Trade Union Budget Proposals and their Economic Growth and Inclusion Prospects

Earlier this year Finance Minister, Pravin Gordhan, presented the 2014 Budget Speech in parliament. The purpose of the budget speech is to outline the year’s fiscal policy; how the government plans to obtain its funds and how it plans to spend them. More importantly, however, is how the 2014 fiscal policy will affect economic growth and inclusion in South Africa. While Gordhan has, in the context of his speech, made it clear how the policies are intended to work towards growth various trade unions have disagreed and offered their proposals in response.

This essay will aim to compare and analyse the plans of government (as per the budget speech) in conjunction with the proposals put forward by trade unions. An evaluation will be done in terms of the affordability and possible outcomes of each proposal. Both the budget speech and the responses by trade unions provided substantial plans and counter-suggestions, this paper will focus on just three; the issue of government planning to offer tax relief to lower income earners while trade unions propose an introduction of various taxes, and the highly contested issue of a youth wage subsidy. Each topic will also make reference to possible bias that trade unions may have and why they may argue strongly for some policies and against others. Given the political nature of trade unions and fiscal policy, coupled with 2014 being an election year, various political issues are unavoidable and will too be discussed.

Defining economic inclusion and economic growth will be central to this discussion. Economic inclusion is present, as per the European Bank for Reconstruction and Development (n.d), when “broad access to economic opportunities” exists. This implies that all citizens of South Africa regardless of class, gender and educational level are able to access job opportunities and other economic activities. Economic growth is simply a real increase of a nation’s income over a period of time (Blanchard, 2011). In this paper economic growth will commonly be expressed as a growth in GDP, aggregate output or consumption.

The budget speech and trade unions in Context

On the political front, critics of the 2014 budget speech argued it was “muted” and, given that 2014 is an election year, was simply being used as a vehicle of voter appeasement (!!!). These allegations are interesting as they offer perspective on the framing of the budget speech and the choice of policies presented. Fiscal policy is traditionally used to combat financial problems but it is worth considering that this year the budget speech placed importance on making consumers and businesses happy as a tool to garner votes.