371. This chapter explores two major labour market programmes designed to support unemployed people. These are the Unemployment Insurance Fund (UIF) and the Public Works Programme. The Commission makes specific recommendations as to how both programmes could be made more effective. We begin by pointing out the extent to which the unemployed currently rely upon other household members and upon informal sector activities.
372. The UIF is a contributory social insurance fund designed to deal with frictional unemployment. As such it has little impact on the most serious aspect of unemployment ­ long-term unemployment. Many of the unemployed have been without work for several years and have become discouraged from searching further. Other workers, above a certain age, who lose their jobs find employers unwilling to hire them. And young workers find it difficult to get employment, especially first-time employment. The UIF does not deal with the central aspect of the unemployment problem, nor should it try to do so. Public works programmes, dealt with later in this chapter, are only a partial solution to the problem.
373. There is therefore a need to investigate whether a general income transfer to the unemployed is sustainable and affordable in South Africa. The Commission spent some time examining the concept of a basic income grant in South Africa. We looked at the advantages and disadvantages of making a modest monthly transfer from the fiscus to all citizens. The social and labour-market advantages could clearly be substantial. It would, for example, increase household income in poor households and could moderate wage pressure and enhance labour mobility. But the potential difficulties, not least the expense, which a programme of this nature would involve, are daunting. However, there may be advantage in considering the gradual introduction of such a scheme, beginning with younger workers, and integrating it with other social transfers and the ongoing process of welfare reforms. The magnitude of the basic income issue (or similar scheme), and the fact that our terms of reference did not specifically direct us to it, led the Commission to put the matter to one side.
374. However there is no doubt that unemployment is a major problem requiring major solutions. All the economic policies and proposals from government, employers, unions and international institutions stress, correctly, the need to create jobs. All, even on their most optimistic assumptions, expect unemployment levels to remain extreme for years to come. The Commission recommends that the Department of Labour, in conjunction with the Department of Social Welfare and the Department of Finance, assess the possibility of a new and substantial scheme aimed at alleviating the poverty associated with unemployment. This should include an investigation of the basic income notion (in both general and incremental form) as well as more traditional "dole" systems.

Household Support for the Unemployed

375. Income support for unemployed people in South Africa is limited and sparse. Those who contributed to the UIF when employed are able to draw benefits for up to 26 weeks. Those who have never been employed, or were never contributors to the UIF, are forced to rely on other sources of income support. These include working in the so-called "informal sector" and relying on the generosity of employed relatives or those receiving state transfers such as pensions.
376. According to the SALDRU survey of October 1993, 53% of unemployed people live in households with no wage-income earners. This indicates the importance of state transfers and informal activities in supporting unemployed people. While wage income is clearly also an important source of support for the unemployed living in households with one or more wage earner, it is far from sufficient, as 54% of such households live below the poverty line. This figure rises to 76% in rural areas.
377. Income transfers (pensions, disability grants, etc.) are also an important source of income support. However, according to the SALDRU data, 63% of the unemployed live in households with no recipients of an income transfer. Furthermore, of those who live in households with such recipients, a mere 21% are above the poverty line. This falls to 15% in rural areas. While it cannot be doubted that the old age pensions system and other associated welfare provisions have second-round welfare effects upon other household members, it is just as clear that such programmes cannot adequately support the entire pool of the unemployed.
378. Thus, it is debatable whether state transfers, wage income or income generated from informal activity by other household members should be regarded as a "social safety net" of some kind. Such household income certainly provides a measure of support for unemployed household members, but one can conclude very little about the dynamics of redistribution within households. While employment creation must form the heart of any strategy designed to alleviate poverty, higher wages and more generous transfer payments ­ insofar as these are feasible ­ would also reduce poverty, provided higher wages do not lead to a counter-productive decrease in employment.

Unemployment Insurance

379. The Unemployment Insurance Fund (UIF) is designed to deal with frictional or short-term unemployment. It does not provide income security for the long-term unemployed, or for the many unemployed non-contributors. The ILO Review cites estimates that less than 12% of the unemployed are supported by UIF benefits. Nevertheless, the system does provide some income security to those contributors at risk of short-term unemployment.
380. Eligible workers and their employers currently each pay one percent of the wage to the UIF. Benefits (set at a replacement rate of 45% of the last wage received) are paid to unemployed contributors. One week's benefit is paid for every 6 weeks worked up to a maximum of 26 weeks' benefit. As indicated in the ILO Review, the replacement rate and the maximum period of benefit payments are low by international standards. Given the minimal support provided by the UIF, it is most unlikely that the receipt of UIF benefits discourages job search on the part of unemployed beneficiaries in South Africa.
381. Although coverage has improved in recent years, the selective and arbitrary character of the UIF system has persisted. Workers still excluded from contributing to or receiving benefits from the UIF include those earning above R69 420, contract workers, piece workers, casual workers working less than eight hours a week, domestic workers and employees in central government. The Commission recommends that consideration be given to extending UIF eligibility to the entire workforce. This however would require a restructuring of the UIF, in particular a move towards individual-based record keeping, as suggested below.
382. Unemployment insurance in South Africa has had a chequered history, with coverage and benefit entitlements altering in line with racial policies and changing perceptions of the role of the UIF (see the ILO Review). Very low paid workers were excluded from the system, and officials of the Department of Labour were entitled to deny benefits to unemployed contributors if they failed to take up what officials deemed to be "suitable" employment. This was particularly harsh for lower income groups. In this way, workfare-type provisions allowed for the manipulation of the number, class and racial composition of beneficiaries.
383. Revisions to the UIF system from the late 1970s onwards both extended coverage (notably to lower paid workers, gold and coal miners, and most recently, to agricultural workers) and moved away from workfare. According to UIF statistics, approximately 6.3 million workers are now contributing. These figures, however, are suspect because official statistics suggest that only 5 million workers are eligible. While it is likely that employment is underestimated by official statistics (see the ILO Review on this issue), this probably does not account for the discrepancy. The problem appears to lie primarily in the way in which the UIF operates and generates statistics.
384. At present, employers deduct one percent from the wages of all eligible workers and supplement the total with an equivalent amount. The total is then paid over to the UIF as a lump sum. The UIF has no reliable record of either the number of contributors, or of the amount each individual has paid into the Fund. When a contributor becomes unemployed, he or she has to take their record card (kept by the employer) to the Department of Labour in order to show how long they have been contributing to the UIF. This system is inadequate and open to abuse. It contributes to the serious allegations of fraud which must be addressed urgently.
385. The Commission recommends a thorough overhaul of the UIF system. The UIF should keep individual records of paid-in contributions by employees. Employers should be required to state the name of each contributor, the wage, and the amount of the contribution to the UIF. By giving workers access to their individual records, checks can be made on employers suspected of paying in too little to the UIF. Improving such voice regulation ought to improve the financial position of the UIF.
386. As stated above, the Commission supports the widening of UIF coverage to as many workers as possible. The experience internationally is that most UI schemes do not cover workers in sectors that employ seasonal workers or where coverage would be very difficult or very costly to administer. However, the Commission is of the opinion that through revising the way in which the UIF is administered greater coverage will become possible. In this spirit, the Commission recommends that consideration be given to making the UIF available to domestic workers and their employers as part of an attempt to formalise employment relationships and increase security for the more than 874 000 regular and casual employees in this sector.
387. As regards workers in short-term employment (and in Public Works Programmes), it is important to note that workers need to contribute to the UIF for 3 years if they are to draw the full 26 weeks benefit. In other words, the level of contributions of workers in short-term employment is unlikely to be significant enough to warrant inclusion in the UIF system. Nevertheless, there is no intrinsic reason why such workers should not be eligible to become contributors to the UIF.
388. Apart from unemployment benefits (which account for 80% of total benefits paid), the UIF provides benefits to the dependants of deceased contributors, as well as illness, maternity and adoption benefits to contributors (all payable up to 26 weeks). The Commission recommends that these benefits be retained.
389. There is a view that the receipt of unemployment benefits should be made conditional on beneficiaries taking part in training programmes, or being obliged to be available to take specific jobs or places on public works programmes. The Commission rejects the movement towards workfare implicit in such proposals. The abuse of such workfare provisions by Department of Labour officials in the past points to the dangers of arbitrary and ill-informed direction and ad hoc denial of benefits. The UIF is a system of short-term income compensation for being unemployed ­ not an instrument for training and job allocation ­ and should remain as such.
390. The Commission strongly supports the provision of labour market information to UIF beneficiaries. Informing beneficiaries about possible jobs and relevant training programmes should be an important function of the Department of Labour. However, under no circumstances should beneficiaries be denied benefits if they refuse to undertake training or accept jobs selected for them by the Department of Labour. They should be encouraged to register with the placement services of the Department, but should not be required to do so.
391. The finances of the UIF have been in a dismal state for many years. Contributions by workers and employers were reduced in the 1950s and from then onwards the UIF suffered chronic deficits which were mostly covered by a government contribution of 25%. In 1977, a ceiling of R7 million a year was placed on the state's contribution. This contribution, which declined in real terms and is now low by international standards, squeezed the Fund to such an extent that, despite the rise in contributions by workers and employers from 0,5% of the wage bill in 1984 to one percent in 1993, the government had to bail out the fund in an ad hoc manner on numerous occasions. For instance, the 1995/6 budget allocated R268 million to the UIF as additional support.
392. The reasons for the UIF's poor financial state are many and complex and have been the subject of the Auditor General's Report. Possible fraud has already been mentioned. Aside from this, it appears that the major reason for the financial deterioration between the mid 1960s to the mid 1970s was the admission of large numbers of low-paid workers to the Fund. However, real contributions have recovered over the past ten years and now the problem appears to be related to the increase in the number of benefit recipients per 100 contributors (see the ILO Review).
393. In short, the UIF has expanded in a non-viable way. It has a growing number of low income contributors with a high risk of unemployment, while the relative number of those with a low risk of unemployment has dwindled, and those earning high incomes (with the lowest probability of unemployment and lowest income insecurity) are excluded altogether.
394. This situation is undesirable and unsustainable. The Commission recommends that urgent attention be given to restructuring the UIF. In particular, the Commission recommends that the exclusion from UIF of those earning over R69 420 be removed as soon as possible. By increasing the number of high-paid contributors (with lower risks of becoming unemployed) the UIF will become more solvent and will facilitate a greater degree of redistribution. Consideration should also be given to providing a minimum benefit to low paid workers and a maximum benefit to very high-paid employees.
395. Other ways of improving the viability of the UIF include investigating allegations of fraud in pay-out points and reorganising personnel requirements in such a manner that they reduce overstaffing at the Regional Centres and Labour Centres while increasing the complement of inspectors. A further measure is one already initiated by the Fund. This involved gaining the co-operation of the Compensation Commissioner in tracing defaulting contributors in the Pretoria area. This pooling of resources generated a net income of approximately R1.5 million. This is a clear justification for the state pursuing this strategy in the rest of the country. The Commission also heard arguments that automatic teller machines could be used to dispense UIF benefits in a cost effective and convenient fashion.
396. In the longer term, there may be a case for linking all the institutions associated with the provision of benefits into one information-gathering data base. In this manner, it will be possible for UIF evaders be traced through their contribution to other employee benefits. For example, if an employer were a pension contributor, but not an UI contributor, a data base of this sort would very easily uncover this form of non-payment. The Commission believes it would be desirable if all statutory workplace deductions ­ such as UIF, Workers' Compensation and council levies ­ were listed on one form and effected with one transfer. A one-stop system of this sort would improve monitoring, be administratively simpler for employers, and encourage compliance.
397. A further set of recommendations relates to the declaration of income tax returns. Current legislation prevents any individual or institution, private or public, from gaining access to this information. This raises the possibility that unscrupulous employers might be overstating their wage bill where applicable tax deductions exist, and understating this bill in reporting to the UIF. Access to the income tax returns of all registered businesses could simultaneously enable the UIF to detect such under-reporting and the Department of Revenue to uncover those who over-declare for tax purposes. However, this measure may be unnecessary once the UIF system is revised to create individual records of contributors as suggested earlier.
398. Litigation procedures currently impose scant fines on firms who fail to make their Unemployment Insurance contributions. In addition the costs on the Fund of taking an employer to court are unduly high. Given the fact that these legal procedures are intended to benefit the destitute and the needy, it is the Commission's recommendation that the costs and penalties associated with non-payment of Unemployment Insurance should be reconsidered, with a view to making the Fund's role in provision of adequate benefits easier.
399. The final recommendation regards the investment of the UIF's contributions. Currently, according to the Unemployment Insurance Act, funds may only be invested through the Public Investment Corporation. It is the Commission's view that consideration be given to allowing some of the UIF's financial assets to be invested in the open market by private sector fund managers. This raises the likelihood of greater returns for the Fund.

Public Works Programmes

400. Over the decade prior to the 1994 elections there were a number of public employment programmes in South Africa. The Special Employment Creation Programmes (SECP) ran between 1983 and 1992, and spent approximately R1 billion while creating an estimated 114 million person-days of work during this time. This equates to roughly R2 200 per full time equivalent employee (although these figures are not in constant-valued rand). The Strategic Oil Funds (SOF) projects spent a billion rand between 1990 and 1993 on employment creation projects that created 60 346 jobs. More recently, the former National Economic Forum (NEF) was requested by the government to design and execute a job creation programme. By 30 June 1995, a total of 561 projects with a value of R229 million had been approved. This history also represents something of a learning curve. Assessments of early programmes revealed them to be poorly organised, short-lived, uncoordinated and too narrowly focused on instantaneous job creation. By 1993, the NEF programme sought to set itself up as a model public works programme which would aim to create short-term employment, enhance skills acquisition and training and produce quality infrastructure with the capacity to release further private sector investment and build community capacity to participate in development.
401. The current initiative to assist the unemployed has two components. The first is the National Public Works Programme (NPWP) which is an enabling framework that regulates the terms under which public contracts are granted, including the question of wage rates. It does not actually fund any employment programmes, but it is the mechanism through which the numbers employed via public sector contracts can be increased. The second component is the Community Based Public Works Programme (CBPWP), launched as a Presidential Lead Project within the National Public Works Programme (NPWP). A grant of R250 million was allocated from the RDP Fund to finance the CBPWP through the end of the 1996 fiscal year. All projects have been scheduled to finish within this time period, and as yet there is no guarantee of funding beyond this period. Well over half of this funding has been allocated to provincial governments with the poorer provinces being specifically targeted. The remaining funds have been allocated variously to the Independent Development Trust (IDT), the National Sugar Association, and other non-governmental organisations (NGOs).
402. Provincial projects have required a considerable degree of prior community and provincial capacity building. Despite employment targets of 30 000 jobs during 1995/6 and 68 000 during 1996/7, these provincial programmes have taken a long time to get going and most projects have only recently started. As a consequence there is no monitoring and evaluation information yet available. This lagging of a Presidential Lead Project is widely seen to be a problem. It would seem that the IDT, an NGO with a vast experience of working with communities, has been more successful. Using the same procedure as the provinces in terms of costing and implementing projects, the IDT had allocated its full budget by January of 1996. A recent analysis of these projects estimates that they have created 28 158 jobs which, using published dependency rates, could be said to have a broader impact on some 108 000 people. If it is assumed that all prongs of the CBPWP will eventually produce the same results, an upper-bound estimate of the employment creation resulting from the CBPWP would be 100 564 jobs.
403. There remain numerous problems and obstacles in assuring the effectiveness of the CBPWP in creating productive employment. Firstly the Commission is concerned about evidence that the programmes instituted are not giving sufficient attention to the need for skills upgrading and training. The latter is vital if the CBPWP is to serve as a springboard for more sustainable employment in the long run. Second, explicit recognition needs to be given to the fact that such short-term employment must lead to the development of needed infrastructure. This, however, is only viable if opportunities beyond the initial project are addressed in advance ­ with a focus on assistance regarding possible career pathing informed by industry and development plans. An excellent example was developed in the electrical working field, where electrification job creation schemes funded through the RDP were augmented by follow-up training and structured work experience with house wiring and appliance installation, leading ultimately, after a training programme, to a self-sustaining skill in appliance repair accredited by the relevant training board. Other sectoral training boards need to be challenged to develop similar learning pathways which can be "grown" after the completion of job creation schemes, and the necessary funding is put in place.
404. A crucial facet of any public works programme is the method of remuneration. The CBPWP has opted for a task-based wage on their various projects. International evidence from Kenya's Rural Access Road Programme, for example, reveals that this form of payment together with the piece-work wage has been very effective. However, the task-based payment systems, although promising positive productivity gains, are open to abuse by employers or project managers. Managers may constantly re-evaluate what is to be considered a gain in productivity. In addition, these remunerative packages will, in their initial stages at least, require intensive supervision to minimise dishonesty. Furthermore, unions believe that workers may "exploit themselves", wanting to complete more tasks per day in order to increase their wage. It is vital that proponents of the CBPWP be mindful of these drawbacks, and institute the necessary checks and balances in order to prevent abuse of the task-based wage.
405. Intricately linked to the issue of remuneration is that of targeting the most needy in the CBPWP. The wage in these projects is determined through negotiation between the project leader and the community's project committee, and is written into the contract. Data on average wages paid on CBPWP projects is not available, but by all accounts average wages are quite low. Submissions to the Commission suggested that these range from R7 to R10 per day, climbing to about R25 per day. As many have pointed out, this has the advantage of both spreading limited funds more widely and of acting as a screening device: only the most needy will be willing to work for such wages. There remain problems though in the CBPWP's targeting mechanism. For example, very few women and youth have been working on the projects that have been launched. This is particularly true of the projects in Kwazulu/Natal. Targeting of the most needy is notoriously difficult, if only because these groups are very often difficult to reach given poor channels of communication and inadequate access to labour market information flows.
406. The notion within the CBPWP that its operation should be decentralised is supported by the Commission. However, the partial decentralisation of activities to the provincial level has yielded problems. The poor records of provincial governments in allocating their CBPWP funds are grounds for concern. Local authority elections have now made it possible, if further funding is forthcoming, to ensure that legitimate local-level institutions enact and oversee the CBPWP. A flattened hierarchy of this sort would generate greater community participation which, in turn, would seem to be the only way of ensuring that public works initiatives are assimilated into community development plans.
407. The CBPWP lacks formal, built-in evaluation and monitoring mechanisms. It is crucial that such procedures are integral to any programme from the earliest proposals through to ongoing monitoring of the project during its life and concluding with post-project evaluation. Such evaluations serve as invaluable early warning systems and also aid in decisions about future short-term job creation schemes that the state may want to undertake.
408. The current funding to the CBPWP, through tranches from the RDP Fund, is temporary and is subject to a review process. The temporary nature of the funding hinders appropriate planning for existing programmes and new projects under the auspices of the CBPWP. This instability has also contributed to poor performance and high turnover rates amongst staff members. In an oral submission to the Commission, officials of the CBPWP have argued that the insecurity of funding has not allowed them to learn from past mistakes to ensure that, with the second round of funding, these errors may be avoided and the programme implemented more effectively.
409. The Commission supports the provision of further financial support to the CBPWP at current modest levels and recommends that the CBPWP be directly funded as a line item in the budget of the Department of Public Works for a four-year period. In this way continuity in funding can occur and will be symbolic of a medium-term, but conditional, commitment to the CBPWP. This will also allow the CBPWP to offer the NGOs more stable funding which will in turn enable them to commit resources to managing and implementing employment programmes. This is essential if the programme is to have a significant impact on employment.
410. A full assessment of the programme should be undertaken at the end of each year of the four-year funding period. If the programmes can be shown to be performing efficiently, consideration should be given to increasing the level of funding before the end of the four year period.
411. Given the severity of South Africa's unemployment problem, the Commission would have wished to support a stronger recommendation that the scale of the CBPWP be increased significantly. However, the Commission cannot recommend an increased commitment to the CBPWP until credible monitoring and evaluation information from the CBPWP convincingly shows that the CBPWP is creating jobs and skills by delivering infrastructure through processes that are both community-driven and cost-effective. There are a number of difficult trade-offs between these goals and between equity objectives and efficiency objectives. The medium-term assessment will look for clear evidence that an appropriate balance has been struck. The Commission's support for stable funding at the current level allows the CBPWP to make its own case. To the extent that it is becomes a valued participant in community development initiatives, the CBPWP will also be in a position to leverage its own additional funding through partnerships with the private sector for local infrastructural development.
412. International evidence has shown that well-managed public works programmes can indeed create significant amounts of employment for the poorest members of society, at extremely low cost, and in so doing generate productive infrastructure and prevent environmental deterioration. An example of a particularly successful rural programme, which has been running since 1979, is the Employment Guarantee Scheme of the Maharashtra state government of India. This scheme has employed an average of half a million people at any given time from 1975 to 1989, with as much as 79% of project expenses being devoted to wages, not overheads, and with 90% of recipients being below the poverty line. The scheme has improved water supplies, built roads, planted trees for environmental reclamation and improved soil conservation.

The National Public Works Programme

413. As part of the RDP, there has been consistent discussion of the need to reorient the way that government ministries perform their tasks. A major part of this reorientation concerns a commitment to employment creation without compromising on quality of service or speed of delivery. However, restructuring is difficult especially in the context of severe budget cuts and delivery pressures. Thus, the focus on employment creation within government is not generalised but is predominantly concentrated on construction activities within the line ministries. The construction sector is viewed by many as an important engine of any employment-creation strategy, and the Commission endorses this emphasis. However, a shift in construction techniques in the direction of greater labour intensity will not be possible without a significant restructuring of the industry. With this in mind, we turn our attention to the National Public Works Programme (NPWP).
414. The NPWP is medium- to long-term in nature. The aim here is, broadly, to encourage and advocate, through the Department of Public Works, the use of labour-intensive methods of production in the provision of infrastructure by the public sector, and by those tendering for public sector contracts. Ancillary goals of the NPWP include the acquisition of skills on the job, intensive community participation, the creation of necessary assets and finally the promotion of involvement of small-scale black contractors in the provision of infrastructure. Given the nature of the NPWP, its focus is essentially sectoral. More specifically the programme intends to use the leverage that the government has with the private sector to intervene in various ways in the construction industry and also to intervene in the construction activities of all line ministries.
415. Recent trends in construction include a move toward more flexible methods of production, particularly that of labour-only subcontracting (LOSC) which enables firms to avoid the costs of providing benefits and other regulations. The movement to LOSC has generated a series of problems such as a decline in training. Although the increase in LOSC has shifted employment towards SMMEs, the majority of which are black-owned, it comes at the expense of training, health and safety and minimum-wage protections. Recent pressure from the industry on the Department of Labour to pay for the training of subcontracted employees is effectively a request to transfer responsibility for training investment from the private to the public purse. The Commission debated the proposition that the private sector should be required to contribute towards skilling the subcontractors they engage. Some were concerned that this may halt the work to sub-contractors, while others feared that if no such contribution is required, the informalisation of the labour market may be accelerated. The Commission resolved to support the proposal in respect of all publicly funded contracts and to recommend an investigation in respect of private contracts.
416. Construction, as is well known, is a feast or famine industry that experiences regular booms and downward cycles, with large fluctuations in the level of employment. Faced with an industry of this character, the Department of Public Works is attempting to put in place what it terms an "enabling environment". This environment involves a set of inter-related policies, including the proper planning of public sector infrastructure projects, to ensure that the construction industry has a more predictable demand for its services over a long period, the encouragement of the use of black-owned small, medium and microenterprises in the allocation of contracts, and the facilitation of closer working relationships between big construction companies, construction workers, SMMEs and more casual work seekers in this sector.
417. It is clear that such a strategy hinges on the participation of the suppliers of the product, particularly those few who dominate the industry. Without the guarantee of a steady demand for infrastructure, such firms are unlikely to be persuaded by a strategy that serves to alter the manner in which business has been done for scores of years.
418. The second crucial segment of the Department's advocacy strategy, is to serve as the co-ordinating ministry for all infrastructural provision undertaken by the various other ministries. Currently, departments such as Water Affairs and Forestry, Transport, and Health are involved in infrastructure projects, the majority of which do not involve the Department of Public Works. The attempt of the latter then, is to begin a process of drawing in all the relevant ministries into its strategy. This would ensure the reorientation of public sector investment and, as a corollary, assist in the transformation of the construction industry.
419. An important aspect of co-ordination should be the provision of technical support to the relevant line ministries. The major focus of the technical support is directed at middle management involved at the coalface of the numerous projects. A large number of civil engineers, quantity surveyors, architects and other civil servants in public sector construction are not adequately trained in labour-based methods of production. The Department intends to assist in the provision of this training to all the affected civil servants in all the relevant departments. Operationalising this support is crucial to infrastructural provision that views employment creation as a key objective. Indeed international evidence indicates that numerous projects have failed because the pre-project groundwork was hastily overlooked.
420. There is clearly some tension that needs to be resolved for the co-ordination with line ministries to be successful. Various ministries are, correctly, intent on delivery in a timely manner. This objective is often seen to stand in contrast to more labour-intensive methods of production which are assumed to be more cumbersome and difficult to implement. A further contradiction lies in the quality of the product and its cost. Labour-intensive production may at times yield a poorer quality product, and may also be more costly. Ministries, working within tight budgetary constraints and expectant communities, are therefore likely to be sceptical of this method of production. A view often expressed by firms in the construction sector and even some of the ministries is that the practical aspects of labour-intensive construction need to be considered carefully by the Department of Public Works before projects can be managed in this manner. However this form of construction has been attempted elsewhere, and a wealth of experience exists in the area. The Department must make this knowledge more accessible. But this should be complemented by a more concerted effort by suppliers to adopt this approach.
421. Government's attempt to foster this enabling environment is partially reflected in the recently developed Framework Agreement for Labour-Intensive Construction. The agreement is an attempt to reach a compromise between unions and employers regarding appropriate wages, benefits and minimum standards for workers on large-scale Public Works Programmes. While some agreement has been reached, it is not clear that all issues have been resolved.
422. Because they are labour-intensive, it may be necessary for wages on these projects to be lower than those prevailing on more capital-intensive projects. To this end the Department of Public Works has proposed that a Labour Order be drawn up, in consultation with the relevant parties. The Labour Order would set a floor with guidelines. It has been agreed that wages in the NPWP would be a certain percentage of those paid in the relevant formal sector labour market. However, the suggestion that task-based payments be instituted has generated resistance. As discussed above, these task-based payment systems are compulsory on the predominantly rural CBPWP projects. However, they are much more difficult to implement and even to justify in established urban labour markets.
423. The advocacy strategy of the Department of Public Works also has to incorporate a sense of developing a wider system of linkages in the provision of infrastructure. This would involve including all relevant interest groups in the process of delivery. There should be efficient co-operation within government and between government, trade unions and the private sector. In this sense, the NPWP should be viewed as a mechanism for creating social consensus on the issue of employment generation in the construction industry. More specifically this consensus could be achieved through the medium of a sectoral accord. The parties to the accord would include government, the private construction firms and the unions representing construction workers. Sufficient representation from smaller firms must be ensured, while government representation would be dominated by those departments involved in the delivery of public infrastructure. This process has already begun within the ambit of the Framework Agreement. In an accord process, though, government would bring to the table the promise of a steady flow of public sector construction projects. Unions may concede greater flexibility in the method and level of remuneration, in return for greater and more secure employment. They could be offered a more stable industrial relations environment where the use of labour brokers and casual labour would be curtailed. The private sector would, in return for a definite flow of public projects, offer to undertake labour-intensive construction methods and take over facilitation of industry accredited training. The Commission therefore recommends that the reorientation of the construction industry would be best achieved through the medium of an industrial level accord that seeks sufficient consensus amongst the three interested parties at a regional level, with the primary attractors being jobs and employment security for trade unions and more stable levels of demand for the firms involved.

Employment Subsidies

424. The Commission recommends that a task force within the Department of Labour should be convened to consider the pros and cons of employment subsidies. Issues to be resolved include, at a minimum: an assessment of the international evidence; better forecasts of cost per job created as compared to other programmes; the advantages and disadvantages of various subsidisation techniques; the optimal (and feasible) source of financing; and the consistency of this strategy with other economic policies.

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