A recent spat between Business Leadership SA and labour unions over the 6% wage increase that Transnet workers are getting is a nice case study of how far apart we are in terms of the trade-offs that have to be made for faster economic growth.

In a weekly newsletter Busisiwe Mavuso wrote the unions used government as an ATM and held the economy ransom with threats of strikes. This happens while private sector companies need to reduce staff to be able to keep going. Unions like Untu and Cosatu hit back, calling it a shocking attack on workers. They basically argue that it is not their fault that State-owned Enterprises like Transnet is in the state that it is in.

It is true that unions are not solely to blame for the state of the SOEs, but it is also true that wage increases have been far above productivity increases for a long time.

This also speaks to the much bigger problem of the government wage bill.

It also says something about why job creation in the private sector is limited. When the labour market regime favours workers’ rights  making it more difficult to fire, it also makes it more difficult to get hired. Imagine how difficult it would be to get a date if every date required marriage (and maybe a costly divorce later). In the same way, it’s more difficult to find a job when every job requires a long-term (and above-inflation-wage-increase) commitment from the employer.