Experts Poke Holes in Claim of Labour-Broking Cataclysm

Several critics have contested the validity of the claim made by University of Cape Town professor Haroon Bhorat that a majority of workers employed by labour brokers lost their jobs when the law was amended in April to restrict temporary contracts.

The amendment to Section 198 of the Labour Relations Act made provision for employees of labour brokers to be deemed permanent workers of the end client after three months. The amendment was highly contested: organised labour wanted labour brokers banned entirely while business opposed the new restrictions, saying they would reduce the flexibility of employers to hire labour only for periods when needed.

On the basis of a survey undertaken by industry association the Confederation of Associations in the Private Employment Sector (Capes), Prof Bhorat says after the change a small number of employees — one in five — were taken on by the end client and got permanent jobs. However, half had their employment terminated. The remainder were unaffected or given new contracts. He argues that while the survey is similar to "an impact study", it is "strongly indicative" of a trend of large-scale job destruction. But social policy researcher Debbie Budlender, who like Prof Bhorat has done extensive work on labour brokers, says the survey used by Prof Bhorat — which comes from an online request by Capes to its members — does not pass the test for avoiding selection bias.

"The request for information will clearly result in a "self-selected" sample, that is, those who have not been affected will not be interested and not bother to send in information," she says. Ms Budlender also criticises the survey for not being specific enough about the time frame over which jobs were lost or the reasons. As temporary employment contracts by their nature are temporary, it should be expected that a continual process of ending contracts occurs. However, the survey did not provide a basis for comparison with other periods.

While Prof Bhorat does not claim that the survey demonstrates an economy-wide effect as it shows only how the firms that responded reacted to the change, he argues that it is nonetheless a good indicator. He rejects the claim that the Capes survey would result in selection bias. "Whoever was able to respond, did respond. Secondly, we do say in our paper that we need to do a pre-and post-analysis of the period to assess the longer-run impact.

He has also been criticised by the director-general of the Department of Labour, Thobile Lamati, and top labour lawyer and government adviser Paul Benjamin. Mr Benjamin is critical of the validity of the survey sample and some of the conclusions drawn. For instance, the survey shows that the metal and engineering sector was among the worst affected by the change. This is unlikely, says Mr Benjamin, as the bargaining council in the sector has always regulated labour brokers tightly. "This implies that the change could be due to other factors," he says.

Mr Lamati questions the survey size. It covered 6,900 employees, while research undertaken for the International Labour Organisation (ILO) in 2013 found the annual number of workers recruited and placed by labour brokers was 1.3-million. Ms Budlender, who worked on the ILO research project, also takes issue with the second leg of Prof Bhorat’s paper, in which he uses Statistics SA’s Quarterly Labour Force Survey (QLFS) figures for the second quarters of this year and last to show a large number of job losses in the temporary employment sector.

In the ILO paper, Ms Budlender criticises Prof Bhorat’s use of the QLFS to glean information about temporary contract workers, which she argues is not possible as the categories in the survey are not an accurate enough proxy.

Prof Bhorat, who has written extensively on temporary employment services, disputes this and argues that sub-coding in the QLFS provides accurate data. On this basis, his paper argues that in the immediate aftermath of the amendment, there was a 60-fold increase in job losses in the temporary employment sector compared to the same period a year earlier.

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