The youth wage subsidy is a positive initiative in the battle to reduce youth unemployment, but it’s a band-aid solution.
This is the view of Sandra Burmeister, CEO of Amrop Landelahni. “In the longer term, we need to focus on growing the economy to generate jobs and on education to ensure people are employable,” she says.
“In the interim, the youth wage subsidy is a mechanism for getting unemployed youth, including graduates, into the workforce where they can learn basic skills. In terms of the Incentive Tax Employment Act, employers will receive a tax incentive to employ young workers for a maximum of two years under certain conditions.
“Young people are fast learners and can quickly become productive, and a first-time job can be a stepping stone to full, unsubsidised employment.”
In Labour Market Dynamics 2013, Stats SA reports that South Africa has one of the highest youth unemployment rates in the world, and about 67% of unemployed people are between the age of 15 and 34.
“Nonetheless,” says Burmeister, “the focus should not be on employment per se. The issues are broader and more complex than that. There is no point in pushing for job creation, without taking account of the structural and education issues that need to be addressed.”
Four years ago, the Centre for Development and Education (CDE) advocated a four-pronged approach to economic policy to create jobs. Firstly, government should provide tax breaks and exemptions from laws on hiring and firing first-time employees between the ages of 18 and 24. Secondly, the CDE proposed the creation of special economic zones to generate employment for the youth in particular.
Thirdly, the CDE recommended the creation of vocational education programmes linked to apprenticeships. Its fourth proposal was the creation of employment schemes in the poorest provinces to provide useful employment at a subsistence wage.
“All these initiatives are now being rolled out in some shape or form,” says Burmeister. “Government has underscored its commitment to enhancing employment opportunities and skills development for youth with limited work experience through the implementation of the youth subsidy.
“This goes against the standpoint taken by unionists that the employment tax incentive would create a two-tier labour market and displace older workers. It means taking the view expounded by American economist Paul Romer that ‘a low wage is better than no wage’.
“The Special Economic Zones (SEZ) Act, which President Jacob Zuma signed into law in May, although not specifically targeting the youth, aims to contribute to the revitalisation of the economy and help alleviate unemployment. It has been welcomed by economic analysts as facilitating the creation of an industrial complex with strategic economic advantage.
“Vocational education programmes have been stepped up by the Department of Higher Education through the expanded Further Education and Training (FET) colleges, although these have tended to focus on short courses rather than comprehensive training and apprenticeships.
“Employment schemes in the poorest provinces are being rolled out by government in its Expanded Public Works Programmes (EPWP) – a nationwide drive with the aim of alleviating poverty by creating jobs.”
The Stats SA Report shows that 54% of people between the age of 15 and 34 have no work experience. It points out that people are three times more likely to find a job if they have prior work experience, and recommends that the EPWP and youth wage subsidy should be extended.
“These can be seen as short-term initiatives to create jobs for people now, rather than waiting for an improved education system and tailored graduate development programmes to generate the highly-skilled individuals the high-tech economy demands,” says Burmeister.
“In the long term, however, it all revolves around education. Stats SA concurs that a primary source of unemployment is the poor quality of public education in South Africa. Unemployment among people without matric – at 28%– is three times higher than among those with a tertiary qualification.
“It is essential to upgrade education across the board and – in particular – to align our educational systems to support qualifications in the disciplines of science, technology, engineering, and mathematics. Only in this way can we build the skills needed to drive a developing economy and underpin robust growth.”
· A Job for Every South African, Centre for Development and Enterprise, May 2010, www.cde.org.za
· Labour Market Dynamics in South Africa, 2014, Statistics South Africa, http://beta2.statssa.gov.za/publications/Report-02-11-02/Report-02-11-022013.pdf