Strikes and their economic consequences

Jacki Condon, MD of Apache Security Services, asks if strike action improves labour relations, drives worker safety and encourages productivity, or discourages economic development?

After conducting research on the impact of strikes on the South African economy, the Mandela Initiative came to several conclusions. One of these was that the right to strike is made up of a delicate balance between the power of firms and the rights of employees, and is considered a sign of a healthy democracy.

The Mandela Initiative is a university-led national endeavour in partnership with the Nelson Mandela Foundation. Through research, workshops and public dialogue with a diverse range of stakeholders, it investigates key strategies to overcome South Africa’s development challenges.

Something to celebrate
Analysis of the report shows that a lack of labour legislation in the early 1990s caused workers to turn to strike action as a bargaining tool. Since then strike frequency and the number of unionised employees has decreased.

According to labour expert Suleyman Alley, there are seven key causes of labour unrest: health hazards in the workplace; excessive working hours; low wages; demand for leave with pay; discrimination; inadequate working tools; and aggressive behaviour of managers towards employees.

Between 1998 and 2008, South Africa’s strike intensity was similar to Denmark, Australia and Iceland; debunking myths that the country has an abnormal level of strike action. That said, when workers do strike, they do so more intensely.

Economic impact of strikes
Whilst there are potential benefits from strikes, such as better work morale, lower absenteeism, or improved labour productivity, strike action also brings about numerous direct and indirect economic costs that can be high, depending on duration, number of workers involved and divisions affected, the Initiative reported.

Strikes and labour unrest have marked negative impacts on the employees themselves, the employers and their stakeholders, the government, consumers, and the economy.

Furthermore, the negative effects on international trade include the hinderance of economic development and creating great economic uncertainty – especially as the global media continues to share details, images and videos of violence, damage to property and ferocious clashes between strikers and security.

Protecting workers and business
There are more immediate consequences to consider than loss of income. As socio-economic issues continue to affect South Africans across the board, tensions are constantly rising. Businesses must protect themselves, their assets, business property, and their non-striking employees from violence and intimidation.

Strikes do have the capacity to negatively impact on the economy. While security is necessary, the aim should be reducing the likelihood of strikes by supporting protection of workers.