Youth wage subsidy: government must support youth job creation

Over 3 million of our nation's youth, aged 18-24, are unemployed. Fewer than 50% of matriculants will hold jobs before they turn 24 years old. These are the sad facts facing a generation of energetic, aspirant young South Africans. That is why the DA Youth is today calling on the Zuma adiministration to institute a Youth Wage Subsidy to help young people gain access to the labour market.

The introduction of aYouth Wage Subsidy was announced by President Zuma in Parliament in February. A discussion document was promised by the end of March, but did not materialize. Last month, Finance Minister Pravin Gordhan reiterated a commitment to wage subsidies in his medium term budget policy statement.  It is now time for these commitments to be translated into action.

As such, the DA Youth will today submit a memorandum to the Chief Operating Officer of Parliament, Mr Tango Lamani, calling on Parliament to prioritise the roll-out of this subsidy scheme with due haste.

A youth wage subsidy would lower the effective cost of employment, and potentially create hundreds of thousands of jobs without an adjustment of wages or conditions of employment. We propose that employers who hire young people be able to claim a tax rebate of R300 per month for every person hired. This rebate would encourage employers to hire first-time job-seekers and those without skills, people who are perennially neglected in their quest for jobs because most organisations are averse to employing individuals without previous work experience or certified skills.

This cuts out most young South Africans who are inadequately equipped by the education system to enter the job market on their own merits. It is much safer to hire older, more experienced workers, rather than take a chance on newcomers to the labour market. Unless, that is, if they are incentivized to do so in a way that makes business sense.

Earlier this year, in response to a question from the Shadow Minister for Finance, Dr. Dion George, Finance Minister Pravin Gordhan indicated his support for a youth wage subsidy. He agreed that, if implemented correctly, a youth wage subsidy has the potential to create about 500 000 jobs by 2013. And it would do so without any changes to current labour legislation.

In addition to creating jobs, a youth wage subsidy acts as an incentive for on-the-job training.  Firms are rewarded for hiring newcomers, and they reward themselves by ensuring that those hired are also adequately skilled. The system acts as a powerful remedy to unemployment, by prioritising labour-intensive production and by getting the market to take care of providing skills, rather than the state.

Unfortunately, one of the biggest obstacles to the youth wage subsidy is Cosatu. Though it punts itself as the hero of the working class, Cosatu fears that this subsidy would create a more competitive work environment. The union does not want its dues-paying members to have to compete against young people hungry for work. It defends a labour aristocracy for the privileged few who already have jobs. But this will not help the masses of unemployed youth who desperately need work opportunities to succeed and assure a prosperous future for the country.

The truth is that a wage subsidy will simply incentivise employers to hire young people and give them marketable skills - something both the education sector and SETAs are failing to do. It does not advocate for young people to be paid less, or to work on a temporary contract basis. Subsidized workers would be paid market-related salaries for the duties they perform, and be subject to the same labour legislation afforded to any worker.

Also, the wage subsidy would not cause older workers to be laid off in favour of younger ones. Nothing will replace the value brought by older, experienced workers. What this subsidy will do, however, is build up a new generation of workers to replace those exiting the market in the future, preventing a massive skills shortage when the current generation does leave.

The cost implications range from R2bn to R6bn per year. This should be possible to fund without cutting core expenditure, raising tax or expanding the deficit further. If we wanted to cut from other areas we could look at the now over R1bn wasteful expenditure bill, the R4.6bn spent on pointless district municipalities or the R2bn surplus once the SETAs are scrapped and replaced with direct re-imbursement of training costs.

It is time that our youth employment crisis gets the attention it deserves. The DA Youth believe that a youth wage subsidy can improve the youth's employment prospects. We call on the President and the Finance Minister to act on this. We youth want to participate in the formal economy and lift ourselves up - and the wage subsidy offers employers the means to open the door of opportunity to us.

Statement issued by Makashule Gana, DA Federal Youth Leader, November 25 2010

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