OECD Economic Survey: Support for wage subsidies proposal

The Organisation for Economic Cooperation and Development (OECD) Economic Survey of South Africa 2010 comes out strongly in support of Finance Minister Pravin Gordhan in his battle with Cosatu over the youth wage subsidy policy. The DA welcomes the recommendations in the survey, published yesterday, which makes a strong case for the wage subsidy policy announced by the Finance Minister in his Budget Speech this year.

Despite Mr Gordhan having promised a discussion document on the proposed policy by the end of March, pressure from COSATU has resulted in it being delayed for almost four months.

The OECD Survey rightly identifies youth unemployment as the major economic challenge facing our country. In addition to the implementation of a youth wage subsidy policy, the OECD recommends a number of reforms that will reduce unemployment, all of which the DA has previously put forward as policy proposals. These include:

(i) reducing administrative ‘red tape' to make it easier to set up small and medium-sized businesses,
(ii) amending current labour laws to make them more flexible, and
(iii) limiting the legal extension of sectoral wage bargains.

These interventions will make it easier for new job-seekers, and especially the youth, to enter the job market and gain the skills and experience they need to compete.

Currently, the political alliance between the ANC and COSATU has led to what the OECD refers to as ‘insider-dominated wage bargaining' and has encouraged inflationary wage demands, freezing job seekers out of the job market.

The DA welcomes closer policy engagement between South Africa and the OECD. The members of this club of 31 of the world's leading industrial economies controls a significant portion of global investment, so their view on South Africa's economic management can have a real effect on investment prospects in our country. It is important that we take on board the recommendations in their highly-regarded research.

In May this year my colleague Lindiwe Mazibuko MP and I wrote to President Zuma to ask him to intervene in the ideological deadlock around the youth wage subsidy. We have yet to receive a reply.

The youth unemployment crisis is too pressing to wait for Presidential dithering. Today I will be writing to Minister Gordhan to enquire as to the status of the discussion document outlining the proposed youth wage subsidy, especially seeing that his position in favour of the intervention has now been significantly strengthened by the support of the OECD in its Economic Survey.

Statement issued by Tim Harris MP , Democratic Alliance Member of the Select Committee on Finance, July 20 2010

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