Strike season: Workers should expect tougher negotiations when business is bad

Mike Browne of Seed Investments writes that South Africa is currently in the middle of the annual strike season. Every year employees, lead by their unions, attempt to ‘negotiate’ better wages with their employers.

Strikes occur when a deal can’t get agreed upon. This isn’t something that’s new, and in my opinion this year’s striking hasn’t been materially better or worse than previous years. South Africans should also be aware that striking (and the associated violence) isn’t unique to our land. While the associated violence is to be strongly condemned, the act of striking under a ‘no work, no pay’ principle is part of any employee’s rights.

Striking is also typically associated with developing (or third world) countries, and while this is true in general as a result of lower standards of living, poorer education, and higher poverty levels in these countries, highly developed first world countries, with socialist leanings, also experience their share of strikes. Paris, for instance, was full of strikers (particularly in the public transport sector) right as the Rugby World Cup was coming to a conclusion, making it really difficult for spectators to get to their matches. Greece has also seen its fair share of strikes (and riots) this year.

In years where the economy and company profits are growing strongly, there is perhaps less resistance to workers’ demands with companies and government able to pay up to keep up productivity. When these institutions are under strain and workers are demanding significantly above inflation wage increases (without improved productivity) the workers can expect tougher negotiations.

Locally, the latest public sector ‘negotiations’ have been grabbing the headlines recently. The union demands are for a wage hike that’s more than double current inflation, as well as a doubling of their housing allowance. At the moment the government are offering a 7% wage increase and a 40% increase in their housing allowance. Time will tell where the parties eventually agree.

There are undoubtedly pro’s and con’s of the striking process. Taking advantage of an uneducated labour force can’t be condoned, but at the same time unrealistic demands and expectations (fuelled by the unions) isn’t right either. In a country with a massive unemployment problem there is also the question of whether we should be targeting higher employment levels at a lower wage per employee, or lower employment at a higher wage per employee?

It is unrealistic, especially in tough economic times, to expect employment and wage levels to grow strongly at the same time.