Wrong to strike with the right to—Proposing a regulatory shift in the bus labour market

PODCAST: Bus Strike on Moving Values

Bus operators may or may not be eligible for subsidies and do receive significant public sector support through taxes circulated directly or indirectly in the travel market. The indirect support may emerge through infrastructure, industrial incentives and service priority (i.e. bus lanes, stops, scholar transport and traffic light priority). While it is prudent to ask do minibus taxis subsidise the state?” as Dr Mathetha Mokonayama does; or advocate for dedicated busways for minibus taxis” as Reginald Kgwedi does. It is also important to consider the complexities of reform and the various avenues and cases we in South Africa, can learn from as noted in a VREF report “the case for investing in paratransit: strategies for regulation” by Gail Jennings and Prof Roger Behrens. As a result of an artificial policy that segregated blacks from the major activity centers South African cities are engulfed in long travel distances and low densities, while enduring significantly long congestion times. Not only are many of the bus services in SA stuck in traffic too, they operate without dedicated lanes or priority treatments in cities and towns. This is for an average commuter significantly costly in terms of travel time and when there is a strike, or a delay in services this travel time may multiply. At the same time, it is simplistic to neglect the fact that many bus drivers do not own cars, and need to commute to get to work just like the commuters they serve making the burden of standing up for a decent wage and working environment an even harder decision for unions to take and drivers to act upon.

Compound effect of history, costs and inconvenience

The bus industry in SA is built around a policy on coverage—capturing the broadest area possible, but not necessarily patronage—the number of people carried per-seat-kilometer. While buses only account for a small share of the traveling population, their unit costs can not be covered by the current service design. These systems do not make financial profit and are supported by public subsidies, while they should make real-profit as they offer an essential service of access and mobility. The battle for a 12% (last year SATAWU accepted a 9% increase) across-the-board increase is on the backdrop of unit costs for companies increasing at a combined rate between the 1% increase in Value Added Tax (VAT) and the increases in the fuel levy and Road Accident Fund levy. At the same time, bus drivers who are at some point or another also commuters, endure the same increases in cost of living as most South Africans are. More so, the current changes in cost of living do not reflect the changes in cost increases across the value chain, which may be lagged between 5 to 18 months or longer depending on specific sector’s exposure to cost changes. Such exposure for a distance sensitive industry implies higher unit costs and margins that may be too tight to retain the workforce without increasing prices[1] or requiring greater government subsidies. The difficulties faced today reflect the hardpressing need for changes in public transport investment thinking and the broad responses required between companies, unions and government especially with regard to how decisions in the political economy impact on commuters and the long term attractiveness of public passenger transport.

Table 1: SATAWU Wage Agreement in 2017

Item 2017 2018
Across-the-board wage increase (backdated to April 2017) 9% (12% was the target) 12%is the target
Overtime Rate 1.5 of normal hourly rate Unknown
Allowances Increased by 10% including travel, subsistence, night-shift and cross border Unknown
Dual Driver Allowance R 400 per month Unknown
*shop floor agreements are superseded by this agreement

“Unions are seeking a 12% across-the-board increase while employers are only offering 7.5%. However, money is not the only issue at stake. Labour was clear from the beginning that these talks were aimed at transforming the industry for the better.”—Zanele Sabela, SATAWU, 2017

Bus drivers are people too

The dominant narrative around the bus strike and its recurring nature revolves around the complexities related to working hours, rest and driver switching and how this is coordinated. Not only does this suggest that the industry bus driver scheduling models may not account for and reflect deeper moral attributes, but it also reflects the general cost of overheads for bus companies to provide needs which unions believe are basic. Bus strikes seem to transcend the average wage, and creep into a quality of working environment for drivers, and a workforce productivity issue for employers. On one hand the quality of the working environment influences the overhead costs per-square meter and productive hour (by shift type) for bus companies, on the other hand these add value to drivers potentially reducing fatigue, improving health and resilience. Workforce productivity is an essential part of the bus scheduling problem in terms of appointing an optimal number of drivers (and other supporting staff like bus attendants), to drive buses at certain scheduled hours for a vast array of trips and shift types (i.e. long-distance) while reducing potential fatigue, managing stops and other performance risks to the business.

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Figure 1: Driver and Company Interface

Drivers take time to travel to work, which employers may not consider as working time. While working hours, are subject to motivation and environmental factors, they are essentially observed in terms of the unit return on investment per psk—pressure questions for how many people need to be employed. Resting periods are aimed at reducing fatigue, which in a business sense reduce the risk of controllable attributes of accidents (preventative behaviour) but require suitable facilities.

In one study I observed that bus operators in Atamelang Bus services in Mahikeng, there are decent facilities for recreation, resting and a driver training programme to attract drivers from minibus and trucking industries. Salaries for drivers in this sector may seem low, as many of them also include medical aid, and pension fund facilities built into the package. The problem is not to be oversimplified as an immediate wage issue, as the market is complex and reflects numerous other issues to improve. At the same time, commuters are bearing the current costs of bus protests and this is influencing latent (underlying) preferences toward bus use while exposing, really, the deep cracks in public passenger transport regulation and commuter protection.

A potentially costly but probably fruitful approach is long-term asset based approaches to labour regulation in the public transport context. An approach that buffers laborers against tax-bracket lags. Labour productivity in SA is known to be low compared to the unit cost of labour. In the March 2018 Quarterly Bulletin from the South African Reserve Bank, labour productivity trends show a decline in labour productivity and an increase in the unit cost of labour (in nominal terms). They report that “nominal wage growth per worker acceleraed at all tiers of he public sector in the third quater of 2017, except in the public transport, storage and communication services sector” (pg. 27) which is an alarming note. While the average wage settlement has been 7.6% in 2017, increasing from 7.5 in 2016 as mentioned in the Bulletin. This places pressure on companies to consolidate efforts to not only ensuring high returns from the unit cost of labour, but also buffer against negotiation risks on a broader scale. A political economic question should be to ask why wage increases in the pubic sector have not filtered down to essential services such as public transport, while increasing nominally between 2015 and 2017—rifting far from percentage changes in the private sector (especially when real wages were increasing). Clearly this puts pressure on public sector intervention, and calls for even harder questions around the need to effectively develop profitable public transport services that do not depend on government subsidies—the patronage is there (i.e. minibus taxis flourish and leverage on market dynamics with low labour costs and poor unit outputs).

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Figure 2: Formal non-agricultural remuneration per worker

There are a number of technical aspects related to valuating the cost of this bus strike to operators and commuters alike. However, viewed perhaps within the context of this case a feasible approach to redressing the unit cost of such events in the political economy requires a complex structural shift in labour regulation. More specifically navigating through labour costs in such a way that they reflect cost certainty in the bus market; and this is reflected in the long term subsidy allocations.

Longer term evidence based wage reform

Efficient operations require optimal operational schedules and should be complemented by investments in working environment quality and systems. Simultaneously offering commuter security and service quality and consistency guarantees through service quality based performance contracts. This is fundamentally to restore both confidence and mature patronage to prevent strikes and enable long-term viability of public passenger transport in SA.

My structural preliminary recommendation is an economic recommendation that should halt negotiations for a period of five years between new increases. This approach is not subject o political volatility, and could enable more consolidated efforts to improve the quality of life of bus drivers so that they perform their services in a dignified manner. I have excluded a number of other aspects to this approach and colleagues, readers will have to wait for an actual article on this subject to better articulate the empirical fundamentals of this approach. Never the less, it is conceptually presented in Figure 3.

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Figure 3: Structural Approach to Wage Reform in Passenger Transport

If a fixed long-term increase is put on the table, it should be high and leveraged through a liability framework that is interest free, and can be allocated to growth funds or paid directly to employees. The nominal salary will be a cost-pushing burden on operating companies, and will increase the subsidy bill. At the same time, it may improve the quality of operations and force innovation and driver management solutions within the 5 year space. Someone has to fit the bill for this welfare based solution.

Firstly, it is expected that bus drivers be protected from the tax-bracket creep or lag that may take place over time as wages increase. Secondly, there is a long-term wage target which is a once-off percentage increase to a certain nominal figure effective for a period of five years. Thirdly, there is a short-term rate which is usually negotiated from the employer’s side in terms of their budget or cost containment options. However, the future value of money is subject to inflation, and a fixed increase will be worth less in five years than it was initially (i.e. R 7000 in 2013, is now R 8 980, a R 1 980 increase). The extent to which money is devalued over time is subject to inflation volatility and other exogenous factors, as such one’s real salary may decline rapidly or slowly to below the short term rate increase. The short-term rate probably reflects a middle point between the worst and the best case scenario for real-income (and real-costs for the business). Now, in order to ensure a an appropriate market evaluation, my suggestion is that a Cost of Living Audit in the public passenger transport sector (or any labour sector) be performed in much greater detail than before. This should inform the wage review which should begin at least 18months before the date at which the new wage will take effect—and no strike action is permitted until the year in which the change should take effect. This should allow unions and councils to debate and review, research and assess while a Single Transport Economic Regulator, and the National Department of Transport and Labour monitor this process in detail.

Dignity, morality and the welfare decision

Companies may ask how they could possibly afford a fixed increase, while productivity may lag behind as drivers could afford more than what they used in the short term and feel that they earn less in the long term. As there tends to be an inverse relationship between labour productivity and wages for some sectors due to an increase in leisure time. However, for the public transport sector, a sector of dignity and customer orientation failing to adhere to strict operational norms monitored and managed effectively should not be taken lightly. Public transport companies in SA do need to operate more efficiently and this requires a change in diligence and managerial cultures to enforce punctuality, reliability and high quality on and off-duty behaviour.  These reforms are much deeper than cost allocation changes, and modifying financial performance. The bus strike should not be an annual event for unions to appear relevant; nor should it be an opportunity for companies to sell short in the face of increasing costs; nor should it be an opportunity for bus users to suffer so intensely.

A moral question, or a welfare question: are bus unions right for striking and holding commuters hostage? No. The strike is the wrong action, and could have been prevented. Yes. The strike is an inefficient choice, but it helps with getting heard. The unfortunate narrative behind strikes in SA is that the difference between a protest and a demonstration has not been established. Unions may long to demonstrate to bus companies and commuters how important their services are; or protest against malpractice and poor performance, if not unfair treatment. At some point we must differentiate between self-destructive protests and effective demonstrations—this applies for all negotiating stakeholders in general. The Sunday Times this past Sunday had a piece wherein the author encouraged us to consider the moral side of the decisions we take, and not be overwhelmed by the commercial attributes motivating structural behaviour today. If public transport use is already a burden for a number of commuters, why should it be allowed to get even worse? Protests, demonstrations or strikes in the public transport space should be the last resort preceded by 18 months of rigorous negotiations.

[1] This is not plausible due to the nature of commuters targeted by these services.Creative Commons License

 

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