Gordhan's budget: We are going backwards on wage subsidy

Sustained pressure from Cosatu has forced finance minister Pravin Gordhan to downgrade the youth wage subsidy from a firm policy to an idea "under consideration". This is a severe blow to the more than 3 million young South Africans under 34 years of age who are unable to find work.

Such a subsidy - broadly supported by economists, the "Harvard Panel", and the official opposition - represents one of the most effective ways of tackling the high cost of employing young people through tax deductions. It would help to create a more flexible employment market without adjusting labour standards.

In his State of the Nation address in February this year, President Jacob Zuma announced, "proposals will be tabled to subsidise the cost of hiring younger workers, to encourage firms to take on inexperienced staff."

Then, the finance minister fleshed out the proposal a few weeks later in the national budget and committed to publishing a discussion document by the end of March 2010. Seven months later there is still no sign of this document.

He also stated his intention "that young people should benefit from this initiative by early next year".  However, in yesterday's Medium Term Budget Policy Statement, the minister downgraded the initiative to an idea that was under "consideration".

In February the Youth Wage Subsidy policy had pride of place in the minister's budget speech as a key strategy to fight youth unemployment, but in yesterday's budget it is buried deep in the budget discussion document, and was not mentioned in his speech.
The only possible explanation for this downgrading of the policy is that it is a response to the knee-jerk opposition from Cosatu, even as other labour unions like Fedusa welcomed the idea. We can only assume that this is related to an ideological standoff in the Cabinet and reiterate our call to President Jacob Zuma to intervene and force the implementation of the policy to lower the cost of employing young South Africans.

Statement issued by Tim Harris, MP, Democratic Alliance Shadow Minister of Trade and Industry, October 28 2010

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