THE PRESIDENCY: REPUBLIC OF SOUTH AFRICA

Private Bag X1000, Pretoria, 0001

NATIONAL ASSEMBLY

QUESTION FOR WRITTEN REPLY

QUESTION NO. 606

DATE PUBLISHED: 9 MARCH 2012

DATE DUE: 23 MARCH 2012

The Leader of the Opposition (DA) to ask the President of the Republic:

(1) Whether he has taken any steps to ensure that the Youth Wage Subsidy which he announced in his 2010 state of the nation address will be implemented by the 1 April 2012 deadline; if so, what steps have been taken; if not, why not;

(2) whether Cabinet intends to abandon the policy entirely; if so, what are the relevant details; if not,

(3) whether he has found that the policy will be implemented by the 1 April 2012 deadline; if so, what are the relevant details; if not, (a) why not and (b) what further steps will be taken to ensure that the policy is implemented timeously,

(4) whether he intends to commission a study into the impact that the delay in the implementation of the programme has on the level of unemployment amongst young persons; if not, why not; if so, when does he envisage the study to be completed;

(5) whether the results of the study will be made public; if not, why not; if so, what are the relevant details? NW772E

REPLY

(1)  As outlined in the 2011 discussion paper, implementation would follow a process of consultation that include:

• Discussions within the Economic Sectors and Employment Cluster of the youth employment incentive as part of the multi-pronged strategy to tackle youth unemployment
• Initiation of discussions through the NEDLAC process to gather further inputs from social partners
• Final proposals made to Cabinet

Discussions have taken place within the Economic Sectors and Employment Cluster and consultation with social partners began at NEDLAC on 10 May 2011. Social partners continue to discuss the youth employment incentive at NEDLAC. As such, final proposals have yet to be made to Cabinet.

Rising unemployment, particularly among young people has become a focal challenge for many countries across the world, including South Africa. Youth unemployment rates in some countries, particularly some developing countries, are as high as 50 per cent and have risen rapidly in advanced economies such as Spain and Ireland. For the young, the impact of starting their working life unemployed can last a lifetime, while for society it can result in lower growth and possible social dislocation or even unrest.

In South Africa, the proposed youth employment incentive constitutes just one of many government interventions intended to alleviate youth unemployment over the short-term and long-term. This include measures to boost labour demand and create a conducive environment for stronger investment and growth through our infrastructure build programme and economic support package, and addressing skills constraints in the economy through measures to improve access to and the quality of basic, further and higher education.

Tailored labour market policies including the Community Works Programme, natural resource management public work programmes and the National Rural Youth Service Corps received additional allocations in February's budget and will help boost youth and overall employment in the short-term.

(2.) Cabinet does not intend to abandon the policy; however discussions with social partners, alongside the public comments received on the discussion paper, will inform a revised document and design of the proposed youth employment incentive. Cabinet will respond to the final proposals made.

(3.) Government has undertaken to resolve the concerns raised by social partners, in particular organised labour, in NEDLAC.

This includes outlining the role of the youth employment incentive as an important pillar of the Department of Economic Development's multi-pronged strategy to confront youth unemployment, and adjusting design features of the proposed incentive to address the specific concerns of social partners.

There have been a number of valid concerns raised with the youth employment incentive, including the potential substitution and displacement of older workers by younger workers, the age of those potentially qualifying for the incentive, and the duration of probation.

Discussions with social partners are aimed at mitigating these concerns. The rules, design and monitoring of a youth employment incentive will be critical to actively reduce the risk of negative unintended consequences, including potential displacement, and help maximise net job creation.

For example, firms will only be able to access and benefit from the incentive if they create additional jobs for young and inexperienced South Africans above current employment levels. The incentive targets a net rise in youth and overall employment.

Mechanisms that manage the risk of displacement would include:

• Existing labour relations laws prevent the retrenchment of older workers just to create new positions for youth
• Bargaining Council structures, which will be important for monitoring and ensuring appropriate implementation of any incentive
• Requiring union/bargaining council agreement for participation in the scheme
• Using the tax system to monitor the number of jobs created using the incentive and to ensure that incentivised employees are young people and add-ons, rather than substitutes for existing workers. This will also help minimise the risks of potential fraud
• Limiting the number of incentivised workers relative to the total number of workers at a firm (i.e. one incentivised worker for every five "normal" workers)
• Effective enforcement to discourage behaviour that undermines the objective of net job creation. This includes partnering SARS monitoring functions with the Department of Labour's inspection services at an operational level and establishing the appropriate and suitably strict legal measures to discourage and punish abuse of the incentive

(4.) There is no intention to commission a study into the impact on the level of unemployment among young people of not implementing the youth employment incentive on 1 April 2012.

 It would be very difficult to determine the effect of the youth employment incentive on levels of unemployment among young people without actually implementing the proposed incentive. However, given the estimates of youth job creation outlined in the discussion paper, and the fact that the economy has created 365 000 jobs over the past twelve months, the impact is likely to be negative.

The precise effect would, however, depend on a number of interdependent factors including how firms would respond to the incentive in an uncertain business climate, and the impact on young people's participation in the labour market. Prior to implementation, we do not know how these types of behaviour would change.

Government will rather focus on accelerating the process of social dialogue and finding satisfactory solutions to the valid concerns that social partners have raised.

(5.) There is no intention to commission a study.

Issued by Parliament, May 16 2012

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