Battle lines drawn in this 21st Century jobs debacle
A couple of weeks ago I said government’s “five million jobs by 2020” plan was dead in the water. This week I’ll go a step further. The government’s “five million jobs by 2020” plan will do irreparable damage to the country. Minister of Economic Developme
Why do I say this? Because instead of creating jobs, this “jobs creation” policy is going to chase the productive sector of the economy offshore. (I reckon many professionals clicked through to “how to emigrate” websites this week!) Government’s new growth plan calls for “moderate wage settlements” for workers earning between R3 000 and R20 000 a month and “inflation-level” increases for those earning over R20 000 a month. The plan also calls for pay and bonuses for senior managers and executives earning more than R550 000 per year to be capped. Over time the gap between the lowest and highest paid worker will decrease, but the gap between the employed and unemployed, and the staggering number of jobless, will remain as huge as ever...
A kick in the nuts for middle and upper income earners
Spend some time on the message boards of the country’s most popular news and information websites and you’ll soon discover how the middle and upper income earners feel about government meddling with their salaries. This reader comment, posted on Fin24, is typical of their reaction: “Bring it on Patel and I’ll be packing my bags and heading elsewhere! You forget that due to government’s inefficiency we’re paying additional amounts for services that should be covered by our taxes. Sort your own internal corruption out first, fix our infrastructure and then let’s talk again…”
What about business? They still haven’t got it... I’m not sure whether it’s because big business makes too much money from government, or whether too many so-called business organisations have been infiltrated by politically affiliated individuals – but they seem incapable of drawing a line in the sand and telling government not to step over it. All the South African Chamber of Commerce and Industry (Sacci) could muster was a “caution” against the proposal to cap wage and salary increases. Sacci president, Chose Choeu, said they would only support voluntary implementation of such restraints. It’s a bit like saying to an armed attacker: “Oh please sir – please don’t hurt me!” I’ve said it before and I’ll say it again… It’s time for business to step up and remind government of their respective roles. Business creates jobs – government creates the environment for business to do so!
What’s wrong with a salary cap?
Government cannot meddle with private sector remuneration without serious consequences. The inevitable result of capping salaries will be a further loss of essential skills. Talent goes where the money is, and each individual in a capitalist society wants to maximise their earnings. The level of the “cap” is largely irrelevant… Skilled banking sector professionals, for example, are leaving London for Switzerland and Singapore in their droves following proposals to cap their bonuses post-financial crisis. Another reader with the handle Nasdaq7 observes: “The reality is that government is failing to reach its objectives, the most important being to retain skills. People won’t stand for this. Professional people will take their assets out of the country!”
The plan also ignores the contribution by wealthy individuals to both government coffers and the economy. High salary earners pay over large chunks of their income to the state, typically employ domestic help and gardeners and fuel domestic economic growth through their consumption activities. Another “average Joe” explains: “If I earn more – I spend more, thus stimulating the economy. I am able to employ people to clean my house, manage my garden, service my car, look after my children and maintain my home. If you cap my income, who benefits? If a company is profitable – where will that profit go if not distributed amongst the performers?”
This policy demands another layer of unnecessary red tape. The next thing you know there’ll be a call for salary control legislation requiring another taxpayer funded institution with hundreds of political appointments to police it. Another Fin24 reader opines: “The only way to control this would be for more government bureaucracy – imagine having to get clearance from the government every time you change your job – with Patel’s plan this is inevitable.”
Feeding from two troughs
Are these policies socialist? You bet they are… But what government doesn’t tell us is the “Top Pigs” feed at the trough regardless of economic system. You need only look at the billionaire businessman stepping out of Russia when communism imploded there. David, another Fin24 reader, summarises the situation perfectly: “Capitalism is based on greed. If you retain the exploitative nature of large-scale capitalism, but throw away the opportunities for personal advancement, then you are left with the worst of capitalism and the worst of communism. Well done to the South African government for proposing that we live in the worst of both worlds.”
But I tire of lambasting government policy. The words to close today’s rant are borrowed, once again, from a concerned citizen. He writes: “This is such a bad idea – not only in terms of affecting those who earn well – but in terms of trashing the entire economy!
Editor’s thoughts: I’ll confess to being really concerned by what I’ve heard about Patel’s plans. I don’t think companies will hire more people as their salary bills reduce… They’ll simply make more profits. The only tangible consequence of Patel’s plan will be poorer productivity – because the incentive to produce will be withdrawn. Should we be focusing on eradicating wage inequality or creating jobs? Add your comment below, or send it to gareth@fanews.co.za
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