. Third, the findings reinforce our concern that informed policy debate is hampered by a lack of reliable data.
17. While unemployment is an important determinant of poverty, it is by no means the only cause. A recent study argues that 33% of overall income inequality may be traced to distribution of employment and unemployment, while 67% is due to "other factors." In particular, there is a growing awareness that a significant proportion of those actually in employment remain in dire poverty due to extremely low wages in certain key sectors of the economy ­ notably domestic service and agriculture, but also large parts of the services and mining sectors ­ and low returns to most informal sector activities. Amongst female African domestic workers the average real cash wage (in 1990 prices) ranges between R157 in Klerksdorp to R300 per month in the Cape Peninsula. In the informal sector earnings are extremely low: close to 70% of the self-employed were earning, in 1993 rands, less than R500 per month. Other instances of extremely low wages are documented in Chapter 4. Certainly, mass unemployment bears a large measure of responsibility for these low earnings. However, so too do particularly unequal power relations and extremely low levels of productivity in certain sectors contribute to the incidence of poverty in employment. Where power relations are highly unequal, there is a role for public policy in supporting the incomes of disadvantaged workers. Where low earnings reflect very low levels of productivity there may be a role for public policy to support productivity enhancement. These interventions ­ essentially designed to ensure employment of a minimum quality ­ must, if they are not to exacerbate poverty, be compatible with employment creation. Labour market regulations designed to secure minimum wages and employment standards, in a fashion that is sensitive to the need to stimulate employment creation, are dealt with in Chapter 4 of this Report.
18. Race continues to dominate every measure of labour market inequality, including relative wage levels. The average monthly wage in the non-primary sectors, at 1993 prices, for Africans was R1 118 while the figure for whites was R3 063. To the extent that unemployment disproportionately burdens black South Africans, employment creation may increase the overall share of income accruing to this, the majority segment, of the population. On its own, however, it will not change the reality that sees black wage earners (particularly women) clustered in the lowest paying sectors and occupations while their white, usually male, counterparts continue to dominate the choice sectors and occupations. Chapter 8 of this Report contains proposals directed at tackling these inequities. That chapter highlights the importance of providing a systemic response to current discrimination and to the accumulated effects of past discriminatory policies, both within and prior to entry into the labour market. It also emphasises the role of voice regulation of the employment equity process, through the mechanism of the Workplace Forum.

Labour-Absorbing Growth

19. The Commission recognises, as indeed does the government, that the twin objectives of ending poverty and reducing race- and gender-based inequality cannot be achieved by redistribution alone. Strong economic growth is clearly essential. Furthermore, such growth must be strongly labour-absorbing.
20. Current economic performance is not encouraging in this regard. While the validity of the CSS's quarterly employment estimates is open to challenge (as elaborated in the ILO Review) it seems clear that the recent economic recovery has not resulted in the rapid creation of formal-sector employment. Many analysts have attributed this outcome to the inflexibility of current labour market institutions.
21. The Commission argues, however, that deregulating the labour market is not the solution to poor employment growth. Our review of the various contending macroeconomic models of the South African economy suggests that labour market reform alone will not generate the required growth in employment: the labour market cannot bear the full brunt of economic adjustment. Rather, the Commission holds that the success of a labour-absorbing growth strategy rests on three fundamental requirements. First, macroeconomic, industrial and trade policies must promote employment. Second, reforms in the labour market must promote flexibility, where flexibility is understood as a multi-faceted concept that is not merely a euphemism for lower real wages or weakened unions, and that is furthermore consistent with labour market security. This position is defended below, and its practical implications are found throughout this Report. Third, labour-absorbing growth is more likely to occur when labour market policies and outcomes are co-ordinated with macroeconomic policies by means of a national Accord for Employment and Growth involving all of the social partners. The remainder of this chapter outlines each of these requirements in turn.

Macroeconomic and Industrial Policies to Promote Employment

22. Any discussion of macroeconomic policy must be cognisant of the extent to which the rapid globalisation of capital and product markets constrains national economic policy formulation, particularly in relatively small and open economies like South Africa's. The scope for independent fiscal and monetary policies is considerably narrower than in decades past. Industrial policy must also take its cue from the relative openness of global product markets.
23. However, while globalisation constrains domestic policy options, it does not eliminate them. In the process of blunting some traditional policy tools, it encourages the development of others. In particular it sharply focuses attention on increasing efficiency in the utilisation of domestic resources, both labour and capital, as the basis for effective engagement in international markets. Renewed growth will be predicated upon identifying policy instruments capable of underpinning increased efficiency in the use of resources.
24. Therefore, while it is not possible to ignore the impact of open global markets on national policy formulation, this impact should not be exaggerated. Hence in Chapter 2 we identify the key pillars of an employment-stimulating macroeconomic strategy. We strongly endorse the imperative to significantly increase levels of private sector investment in order to underpin employment growth. Investment requires stable economic, industrial and political relations. It also requires steady growth in domestic and international markets. We argue that macroeconomic policy dominated by a single-minded imperative to drive down inflation may backfire by undermining the incentive for domestic investment. Contractionary economic policies are unlikely to lead to employment growth, whatever labour market policies are adopted.
25. In similar vein, Chapter 3 will identify industrial policy instruments that will sustain labour-intensive activities, notwithstanding the limits imposed by the General Agreement on Tariffs and Trade (GATT) on tariff protection. South Africa's erstwhile industrial strategy has rested upon investment subsidies to upstream, generally capital-intensive activities, frequently combined with generous tariff protection. Labour-intensive activities, prejudiced by uncompetitively priced domestic inputs, have relied to an even greater extent upon trade barriers for support. New global arrangements circumscribe the use of tariffs as an instrument of industrial policy, but there are other instruments that may be used to promote employment. Some of the examples discussed in Chapter 3 include the Industrial Development Corporation's various tools of development finance, and support measures for small, medium and micro-enterprises. Thus, the blunting of tariff protection is not cause for eschewing labour-intensive sectors or for placing the entire burden of adjustment on the labour market.
26. South Africa's economic structure, conditioned by inward-oriented industrialisation and highly skewed income distribution, is characterised by its diversity or lack of specialisation. Even where internationally traded goods and services are concerned, South Africa has considerable established capacity across the range of sectors and products. The opening of international markets has already put downward pressure on unskilled wages and will continue to do so. It will also reinforce the shift in the composition of labour demand away from unskilled labour and towards more skilled occupations. These two effects, taken together, may be expected to result in a significant widening in differentials between skilled (including managerial) and unskilled earnings. The alternative would appear to be a rise in unemployment among unskilled workers. This Report outlines a labour market framework which combines flexibility with security through improved voice regulation. It supports the expansion of labour-intensive production as well as measures to enhance productivity growth. This strategy is elaborated in Chapters 3, 4 and 5.
27. Non-tradables are clearly not subject to pressures of equal intensity. However, the imperatives of poverty alleviation (and pressure to lower the price of basic, frequently non-traded, goods and services) coupled with heightened competition in domestic markets will expose even non-tradables to productivity-enhancing and cost-cutting pressures, with predictable consequences for the labour market. The construction sector, where the statutory regulatory system appears to be honoured more in its breach than its enforcement, is a case in point. Clearly, though, in non-tradable sectors there is greater latitude in technology choice and, hence, in capital/labour ratios and relative wages.
28. We endorse a series of measures ­ many of which are already government policy ­ directed at enhancing productivity and international competitiveness in these labour-intensive segments of the South African economy. These include a range of macro-measures in the sphere of, inter alia, trade policy, competition policy and in the allocation of industrial development finance that are all designed to encourage investment in labour-absorbing sectors and processes and thus to improve the allocative efficiency with which South Africa's resources are deployed. They also include a range of micro-economic measures directed at enhancing the productivity of the key factors of production and the efficiency with which they are combined. The value of such measures lies in their ability to promote dynamic efficiency, a point which is also stressed in the ILO Review. The Commission also argues that at the centre of any attempt to increase productivity must be an increased reliance on worker participation, or voice regulation, in the redesign of the work process, in training and skills development and in employment equity planning.
29. We should note that our terms of reference do not cover the large and complex area of training and human resource development (HRD), which is the subject of other policy formulating initiatives within the Departments of Education and Labour, in the National Economic Development and Labour Council (NEDLAC), the National Training Board and in a range of non-governmental institutions. It is, however, a vital component of an industrial strategy that seeks to build sustainable competitive advantage in labour-intensive production. Chapter 3 includes a very brief outline of a human resource development strategy directed at semi-skilled and unskilled operatives.
30. The industrial strategy proposed here does not seek to undermine existing investments in capital-intensive sectors. Indirect employment arising from these investments may be considerable, particularly if they encourage downstream investment. They also have the potential to inject learning and technological dynamism into the economy. Our argument is simply that, given the imperative for rapid employment creation, it is inappropriate to continue providing public support at historical levels for these capital-intensive activities.

Labour Market Reforms

31. As stated above, the aim of the labour market reforms proposed here is to balance the requirements of flexibility with the need for security. The ILO Review identifies various forms and levels of flexibility. A distinction is drawn between employment flexibility (the ability to change employment levels quickly and easily); wage flexibility (rapidly changing absolute and relative wage levels with the possibility of wide wage gaps between sectors and occupations); and work process flexibility (the easy and low-cost alteration of work tasks, times and practices). It is argued that each form of flexibility has its advantages, but each can also be taken too far. For example, if hiring and firing are too easily accomplished (a case of excessive employment flexibility) this may discourage firms and workers from investing in firm-specific, productivity-enhancing skills, and may also lead to short-sighted physical investment decisions by firms.
32. The trajectory of South Africa's industrial strategy must shift from one that has devoted considerable resources to supporting the capital-intensive end of the South African economy, including such industries as mineral beneficiation, paper and pulp, and petrochemicals. The major thrust of policy support and public resources must turn decisively towards those sectors and processes that employ large numbers of relatively unskilled workers and semi-skilled operatives and machinists per rand of fixed investment. We refer here to a range of activities ­ clothing, furniture, construction, tourism, metal fabrication, auto components are some examples ­ all of which are potentially large employers in which South Africa has considerable established capacity.
33. There are forms of flexibility ­ particularly work process flexibility ­ that are often highly valued by workers. However, it is clearly acknowledged that, in general, workers and their representatives associate flexibility with insecurity, and this constitutes the basis of worker and union opposition to flexibility. Again, the Review details different forms of security: labour market security (widespread opportunities for employment); employment security (protection from arbitrary loss of employment); job security (protection against arbitrary transfer between sets of work tasks and loss of job-based rights); work security (health and safety protection in employment); income security (protection against arbitrary reduction in incomes); and representation security (secure capacity to bargain and influence the character and terms of employment).
34. As was argued above, the necessary balance between flexibility and security is best achieved through the mechanism of voice regulation, in particular, by means of bargained arrangements between, strong, stable and well-informed employer and employee representatives. The ILO's position is clearly summarised in the following paragraph:

The competing or conflicting set of concerns for employers and for workers both need to be taken into account, as do those of the more marginalised or vulnerable on each side of the spectrum. They cannot be given their due weight if one party or the other is enfeebled or fragmented. This is ultimately why 'voice' mechanisms, or representative institutions, are required, even though the neo-liberal supply side advocates of flexibility and "de-regulation" regard institutions and regulations as rigidities and the main source of inflexibility. Those sirens of de-regulation are wrong, because unless flexibility is bargained between strong negotiators, opportunism would lead to short-term gains by one side or another ­ usually large-scale, powerful employers ­ that would have long-term adverse consequences for dynamic efficiency.

35. We should emphasise that providing a degree of labour market security is not simply a political imperative in a democratic society; it is also an effective economic strategy. For example, in a society where employers and government demonstrate a commitment to ensuring employment security (protection against arbitrary loss of employment), workers are far more likely to accept a strong degree of work process flexibility, and indeed of wage flexibility as well. The success of many of the rapidly growing East Asian economies was predicated on just this sort of combination of security with flexibility, the one being used to purchase the other. This was not brought about by governments acquiescing to demands for industrial democracy, but rather by their blunt determination to foster economic growth.
36. The concern for the proper balance between security and flexibility runs through each of the chapters of this Report. Chapter 4 presents a proposal for a minimum wage-setting mechanism that aims to extend minimum wage protection to all sectors of the economy, while stressing the need for an incremental approach that is sensitive to the differences between regions and sectors. The chapter also discusses the role of the bargaining councils and the question of the extension of council agreements to non-parties. Here too the Commission's recommendations, while staying within the framework of the Labour Relations Act, involve a move in the direction of flexibility by granting the Minister of Labour more discretion in deciding whether or not to extend council agreements. The Commission also argues that small businesses should be given greater voice in the bargaining councils, and recommends several mechanisms designed to strengthen their participation.
37. To increase productivity both management and labour must be willing to adapt to new forms of workplace organisation. Chapter 5 argues that this flexibility will be best achieved through consultation between the relevant stakeholders. The Workplace Forums should facilitate this discussion at the level of the firm, while the bargaining councils must address the question of productivity at the industry level. The Commission also sees a role for a tripartite campaign around productivity enhancement at the national level.
38. Periods of rapid and deep-seated economic restructuring also demand high levels of flexibility and are associated with high levels of labour-market insecurity. The mode of regulating this structural change is particularly important: overly prescriptive and bureaucratic mechanisms run the risk of freezing the restructuring process, while a reliance on market forces in periods of structural change understandably generates particularly high levels of insecurity and resistance. Regulated participation by the social partners in the process of economic restructuring is vital. This is elaborated in Chapter 6, where proposals for a Social Plan Fund are presented.
39. Chapter 7 proposes reforms to the Unemployment Insurance Fund (UIF) designed to increase the income security of the unemployed by extending UIF coverage to all sectors of the economy. One of the crucial recommendations is the implementation of individual record keeping, which will allow workers to know the extent of contributions on their behalf. This provides a form of voice regulation that will help increase the rate of compliance by employers. The chapter then discusses reforms to the Community Based Public Works Programme designed to ensure that it has a stable financial base and that its effectiveness is more closely monitored. The Commission recommends that local communities be given greater voice in the design of public works programmes through their local government representatives.
40. The advantages of an inclusive and participatory process are further stressed in relation to employment equity programmes, in Chapter 8. Few would argue that market forces alone are sufficient to overcome the consequences of systemic discrimination. On the other hand, the dangers of rigid, prescriptive legal regulation ­ as expressed, for example, in a quota system ­ are also widely appreciated. Our proposal for affirmative action avoids both of these extremes, and emphasises the important role that collective bargaining and participatory workplace structures can play in developing employment equity plans.
41. In Chapter 9 we recommend a thorough overhaul of immigration law that would replace the current patchwork of provisions with a single framework. The Commission argues that access to the South African labour market must still be regulated, but that the long-term goal should be a movement towards open borders. This would be facilitated by regional co-operation around economic development that would narrow the economic gap between South Africa and its neighbours. In the short term, we recommend a series of measures designed to increase the labour market security, and reduce abuses by employers, of non-citizens.
42. The approach to labour market policy outlined above, unlike the strategy of simple deregulation, is entirely consistent with the government's recent decisive reorientation of the domestic environment for labour market policy. The broad objectives of labour market policy evidenced in the government's fundamental orientation in the Constitution and in the RDP have been given institutional structure in the Labour Relations Act (LRA) and in the creation of the National Economic Development and Labour Council (NEDLAC). The new LRA strongly underlines government's support for collective bargaining and provides mechanisms for employee participation in decision making at the factory-floor and the sectoral level. The NEDLAC Act further provides for employer and employee participation in national economic policy formulation.
43. The Commission strongly endorses this approach. The industrial relations system enshrined in the LRA and the approach to policy formulation adopted in the NEDLAC Act further consolidate the democratic transformation led by the government. In this light, the Commission stresses the importance of ensuring that the multipartite institutions allow the less powerful interest groups to have a strong voice in the debate. For NEDLAC this implies that the Development Chamber must be treated as a full partner in all negotiations. For the bargaining councils it implies increasing the participation of small business; for the Wage Board it means keeping the concerns of the unemployed on the agenda. Proposals to achieve these outcomes are made in Chapter 4. Finally, in Chapter 10, we discuss means by which regional social accords may be used to improve the degree of grassroots participation in economic affairs, including around questions of the regional impact of economic restructuring in the economy, with the aim of giving voice to the most marginalised members of our society.

Towards a National Accord for Employment and Growth

44. Consistency of policies is a two-way street. Just as the realisation of our labour market objectives requires a supportive set of macroeconomic and industrial policies, so too must we take account of the impact of labour market dynamics on macroeconomic performance. To identify some of the most important linkages: labour market processes must not intensify inflationary pressures and must not, through upward pressures on unit labour costs, undermine efforts to penetrate global markets, and, indeed, undermine efforts to compete with imports into our domestic market. The proposed national Accord for Employment and Growth, discussed in Chapter 10, is an important means by which the risks of such wage-push inflation may be reduced, and South Africa's competitiveness in world markets may be enhanced.
45. Such an Accord is absolutely critical to South Africa's future. Consistent and complementary macroeconomic, industrial, and labour market policies require a degree of institutionalised co-ordination in order to create greater certainty, and to avoid unnecessary and conflict-based bouts of inflation. It is, in the view of the Commission, the marked lack of co-ordination of these key policy fields that accounts for a certain conservatism and lack of boldness on the part of South African policy makers in each of these areas. Those charged with managing our macroeconomic policy are reluctant to release the brakes for fear that the labour market response will entail a loss of control of the vehicle, and for fear that our industrial engine will not respond positively to renewed demand. Similar uncertainties prevent bold initiatives in the other spheres of economic policy. These fears, though understandable in an uncoordinated environment, effectively dictate that business should be as usual in the conduct of policy and, hence, in economic performance. A national Accord for Employment and Growth is an essential means of taking the South African economy beyond the disappointing prospects of the business-as-usual approach.
46. If a national Accord is to be successful it must be based upon a genuine and wide-ranging agreement between the social partners ­ business, labour and government ­ covering such sensitive issues as wages, prices and investment. The creation of such an Accord, and the increased reliance upon voice regulation in all aspects of the labour market, pose a challenge of major proportions to all involved. It will clearly challenge the organisational and leadership capacities of the unions and will necessitate that they review some long-held and hard-fought positions. In the immediate past, the commitment of the unions to the unemployed was manifest in their active participation in challenging and overthrowing a political system that offered no hope whatever for the marginalised. In the democratic era the unions will be called upon, through their participation in national economic policy formulation and collective bargaining, to demonstrate a commitment to employment creation. It is the Commission's view that the unions have as vital a role to play in the economic transformation of the society as they did in its political transformation.
47. Employer associations and other business organisations will also be challenged. Like the trade union movement, they must become more inclusive (especially of small business), and better equipped to overcome the problems which bedevil these alliances of competitors. By creating incentives for firms to act in concert, the government can help business play a meaningful role in social accord processes.
48. The Commission's Report contains a series of recommendations which, taken together, will contribute to employment creation, improved wages and conditions of work, increased productivity and international competitiveness, an improved, better-financed and more equitable social safety net which will include better provisions for the victims of economic restructuring, and a reduction in labour-market discrimination and inequality. However, the success of any of the elements of this package will depend upon government's ability to expedite their implementation in a fashion that enjoys the full co-operation of all the social partners. Conflictual economic relations offer no hope for South Africa's future.
49. Accordingly, our overarching and urgent recommendation is that the President convene a Jobs Summit of the all of the social partners as the first step in the building of a national Accord for Employment and Growth. Unemployment is undeniably a national crisis. However, we are convinced that concerted effort and sacrifice on the part of all the key economic actors is capable of ending the tragedy of destitution in the midst of plenty.