Job destruction in Newcastle: minimum wage-setting and low-wage employment in the South African clothing industry

Abstract

From its establishment in 2002, the National Bargaining Council for the Clothing Manufacturing Industry (NBC) was used by the South African Clothing and Textile Workers Union (SACTWU) and mostly Cape Town-based employers to raise wages in lower-wage areas, including Newcastle. Rising minimum wages were agreed in the NBC, and then extended countrywide by the Minister of Labour. In Newcastle (and elsewhere), major firms shut down, whilst others failed to comply fully with the repeatedly raised minimum wages and levies imposed by the NBC. In 2010, the NBC launched a new ‘compliance drive’, using the labour courts to put pressure on, and close down, non-compliant firms, threatening at least 20,000 jobs. The NBC also agreed further wage increases, and presented these to the Minister of Labour for extension countrywide. Newcastle employers responded by taking legal action against the Minister of Labour and the NBC. The struggle over minimum wages in areas like Newcastle is of broader importance because the non-compliant firms comprised the labour-intensive rump of the last remaining labour-intensive manufacturing sector in South Africa. The Newcastle crisis reveals starkly the tensions between labour market policies and institutions and employment. The Newcastle case shows how, under the guise of promoting ‘decent work’ for workers and the supposed levelling of the playing field for producers, an unholy coalition of a trade union, some employers and the state initiated and drove a process of structural adjustment that undermined labour-intensive employment and exported South African jobs to lower-wage countries such as Lesotho and China.