Economic theory predicts that strict labour laws lead to higher unemployment, all things being equal.
When it came to assigning overall rank, 15 states were ranked ‘Good’, 20 ‘Fair’ and 15 ‘Poor’. I calculated the average employment growth in each group over the five-year period from 2009 to 2014: As a measure of the strictness of a country’s labour law, I used the points allocation of the Economic Freedom of the World Index of the Fraser Institute for hiring and firing laws, and collective bargaining, the two areas that are cited far and away by most South African employers as hampering productivity, efficiency and job creation.
Thirdly, ostensibly pro-poor government intervention in the form of spending, can do more harm than good, either disincentivising entrepreneurship or enabling enforcement of regulations that stifle entrepreneurship and job creation. One obvious potential stumbling block is poor education. South Africa’s education system is one of the worst in the world, even by African standards.There are no readily available statistics of labour law spending in Africa. But welfare spending should be a fair indication of its relative importance in a country’s budget. If that is so, it would explain why some countries like Zimbabwe – with strict black-letter labour law – nevertheless have low unemployment.