• Why is it More Important to Save Unskilled Jobs
  • October 22, 2012
  • Law Firm: Norton Rose Canada LLP - Montreal Office
  • The recent Walmart/Massmart merger raised questions about the competition authorities’ role in preserving jobs at the merging firms and at their suppliers, and about conditions of employment. In this and other mergers, a prime concern has been to protect the jobs of unskilled workers. When deciding whether a merger can be justified, the Competition Commission or Competition Tribunal must, in addition to determining whether the merger will substantially prevent or lessen competition, assess the merger in relation to four public interest factors, namely the effect of the merger on -

    a. a particular industrial sector or region;
    b. employment;
    c. the ability of small businesses, or firms controlled or owned by historically disadvantaged persons, to become competitive; and
    d. the ability of national industries to compete in international markets.

    Regarding employment, the Act uses one word - employment. There is no further direction in the Act which suggests that the authorities must consider the effect of a merger on certain types of jobs differently to others. But the competition authorities have consistently taken it upon themselves to treat the loss of unskilled jobs more sympathetically than the loss of skilled jobs.

    For example in its 2005 decision on Harmony/Goldfields the Tribunal said of the anticipated 1 000 retrenchments “We take some comfort from the fact that the merger-specific retrenchments to which our condition refers will implicate only those categories of employees best equipped to secure alternative employment [...] We are then content to limit the merger specific retrenchments to 1 000 and to require that they all be drawn from the ranks of management and supervisory staff. It seems to be common cause that these are employees that are able to find new employment in the event of retrenchment because they have marketable skills.”

    The Tribunal expressed similar sentiments about the 373 retrenchments of mainly skilled employees in the Investec/Fedsure merger in 2001. And in the Tiger/Bromor merger in 2006, the Tribunal said about the 60 likely retrenchments: “However, we are advised that this would not affect unskilled employees. It is only the semiskilled and skilled employees (i.e., non-manufacturing employees) who would be affected by post-merger redundancies.”

    In the Tiger Brands/Ashton Canning merger in 2005, the Tribunal stipulated a re-training fund of R2m for the employees affected by retrenchments, mostly seasonal workers. Again, the assistance expressly excluded management-level employees.

    In the 2009 merger between Nedbank and Imperial Bank, 464 job losses were anticipated, and the Commission stated that of the permanent employees affected, most were skilled, qualified people with many years of experience, who would be able to find work elsewhere.

    Moratoriums on retrenchments for a year or more may also apply only to unskilled workers who will lose their jobs, but not to skilled workers, as happened in the Metropolitan/Momentum merger of 2010. The Tribunal stated: “We have excluded senior employees from the moratorium on retrenchments as these employees are most likely to obtain new employment and hence there is a less compelling public interest to protect them.”

    There has been no outcry about the differential concern for unskilled vis-à-vis skilled, senior, or more experienced workers, and it is not difficult to see why - the merging parties have no incentive to complain that they are being let off in respect of retrenching skilled workers, and skilled workers are less likely to be represented by unions that would protest on their behalf.

    But is the Tribunal right not to worry about skilled, senior or experienced employees who face retrenchment? Perhaps economics can provide some answers.

    As the Commission and Tribunal have consistently argued, skilled employees might find alternative jobs faster than unskilled workers. Or, they might not: workers with specific skills may be confined to a particular sector in their search for new jobs. The merger itself means there is one less employer in the sector, and if the sector is in decline or crisis, there may be no jobs available for those with relevant skills. Unskilled workers can, almost by definition, look for unskilled jobs anywhere. On the other hand, if it comes to that, skilled workers should also be able to look for unskilled jobs if there are no jobs that match their skills.

    Caring more about unskilled job losses arguably incentivises employers to retain more unskilled employees than they need post-merger, and to compensate by retrenching more skilled employees than they would otherwise. This would be a distortion that results from the particular interpretation of the employment factor that has been adopted by the competition authorities.

    What about the business cycle - particularly now, with the global financial crisis? Are not all workers (including those in financial services) more vulnerable to job losses as a result of merger activity? In a recession, should the competition authorities place more emphasis on the employment factor in the public interest test? Conversely, during an economic upswing, should the authorities be more relaxed about the ability of retrenched workers of all skill levels to find alternative employment?

    Unfortunately, neither the Commission nor the Tribunal seems to have considered these dimensions of the employment factor in applying the public interest test. One wonders whether the lack of concern for skilled workers is more down to a presumption that such employees have higher savings buffers and are thus more likely to be able to get by for the weeks or months it takes to find alternate employment? Unskilled workers may have to live rough from their very first day of unemployment. This is perhaps a better reason to be more concerned about unskilled workers than about skilled workers. And there does not seem to be any reason why the authorities should not say so: the line that skilled workers can always find new jobs more easily, is wearing a bit thin.